Stablecoin: An Indispensable Key Element in the Crypto Assets Field

In the Crypto Assets market, stablecoins have become an indispensable and important component. Their unique value is not only reflected in the medium function of trading Crypto Assets but also shows revolutionary potential in traditional financial scenarios such as cross-border payment settlements. As of April 9, 2025, the global circulating market value of stablecoins has reached 236.7 billion USD. Top asset management institutions and some sovereign economies are accelerating their layout in the stablecoin field. USDC issuer Circle recently submitted its prospectus, expecting to land on Nasdaq with a valuation of 5-7 billion USD, reflecting the vigorous development of the industry.

1. Definition and Functions of Stablecoins

A stablecoin is a type of Crypto Assets that theoretically can maintain a specific price over the long term, with its core characteristic being the maintenance of the relative stability of its value through specific mechanisms. It is important to note that central bank digital currency (CBDC) does not fall under the category of stablecoins.

The emergence of stablecoins mainly addresses the value storage problem in the world of Crypto Assets. Investors can lock in their investment gains or losses through stablecoins, avoiding additional risks brought about by the price fluctuations of Crypto Assets.

In addition to playing a role in Crypto Assets trading, stablecoins are also widely used in decentralized finance ( DeFi ), cross-border payment settlement, and other areas. In terms of cross-border payments, stablecoins demonstrate significant efficiency and cost advantages, enabling fast and low-cost cross-border transfers.

In the DeFi ecosystem, stablecoins have become cornerstone assets, providing stable liquidity support for various decentralized platforms and optimizing the economic models of trading and lending.

2. Main Types and Characteristics of Stablecoins

( one ) fiat currency pegged stablecoin

1. USDC

   • Issuer: Circle
   • Circulating Market Cap: Approximately $60 billion
   • Stablecoin value stabilization mechanism: Excess reserve of US dollar cash and short-term US Treasury bonds
   • Compliance framework: Regulated by state laws in the United States, holds remittance licenses in multiple states, and complies with the EU MiCA regulation requirements.

2. USDT

   • Issuer: Tether
   • Circulating Market Cap: Approximately $60 billion
   • Stablecoin value stabilization mechanism: 1:1 reserve cash and other assets
   • Compliance framework: Fined for lack of transparency in reserves, compliance is in dispute.

( two ) Crypto Assets pegged to stablecoin

For example, DAI:

• Issuer: MakerDAO
• Circulating Market Cap: Approximately $3.1 billion
• Coin Value Stabilization Mechanism: Crypto Assets Over-Collateralization
• Compliance framework: Decentralized Autonomous Organization, lack of clear legal entity

( three ) physical assets linked stablecoin

Take PAXG as an example:

• Issuer: Paxos
• Circulating Market Cap: Approximately $1.87 billion
• Stablecoin mechanism: physical gold reserves
• Compliance Framework: Regulated by the New York State Department of Financial Services

( four ) algorithm stablecoin

Maintaining coin value stability through complex algorithms, but there are higher risks. The 2022 UST collapse incident exposed potential issues with algorithmic stablecoins.

3. The Value Basis and Risks of Stablecoins

The value of stablecoins is based on two supports:

1. Anchored physical or digital assets as underlying guarantees
2. Market consensus-driven liquidity and trust mechanisms

It is important to note that the "stability" attribute of stablecoins is not absolute. When there are cracks in market consensus or when reserve assets face systemic risks, there may be risks of price fluctuations or even de-pegging. To protect the rights and interests of stablecoin holders, relevant regulatory frameworks and technical assurance mechanisms still need to be further improved.