Pan Gongsheng mentioned it for the first time and Liu Qiangdong also spoke out. What exactly is stablecoin?

On Wednesday, June 18, Pan Gongsheng, governor of the People's Bank of China, mentioned stablecoins for the first time at the 2025 Lujiazui Forum.

Emerging technologies such as blockchain and distributed ledgers have promoted the vigorous development of central bank digital currencies and stablecoins, realizing "payment is settlement", reshaping the traditional payment system from the bottom up, and significantly shortening the cross-border payment chain. At the same time, it has also posed huge challenges to financial supervision.

On June 17, Liu Qiangdong, chairman of the board of directors of JD.com Group, said at a sharing session that

Liu Qiangdong said that he hopes to apply for stablecoin licenses in major currency countries around the world. Through stablecoin licenses, global companies can exchange money, reduce global cross-border payment costs by 90%, and increase efficiency to within 10 seconds.

Media reports that the first phase of JD.com's stablecoin is tentatively scheduled to be issued with stablecoins anchored to the Hong Kong dollar and the US dollar. It has entered the second phase of sandbox testing and has not yet been officially issued.

On the same day, the US Senate across the ocean passed the "Guidance and Establishment of the United States Stablecoin National Innovation Act" (GENIUS Act), which formulated regulatory rules for cryptocurrencies pegged to the US dollar. This is a milestone victory for the currency circle and Trump.

Previously,the Hong Kong Legislative Council passed the Stablecoin Bill on May 21, and the Stablecoin Bill officially became law on May 30, and will come into effect on August 1.

So,what exactly is a stablecoin? What is the difference between it and digital currency? Is it the savior of U.S. debt? International giants are betting on it. Stablecoins are so popular. What are the risks?

On June 17, Zhou Hao, Chief Economist of Guotai Junan International, was a guest in the Big Coffee Reception Room of Wall Street News Live Broadcast Room. From a macro perspective, he analyzed the logic behind stablecoins and their possible future trends.

Jianwen Jun sorted out the core views as follows:

1. Stablecoin is a key transitional form connecting traditional finance and Web3 - it not only retains the credit of centralized assets, but also reflects the characteristics of decentralized technology.

2. The US "GENIUS Act" and Trump's policies directly promote the rise of compliant stablecoins (such as USDC), forming a regulatory dividend window period.

3. Incremental funds from stablecoins can ease short-term liquidity pressure on US debt, but cannot solve the fundamental problem of long-term fiscal sustainability.

4. Stablecoins currently strengthen the status of US dollars in cross-border payments, but their essence is still a technical tool, and cannot reverse the market's structural concerns about confidence in the US dollar.

5.The Stablecoin Ordinance has made Hong Kong a compliance test field in Asia, and the issuance of coins by companies such as JD.com reflects the trend of "scenario + finance" integration.

6.The quality of the underlying assets is the core, and the advantages of on-chain technology should not cover up the penetrating analysis of the cash flow of collateral (such as US bonds).

7.In the interest rate cut cycle,the expansion of the stablecoin market size (expected to be trillions) is more important than the narrowing of the interest rate spread, and regulatory certainty is more critical than short-term profits.

8. Financial innovation will always return to the origin of asset quality.In the stablecoin craze, we need to be wary of the cognitive trap of "technical packaging replacing value analysis".

What is a stablecoin?

This is a very good question. Many people are asking: What exactly is a stablecoin? How is it different from previous financial forms?

For me, the most important significance of stablecoins is that they have opened up a bridge between traditional finance and future finance.

The financial system we are familiar with today can be roughly regarded as a product of the Web1.0 or 2.0 era, which is highly centralized.

For example, when the central bank issues currency, the market has trust in the central bank, but also doubts about it. The financial world of Web3 emphasizes decentralization: everyone has their own "ledger" to record what they see and hear, which does not rely on central nodes and cannot be tampered with at will.

The emergence of stablecoins has found a point of convergence between these two worlds.

Its ledger is on the chain, open, transparent and cannot be tampered with, reflecting the spirit of decentralization; but the anchor assets behind it, such as the US dollar, treasury bonds, gold, etc., are still relatively trusted centralized assets. This makes it a transitional form connecting "traditional beliefs" and "future beliefs".

People who do not trust traditional finance can see the feasibility of decentralization through stablecoins; and those who believe in traditional finance can also gradually understand and accept the logic of the Web3 world with the help of stablecoins.

So to sum up, stablecoins allow traditional financial people to see the possibility of decentralization, and also allow Web3 believers to see the expansion path of traditional finance.  This is what I think is its core value at present, and it may also be its greatest potential in the future.

Why does the United States promote stablecoin legislation at this time?

I think this has a lot to do with Trump's return to politics. Since he took office, he has been promoting a policy path of parallel regulation and "deregulation" related to cryptocurrencies.

The listing of Circle that we see now actually took off at this vent, superimposed with the two latest bills introduced by the United States: one is the "STABLE Act" and the other is the "GENIUS Act".

I joked that the United States now has two bills that just match Trump's description of himself during his first term: "stable genius", a stable genius - this also reflects a certain symbolic meaning.

Back to the point, the listing of Circle and the US government's promotion of stablecoin legislation are closely linked. As a company that has always operated within the regulatory framework, Circle is itself a representative of the "compliant" stablecoin, and it is also happy to accept this identity of being included in the regulation. This background has made Circle extremely popular under the current policy trend.

In addition, it is the only truly compliant stablecoin target on the market, and it is scarce, so it naturally becomes the focus of capital pursuit.

Many people will ask, how big is the valuation space of Circle in the future? Now the entire stablecoin market is about 250 billion US dollars, and many institutions predict that it may expand to 2 trillion US dollars in two or three years. In other words, if you look at the growth of the entire market capacity, Circle still has a clear upward space in the future.

To sum up:

Trump's return, the change in regulatory direction, Circle's compliance positioning and the rapid expansion of market expectations together constitute the background of this wave of stablecoin legislation and Circle's popularity.

Is stablecoin the "savior" of US debt?

In short, at least in Trump's view, stablecoins are indeed likely to become the "savior" of US debt.

Why do you say that? Because the expansion of the stablecoin market is purely incremental funds. This money was not originally intended to buy US debt, but because stablecoins have a demand for reserve assets, these funds may flow to short-term US debt.

For example, the current stablecoin market is about 250 billion US dollars, and many people expect it to rise to 2 trillion US dollars in the next few years. The "sky-high" amount of US debt issuance that exceeds expectations is usually only a net supply of several hundred billion US dollars. In contrast, the incremental funds of stablecoins are theoretically enough to "eat up" the new supply of US debt, especially short-term debt.

But this is only a partial solution. The reserves of stablecoins are mainly short-term debt, while the core problem of US debt is at the long end. For example, no one dares to buy 20-year and 30-year long bonds now because everyone is worried about long-term inflation in the United States. This is a maturity mismatch problem.

The deeper problem is not whether there are buyers for US debt, but the market's concerns about the sustainability of US finances. This is difficult to alleviate in the short term. In other words, stablecoins may solve the liquidity problem, but they cannot solve the confidence problem.

So I think the help of stablecoins to US debt, especially the relief of short-term debt, is certain; but to say that it is a "savior", this "savior" should be put in quotation marks.

In essence, whether it is stablecoin, RWA (real world asset), or STO (security token), the quality of the underlying assets is the core. If the underlying assets are not trusted, no matter how good these on-chain structures are, it will be useless.

From a political perspective, stablecoins may be "a straw that Trump must grasp", although not the last one, but it is critical enough. As for the medium- and long-term debt problem, more systematic means such as the Ministry of Finance are needed to deal with it.

Is the stablecoin an aid or a challenge to the hegemony of the US dollar?

This is a very good question. On the surface, stablecoins seem to be a tool to consolidate the hegemony of the US dollar, but there are actually more complex dynamics behind it.

Let's look at the facts first: 99% of the reserve assets of mainstream stablecoins are currently US dollars. Both USDT (Tether) and USDC (issued by Circle) are built around the US dollar, which has strengthened the role of the US dollar in cross-border payments worldwide. Therefore, stablecoins have indeed enhanced the international use scenarios of the US dollar to a certain extent, making it more efficient from payment to clearing.

But the question is: Can it defend the core position of the US dollar?

From the current point of view, the expansion of stablecoins has very limited help to the US dollar exchange rate and the long-term interest rate of US Treasury bonds. The main reason for the selling of the US dollar is still the concern about the US fiscal situation, rather than the problem of the efficiency of the payment system. Therefore, the emergence of stablecoins is more of a "technical level" benefit rather than a "confidence level" cure.

However, we can also see that the US government, especially the Trump camp, does have the intention to continue to maintain the central position of the US dollar with the help of stablecoins. This is its political signal and strategic posture.

The next question is: Does Trump want the dollar to be strong or weak?

This is actually uncertain. For example, he was inclined to a weak dollar in order to facilitate exports in the Mar-a-Lago Agreement, but his fiscal team repeatedly emphasized that the dollar should not be too weak. This illustrates a reality: Trump has the ability to adjust, and once the market reacts incorrectly, he may immediately adjust his strategy.

So we can imagine such a situation - if the dollar depreciates, but overseas funds do not withdraw from dollar assets, and stablecoins are still anchored to the dollar, then this is exactly what the Trump administration would like to see most: the international use rate of the dollar is still there, assets are not sold off, and the exchange rate is favorable to exports.

But once the dollar depreciates + large-scale capital outflows occur, the Trump administration is likely to change its policies, such as tightening the dollar, intervening in the market, or reconstructing the stablecoin regulatory approach.

In general, stablecoins themselves do not challenge the hegemony of the US dollar, but are a tool to consolidate it. They represent the efforts of the US authorities to continue to maintain the US dollar as a core asset in the future financial system. But this consolidation effect is premised: the US dollar cannot be truly "abandoned" by the global capital market.

What are the differences and similarities between stablecoins and digital currencies?

The core of this issue is that stablecoins are more decentralized. In contrast, central bank digital currency (CBDC) is still a highly centralized issuance system, and the promotion of the latter is not smooth, which may be related to the rapid development of existing payment methods and the failure of central bank digital currency to gain first-mover advantage.

In addition, the market generally has certain concerns or concerns about centralized digital currencies, and stablecoins make up for this to some extent. Of course, the relationship between the two is not simple. How to intervene appropriately in supervision while preventing the entire system from "returning to the old path" is a problem that both stablecoins and CBDCs have to face.

Ideally, the two can be interoperable. The premise is that there is no capital control and the compliance requirements such as anti-money laundering and anti-terrorist financing are met through appropriate mechanisms. Of course, if there is capital control, the problem will be more complicated.

In reality, stablecoins seem to be more popular in the market at present. They have wider application scenarios and greater convenience, and therefore have become the focus of central banks of various countries.

How do stablecoins affect the payment system? Will they replace the role of VISA?

It is unlikely to be completely replaced in the short term, but stablecoin payments are more convenient, faster and cheaper, especially for cross-border payments. This will definitely challenge traditional payment methods. Paypal is also moving towards and upgrading stablecoins.

For example, if a global e-commerce platform adopts stablecoins as a payment tool, it can be used for payment and exchange anywhere. Compared with traditional payment methods, this expands more scenarios. Payment methods such as Visa are often not widely used in real consumption scenarios, and people still need other payment methods.

Stablecoins, especially cross-border payments, will be faster, more convenient and less costly. More importantly, it is directly embedded in our consumption scenarios. Although you may only see one interface when using it, the result is faster payment. In any case, this will challenge and upgrade existing payment methods. As more people use it, more application scenarios will emerge, and this trend cannot be ignored.

Why are international giants betting on stablecoins?

The key is that stablecoins have "gone out of the circle". People in traditional finance feel that their system is the safest and are unwilling to easily turn to on-chain finance; while the younger generation believes in new technologies more and wants to use on-chain finance to "overtake on the curve". This has led to a long-term separation between traditional and emerging finance, making it difficult to integrate.

But stablecoins provide a bridge - it makes people in traditional finance feel that they can gradually accept on-chain technology, and it also makes people in the currency circle believe that they can reach the old money of traditional finance through stablecoins. Therefore, everyone has to consider this direction.

In addition, stablecoins can bypass traditional payment systems such as SWIFT, and may even circumvent the long-arm jurisdiction of the US dollar. These factors combined make stablecoins a direction that traditional finance, technology companies, and the crypto industry are exploring.

Traditional finance believes that stablecoins are a transition towards decentralization, while the currency circle believes that it can bring a wider range of users and funds. Moreover, the interchangeability between stablecoins also avoids market fragmentation-for example, the stablecoins of Bank A and Bank B can be exchanged based on the exchange rate of underlying assets, and there will not be a chaotic situation where tens of thousands of stablecoins are not interoperable.

Therefore, stablecoins have really opened up many obstacles, which is the key reason why all parties are willing to invest.

How do you view the recent performance of circle, the first stablecoin stock?

I will not make specific judgments on individual stocks, but I can make a prediction from an industry perspective. With the expansion of the stablecoin market, as the most compliant stablecoin in the world, USDC should still have room for imagination in the medium and long term.

USDC's business model is very simple - earning interest through underlying assets, while stablecoins themselves do not pay interest, which forms an interest rate differential model.

However, compared with USDT, USDC is not very profitable, because although USDT is very profitable, its biggest problem is that it is not included in the formal supervision of the United States.

Circle has several other characteristics:

1. Its cost is relatively high, and it needs to pay a lot of marketing fees to exchanges such as Coinbase to issue it;

2. The business model itself is very clear - earning interest rate differentials, but channel construction is a challenge;

3. The market space is indeed very broad.

So Circle is a typical "standing on the cusp" enterprise - the business model is not perfect, but it happens to be on the cusp of the development of stablecoins. At present, everyone is still in the investment and trial stage in this field, and the market space is still very large. At least in the next 1-2 years, Circle should still have good development prospects.

Hong Kong passed the Stablecoin Bill, and domestic e-commerce companies such as JD.com are also preparing to issue stablecoins. Will this be a trend in the future?

The situation in Hong Kong is relatively clear - after the Stablecoin Bill officially takes effect on August 1, the three institutions currently participating in the sandbox test (JD.com CoinChain Technology, Yuanbi Technology, and Standard Chartered Bank Consortium) should issue stablecoins one after another. Hong Kong is indeed at the forefront of stablecoin regulation, almost following the pace of the US GENIUS Act, and even advancing faster in some aspects.

In the future, Hong Kong may further promote legislation related to virtual asset derivatives, such as the development of the stablecoin derivatives market. This reflects Hong Kong's global leading position in the Web3 era and its key role as an international financial center in the new financial ecology.

At present, Internet companies (such as Ant and JD.com) pay much attention to stablecoins, but whether more institutions will issue stablecoins in the future depends on market demand and actual application. Whether the Hong Kong dollar stablecoin can be widely accepted depends on its payment scenarios and circulation capacity. However, as an international financial center with free capital flow, Hong Kong has a natural advantage in this regard.

As for whether securities firms will enter this field? I think it is very likely. Hong Kong's financial regulatory policies are being improved at an accelerated pace, and the compliant issuance and trading of stablecoins may become a new business direction for securities firms. In particular, if stablecoins are widely used in securities settlement, cross-border payments and other fields, securities firms are likely to participate in them.

In general, the issuance of stablecoins may become a trend, especially for technology companies and financial institutions with payment scenarios. Hong Kong's regulatory environment provides a good development soil for it, and we may see more companies joining this track in the next few years.

Stablecoins are so hot, what risks have been ignored?

In fact, as the most basic and most acceptable form of RWA (real world asset tokenization), stablecoins are essentially the process of putting real assets on the chain. There is a key risk that is often overlooked:

On the one hand, on-chain technology is indeed revolutionary - it has subverted traditional financial technology to a certain extent, and some people even say it is a "dimensionality reduction attack". But we must be aware that the essence of finance has never changed. Just like stock trading, no matter how advanced the technology is, it will eventually return to the value judgment of the company's fundamentals.

Although decentralized technology reduces some risk control requirements through traceability and non-tamperability, this may just make people ignore the strict examination of the quality of the underlying assets. No matter how the technology is packaged - whether it is on-chain, smart contracts or distributed ledgers - the core issue is always: Are the underlying assets supporting stablecoins high-quality? Do they have stable cash flow and profitability?

So the biggest risk is that people are easily confused by superficial technological innovations and ignore the penetrating analysis of the essence of assets. This is like putting old wine in new bottles - no matter how beautiful the bottle is, the quality of the wine is the key. In the stablecoin craze, we need to maintain this prudent attitude of "seeing the essence through the phenomenon".

As the United States enters a cycle of interest rate cuts, will the profits of companies such as Circle be affected?

This is a very good question. There are indeed two key dimensions to consider:

The first is the relationship between interest rate spreads and market size. Although interest rate cuts will compress interest rate spreads (for example, from 5% to 2%), the market size may expand exponentially - from hundreds of billions to trillions of dollars. Just like the snowball effect, the stablecoin business model has the characteristics of rapid replication and expansion, and the speed of market expansion may far exceed the speed of interest rate narrowing.

The second is the importance of regulatory certainty. Although USDT is currently highly profitable, it faces regulatory risks in the long term - the United States can indirectly control USDT by regulating US dollar custodian banks. In contrast, although compliant stablecoins such as USDC are affected in the short term, they have gained a more certain regulatory status and development space.

So the core conclusion is:

1) The certainty of market size expansion is more important than interest rate fluctuations;

2) The certainty of regulatory compliance is more important than short-term profitability.

This will become a key factor in determining the long-term competitiveness of stablecoins. During the interest rate cut cycle, stablecoins that have compliance advantages and can quickly expand application scenarios may gain more sustainable development opportunities.