The Potential Impact of Stablecoins on the Financial System

Stablecoins, as a type of cryptocurrency pegged to a specific asset (usually fiat currency), play an important role in connecting traditional finance and decentralized financial systems. Recently, the United States and Hong Kong have successively passed stablecoin regulatory bills, marking the formal establishment of a stablecoin regulatory framework in major global regions. This not only creates opportunities for the development of decentralized finance but may also deepen its integration with the traditional financial system, while bringing new challenges and risks to the global financial system.

From Non-standardization to Standardization Development

The newly introduced stablecoin legislation has established a series of regulations targeting the risk points that previously existed in the industry, including:

1. Require 100% reserve assets to be backed by fiat currency or highly liquid assets
2. The issuing institution must obtain a regulatory license and meet minimum capital requirements.
3. Incorporate into the anti-money laundering regulatory framework
4. Ensure that users can redeem at face value to protect consumer rights.
5. Prohibition of interest on stablecoins

These regulatory requirements refer to the framework of traditional financial institutions, but are stricter in terms of liquidity management. Regulators position stablecoins as "on-chain cash" rather than "on-chain deposits," treating them as the foundation of the decentralized financial system.

Potential Impact on the Financial System

1. Improve the efficiency of international payments

Stablecoins have the advantages of low cost and fast speed in cross-border payments. However, with the introduction of regulation, their compliance costs may rise. In the long run, the share of stablecoins in international payments is expected to increase, but this process still requires the continuous development of the industry and improvement of regulation.

2. Full reserve requirement limits currency creation

The requirement of 100% reserve assets limits the credit expansion ability of stablecoin issuers. The issuance of stablecoins theoretically does not affect the supply of US dollars, but it may lead to the flow of US dollars between accounts or across borders.

3. The impact of disintermediation on bank deposits

Stablecoins may lead to outflows of deposits, affecting the liability structure of banks. However, the current scale is limited and the impact is controllable. In the long term, if the scale of stablecoins grows rapidly or indirectly gains investment returns, it may exacerbate the diversion of deposits.

4. Absorb government debt, influence monetary policy

Stablecoin issuers have become buyers of U.S. Treasuries, primarily taking on short-term U.S. debt. This may affect short-term interest rates, but central banks can hedge through monetary policy. In the long run, the financial disintermediation caused by stablecoins may weaken the effectiveness of monetary policy.

5. Transmission to the financial market

Stablecoins may influence financial markets through credit creation within decentralized financial systems, contagion of market sentiment, and stocks related to crypto assets.

6. The Potential Reconstruction of the International Monetary Order

Stablecoins are highly pegged to the US dollar, which may strengthen the dollar's position and could also serve as a "bridge" to a diversified currency order. For emerging economies, stablecoins may bring competitive pressure on their currencies.

7. Insights on Currency Internationalization

The Hong Kong stablecoin bill helps enhance the influence of the Hong Kong dollar in cross-border payments, cryptocurrency assets, and other areas. At the same time, it provides a "testing ground" for the internationalization of other currencies. However, this process still requires attention to financial stability risks and timely policy optimization.

Risk Warning

1. Risks of Development in the Cryptocurrency Industry
2. The impact of stablecoins on the traditional financial system exceeds expectations.
3. Regulatory policies are progressing slower than expected