PE investment competition brought by US dollar stablecoin

Author: Joy Liu

One of the biggest news in the financial market recently is probably the passage of the Stablecoin Act.

As a participant in the private equity market, I am also thinking about what impact this will have on our industry?

The private equity field is an "old money" market

The private equity market is the most basic, traditional, slowest trading market in this economy, but it deals with the most people. It complies with the most "old money" trading system.

Integrity/Trust + Negotiation + Legal Contract

The stablecoin system gives global investors a more convenient opportunity to "vote with their feet."

The core private equity market will face more intense competition

While the efficiency of the trading system is improved, the degree of openness of the US market will be further enhanced. This means that more investors (limited partners) from non-US regions will have the opportunity to access and participate in high-quality private equity assets, thereby expanding the liquidity and scale of the entire market.

More importantly, with the support of the stablecoin system, global investors will have easier access to high-quality US assets that were originally difficult to obtain due to closed channels. However, this also means that competition for high-quality projects will be more intense.

Even in the era without stablecoins, the private equity market is a highly professional and high-threshold system. Truly excellent projects have attracted the attention of a large number of investors since their inception, and of course this is also a process of building trust. For example, we often have contact with project operators for several years before entering a project.

This kind of personal relationship and understanding of each other's character is one of the indispensable elements to get the more difficult investment seats.

This is also why many good projects, once they officially enter the financing stage, the investment shares are often snatched up instantly. With the technical convenience and cross-border accessibility brought by stablecoins, competition will only intensify and not slow down.

Assets are still the core, people and teams are still the foundation

No matter how settlement efficiency is improved and how information transparency is enhanced, the investment value of the private equity market ultimately depends on:

• Whether the asset is high-quality

• Whether the share of this asset can be obtained

• Whether the operating team is trustworthy

Many high-quality private equity projects are off-market, that is, not disclosed and only traded offline. Because for high-quality assets, being able to obtain such information and having the qualification to participate is itself a screening threshold.

The stablecoin-related bill was passed in the United States, providing investors around the world with the possibility of investing in high-quality American assets, but the competition of core strength still exists and is more obvious: Who has more accurate judgment? Who acts faster? Who has richer comprehensive resources? Who has stronger investment capabilities?

Although I am not an expert in the field of blockchain and stablecoins, if I observe the changes that stablecoins have brought to the private equity market from the perspective of a private equity investment company, while expanding the investment market, it further magnifies the gap in information asymmetry and judgment ability between investors, and expands the unequal advantages of investors who already have resources, funds, and judgment in the investment market.