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in the web3.0 era, what impact will the federal reserve's interest rate cuts have on the global payment landscape? stablecoin issuers are aggressively deploying on-chain payment channels and "sharing" the transaction profits of traditional payment systems. an invisible "payment war" is taking place.

“there is no doubt that the federal reserve’s interest rate cut will stimulate the economy of markets outside the united states. in the last week before the holiday, global funds poured into a-shares and hong kong stocks. the daily trading volume of a-shares hit a record high of 2.6 trillion yuan, and the hang seng index of hong kong stocks rose by more than 15% in a week. , the fierce competition for low-valuation chips can be seen from the flow of overseas funds, we found that many hedge funds and sovereign wealth funds have entered the hong kong market, but the process of the bank for international settlements system is slow and costly; other capital is being borrowed. the entry of stablecoins into hong kong will lead to a scramble for cheap assets,” sopha chen, the head of a digital asset trading platform in hong kong, said in an interview with china times on september 29.

huang haiguang, ceo of odig (open digital infrastructure group), told this reporter that recentlyjingdong、ant groupthe financial technology companies represented by the company are testing the waters on stablecoins, which is an exploration of new business models in the field of on-chain payment. in the future, the competition in the global payment market will start a new round of competition around stablecoins. at this stage, the main application scenarios of stablecoins are "currency hedging" and "payment". with the active layout of traditional institutions, the first scenarios may be cross-border payments and instant tax refund services for small and medium-sized enterprises. in the future, the scale of the on-chain payment market will reach tens of thousands. billion, more publishers will pour in.

us$170 billion stablecoin leverages 15 times leverage trading

the issuance of stablecoins and their transaction circulation linked to the us dollar are changing the global payment pattern, and this change has a huge impact on currency circulation under trade and capital accounts.

in july this year, jd.com tested the waters of issuing stablecoins. its subsidiary jd.com coin chain technology announced the issuance of jd.com stablecoin (jd-hkd) in hong kong. the stablecoin is linked to the hong kong dollar at a ratio of 1:1; in august, ant international (the international arm of ant group) and singapore's dbs bank has partnered to launch a pilot project for the "dbs treasury token", aiming to optimize liquidity and working capital within the group.

“on-chain payment, that is, transaction payment through blockchain technology, hasdecentralization, strong transparency and non-tampering characteristics. with the rapid development of digital assets, the traditional financial field is integrating with blockchain technology, and stablecoins, as an important application of blockchain technology, are playing an increasingly important role. public data shows that the current size of the stablecoin market has reached us$172 billion. as more and more financial institutions and companies participate in this market, stablecoins are bound to redefine global payment methods. this mechanism is similar to the gold standard system and is issued on the blockchain. it has the characteristics of distributed, peer-to-peer transactions, no need for central bank clearing, and non-tampering. "huang haiguang pointed out during the interview.

in huang haiguang's view, this is a big enough "cake". take tether (tether holdings ltd), the issuer of the stable currency usdt, as an example. it manages stablecoins of nearly 120 billion u.s. dollars, and its net profit for 2023 reached 62 billion, setting a record net profit of us$5.2 billion in the first half of 2024.

wu kaize, head of the asia-pacific region of a cross-border payment institution headquartered in singapore, told a china times reporter that global stablecoins settled transactions worth us$10.8 trillion last year, of which us$2.3 trillion was organically related to payments, cross-border remittances, etc. related activities, if calculated based on the stablecoin issuance scale of us$170 billion, it has leveraged nearly 15 times the transaction volume.

“today’s payment giants face significant disadvantages, including high transaction costs, slow settlement times, and limited transparency. while stablecoins also have their advantages, as competition intensifies, the average remittance payment has grown over the past 15 years, according to the world bank. the cost has been reduced by more than a third, however, the current average cost of sending $200 globally is still 6.35% of the amount sent, compared to the average transaction using stablecoins to send money totaling approximately $54 billion per year. the cost is much lower, only 0.5% to 3% of the remittance amount, and there is potential for further reductions in costs due to continuous innovation in new technologies," wu kai said.

it is worth noting that the amount of stablecoin settlements may rise to $76 trillion by 2030, according to the latest category-by-category estimates from the international fund for agricultural development, fxc intelligence and statista.

“the legacy infrastructure that handles such massive cross-border financial flows suffers from numerous inefficiencies that increase costs and slow down the flow of funds across borders. the global demand for stablecoins is certain to explode, regardless of both domestic institutions and overseas institutions are actively seeking permission to issue coins," huang haiguang said.

can stablecoins be circulated under the capital account?

in fact, in cross-border payments under foreign trade, the development of stablecoins has not gone smoothly. from the first stablecoin appearing in 2015 for virtual currency transactions to the stablecoin being linked to cross-border payment settlement, its compliance risks have it has always existed, and whether it is possible to circulate under the capital account in the future is a bold conjecture.

"it is conceivable, but it cannot be expected to be realized in the short term. if stablecoins can be circulated under the capital account, the impact on global capital transactions will be immeasurable, and the use of stablecoins will open up the channel between traditional investment and digital currency transactions. this will the intensity of this kind of financial supervision is a huge challenge for governments of all countries," wang heng (pseudonym), deputy general manager of a financial consulting company in shanghai, said frankly in an interview with a reporter from china times.

wang heng pointed out that as the payment landscape continues to evolve, traditional banking systems, credit cards and evenmobile paymentboth are under pressure to adapt to changes in customer demand, and stablecoins aim to connect the volatile world of cryptocurrencies to traditional finance by keeping prices stable, primarily pegged to the u.s. dollar. however, these tokens have actually only begun to be used on a large scale for low-cost fund transfers in the past 2 to 3 years, but stablecoins still need to be integrated with existing financial systems to facilitate their use in daily transactions.

“we believe stablecoins represent the next major leap forward in payments and capital flows, especially as it becomes increasingly easier for merchants and other entities to integrate this technology into their economic workflows – even compared to just a few years ago. so. recently,Coinbaseannounced a partnership with payments provider stripe to offer usdc for cryptocurrency payments and fiat-to-crypto conversion on base, in addition,Visa, mastercard andPayPalin recent years, respective stablecoin plans have also been launched. others include shift4, nuvei, worldpay and checkout.com stablecoins need clearer regulation and a smoother cryptocurrency user experience to be more firmly grounded in their potential. "wang heng said.

in huang haiguang’s view, the compliance issue of stablecoins is crucial. at the end of 2023, hong kong issued a series of consultation documents on the regulatory system for stable currencies and responded to them, which to a certain extent shows the hong kong government’s open attitude towards stable currencies. among them, the hong kong government allows the tokenization of assets such as government bonds as reserve assets, and also accepts us dollar-denominated assets as reserve assets for hong kong dollar stable currencies.

“in the past year, the trend of accelerating the integration of web2.0 and web3.0 has become more and more obvious. with the launch of bitcoin spot etf and ethereum spot etf, as well as the acceleration of virtual asset compliance in various regions, traditional enterprises are using web3.0 there are more and more cases of business innovation through technology. behind this trend is the development process of physical assets from traditional forms to digitalization, globalization and on-chain." huang haiguang said.

huang haiguang further said that stablecoins are a very precise but huge market. based on blockchain issuance, the technical threshold is not high, but its compliance standards, scenario applications and user services are very different, but in the end all will be reflected in the adoption rate. in the long term, more issuers will flood into the market. there have been many overseas cases of companies successfully issuing stablecoins. its market potential is comparable to the credit card market, which has reached a scale of trillions of dollars, and the market space is vast. the entry of more institutions with different backgrounds can create healthy competition through differentiated services and incentives for the end market.

editor-in-chief: xu yunqian editor-in-chief: gong peijia