This AMA brought together four industry pioneers from different fields to discuss the deep impacts and future opportunities of the bill.

The innovative PayFi protocol PolyFlow recently held a Special Asia AMA focusing on the "U.S. Stablecoin Bill."

Against the backdrop of Bitcoin breaking its historical high of $110,000, the crypto industry is accelerating its integration into the traditional financial system, and the advancement of the U.S. Stablecoin Bill (referred to as the "GENIUS Bill") is seen as a key step in the transformation of the global financial system.

This AMA gathered four industry pioneers from different fields to explore the deep impacts and future opportunities of the bill.

Meet the Speakers: Four Industry Leaders

Raymond

Founder of cross-border payment company GeoSwift, co-founder of PolyFlow, and an early believer in the crypto industry. Raymond ventured into Bitcoin investment as early as 2011 and was an early investor in Ripple, witnessing the evolution of the crypto market from zero to a trillion-dollar scale, focusing on cross-border payment and stablecoin practices.

Andrew

Partner at King & Wood Mallesons in Hong Kong, practicing attorney in the U.S., and adjunct professor at the University of Hong Kong Faculty of Law, primarily engaged in legal matters including digital assets, structured finance, syndicated loans, financial regulation, capital markets, and asset securitization, and deeply involved in financial policy research in the U.S. and Asia.

Gary

Investor at CICADA Finance and a seasoned practitioner transitioning from traditional VC/PE to crypto. Gary has 15 years of investment experience, promoting the transformation of asset management from traditional models to on-chain protocols, focusing on DeFi and RWA sectors.

KK

Founder of Hash Global and an early investor in the crypto field. Focusing on stablecoins and payment sectors, he has led investments in over 80 Web3 projects, promoting the integration of technology and business scenarios.

I. Overview of the U.S. Stablecoin Genius Bill

Attorney Andrew first introduced the basic situation of the Genius Bill.

The bill aims to establish a comprehensive legal and regulatory framework in the U.S. to support the development and widespread application of stablecoins. As a bridge between the crypto asset market and the traditional financial market, stablecoins have stable value and flexibility, and can be exchanged for fiat currency on a one-to-one basis. However, due to their close relationship with the traditional financial system, governments and regulatory agencies around the world are concerned about the potential negative impacts of the stablecoin market. Therefore, the bill is expected to fall under regulatory oversight and, after a vote in the U.S. Senate, is likely to be sent to the U.S. President for signing into law.

Key Points of the Genius Bill

Definition and Characteristics of Stablecoins: The Genius Bill defines payment stablecoins as digital assets pegged to the value of national fiat currencies for payment and settlement. Stablecoins have stable value, making them suitable as payment tools in the Web3 space, and serve as a bridge between the crypto asset market and the traditional financial market. Their reserve assets include bank deposits and government bonds.

Regulatory Framework: The bill establishes a dual-layer regulatory framework at the federal and state levels. Issuers with a scale not exceeding $10 billion can choose to comply with state regulatory frameworks, while other issuers must adhere to federal regulations. The main federal regulatory agencies include the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.

Licensing System: The bill ensures that stablecoin issuers actively apply for licenses, stipulating that no one other than licensed issuers may issue payment stablecoins in the U.S. Digital asset service providers are prohibited from offering or selling unlicensed stablecoins to U.S. persons. Qualified foreign stablecoin issuers may be exempt but must register with the U.S. government.

Accounting and Financial Requirements: Stablecoins issued by locally licensed issuers in the U.S. can be treated as cash for accounting purposes, usable for derivatives trading margins and interbank settlements. Licensed issuers must maintain 100% of qualified reserve assets and publish the size and composition of reserve assets monthly, subject to accountant review. The CEO and CFO must confirm the accuracy of the information. Issuers with a scale exceeding $50 billion must prepare annual financial reports and undergo audits.

Compliance and Risk Management: The bill imposes requirements on issuers regarding business activity restrictions, capital liquidity, risk management, anti-money laundering, and compliance, requiring adherence to U.S. economic sanctions, anti-money laundering, anti-terrorism financing, and KYC laws. All stablecoin issuers must have the technical capability to comply with legitimate directives from the U.S. government.

In summary, the introduction of the Genius Bill reflects the U.S. government's emphasis on and support for the development of stablecoins. By establishing a comprehensive legal and regulatory framework, the bill aims to ensure the stability and security of stablecoins while promoting their widespread application in the financial sector. This not only helps drive the development of the crypto asset market but also brings new opportunities and challenges to the traditional financial market. As the bill progresses and is implemented, stablecoins are expected to play a more significant role in the global financial system.

II. The Historical Origins of Stablecoins

Raymond, as one of the earliest participants in the industry, reviewed the reasons for the emergence of stablecoins and how they have developed from early stages to the present from a historical perspective. The core value of the U.S. Stablecoin Bill lies in enhancing market confidence and promoting industry consensus, which is the fundamental driving force behind the rapid development of cryptocurrencies from nothing.

The Development History of Stablecoins

The development history of stablecoins can be divided into several stages. In 2010, someone made the first purchase of pizza with Bitcoin, marking the ability of cryptocurrencies to serve as a measure of value for goods in payment, a significant event. As early as 2013, many payment methods using cryptocurrencies had emerged in the market, such as Bitcoin ATMs in Vancouver, Canada, and merchants in Tokyo, Japan, accepting Bitcoin payments. However, the high volatility of Bitcoin prices limited its use as a payment tool, and it was more often viewed as an investment tool.

To address this issue, some began to experiment with issuing stablecoins. In the stablecoin 1.0 era, stablecoins like USDT and USDC emerged, pegged to fiat currencies at a 1:1 ratio. These stablecoins were collateralized by U.S. dollars or other equivalent assets to ensure their stability. Subsequently, the stablecoin 2.0 era emerged, where people began to attempt issuing stablecoins collateralized by cryptocurrencies like Bitcoin or Ethereum. During this period, the collateralization ratio was no longer 1:1 but rather 1.2 or 1.15:1 to cover the price volatility of the crypto assets.

Further development led to the emergence of algorithmic stablecoins, such as Luna and UST. These stablecoins were collateralized by their own issued digital assets, but this model carried risks due to its fragile underlying logic, making it susceptible to market shocks. These events indicate that the core of stablecoins lies in the stability of their pegged assets.

Core Points of the U.S. Stablecoin Bill

The core of the U.S. Stablecoin Bill is to clarify the definition and issuance requirements of stablecoins. The bill stipulates that stablecoins must be issued at a 1:1 ratio with fiat currency to ensure their stability. This provision helps clarify misunderstandings in the market regarding stablecoins and defines what stablecoins are. Many projects have attempted to issue stablecoins using customer funds as collateral, but this does not align with the true definition of stablecoins. Stablecoins must be collateralized by their own assets, not customer funds.

From the perspective of the entire industry, the greatest contribution of the U.S. Stablecoin Bill to the industry is enhancing market confidence and expectations for future development. This confidence is built on an increasing consensus regarding the value of stablecoins. Just as gold has become a valuable object due to its widely recognized value, stablecoins are gradually being accepted by the market due to consensus. This consensus has driven the rapid growth of the stablecoin market, evolving from nearly zero to a scale of $3 trillion to $4 trillion today.

III. Multidimensional Analysis of the Driving Factors Behind Stablecoin Policies

Gary, from the perspective of a frontline financial practitioner, provided an essential analysis of the U.S. dollar stablecoin policy based on his experiences in the U.S. market.

Dollar Expansion to Enhance Global Influence

One of the core goals of the U.S. stablecoin policy is to enable countries to issue dollar stablecoins based on dollar assets and U.S. Treasury bonds. This is actually linked to a large-scale expansion strategy. Unlike previous direct currency issuance by the Federal Reserve, this time the minting authority is granted to other entities, which means the Federal Reserve is effectively relinquishing part of its M2 minting authority. So why is the U.S. making such a choice? The fundamental purpose is still to expand the balance sheet and enhance the global influence of the dollar.

However, this move has raised many questions. If the goal is to expand the balance sheet and enhance influence, why relinquish the issuance authority, potentially losing settlement rights? Currently, the share of SWIFT settlements is declining, and logically, the U.S. should strengthen control, so why is it further loosening now? For example, if the Japanese Financial Services Agency issues USDJ that meets the basic requirements of the Genius Bill, it can satisfy market demand in Japan's domestic currency circulation while also being able to overissue and increase like a stablecoin. Through this bill, the U.S. is leaving room for other countries to issue stablecoins, allowing issuance abroad and further promotion, seemingly relinquishing potential minting and settlement powers.

Decline of Dollar Control and the Impact of New Trends

It is an undeniable fact that the U.S. has gradually lost control over global currency in recent years. From 2019 to 2023, the U.S. overissued currency by as much as 40%, leading to significant currency depreciation. To reclaim the overissued portion, the U.S. has employed various measures such as raising interest rates and increasing reserve ratios, but with little effect. Many regions around the world have begun to break away from U.S. control, building their own currency settlement systems, with discussions around Hong Kong's M-bridge becoming increasingly frequent.

In the past five years, the dollar's control over the globe has rapidly declined, and this year has seen a crisis in U.S. Treasury bonds, a crisis in dollar assets, and a crisis in exchange rates. People are turning their attention to currencies like the Swiss franc, Singapore dollar, and Japanese yen. When Warren Buffett was asked at the shareholder meeting whether to buy U.S. Treasury bonds and U.S. stock assets, he encouraged everyone to buy, but he himself invested in a $90 billion Japanese bond fund, which undoubtedly hints at the current risks of the dollar.

The reasons for the decline in dollar control can be traced along two lines. First, the U.S. has gradually lost control over the dollar globally over the past 20 years, especially after entering 2019, when Covid began to spiral out of control, making 2019 a critical trigger point for the decline in dollar control. Second, the emergence of new trends has made it impossible for the U.S. to maintain control.

In the past four years, the proportion of settlements using crypto has significantly increased. In Nigeria, with a population of 223 million, over 50% of people use crypto for settlements. Although these settlements are essentially in USD, they are unrelated to the U.S. dollar issued by the U.S. and are not subject to oversight by U.S. regulatory agencies like the FDIC, which is a trend that cannot be ignored. Currently, countries and regions such as Jerry, India, Brazil, and Bangla University are rapidly developing in the global consumer finance daily settlement system, showing exponential growth.

The same is true in the field of supply chain finance. I once invested in a North American company with a market capitalization of several billion. In 2022, I suggested they use USDT for settlements, but they were hesitant due to legal concerns. By 2023, their usage had reached 0.5%, and in 2024 it is expected to rise to 5%. This indicates that the proportion of crypto settlements in trade among small and medium-sized enterprises is rapidly increasing, and these were originally assets off the U.S. monetary balance sheet. The company expects that by 2025, based on natural growth, the proportion of crypto settlements will exceed 15%, and this trend is already quite evident.

Overall, whether it is the issues of the dollar itself within the traditional financial system or the problems arising from the development of crypto, they point to one fact: the dollar's control over the globe is rapidly declining. This is also the foundational context for the introduction of the Genius Bill; if the U.S. does not take action now, the influence of the dollar will continue to decline.

The Deep Logic and Impact of U.S. Stablecoin Policy

This year, the Senate has vigorously advanced this policy, showcasing the flexibility and adaptability of the U.S. system. This seems to be a strategy of "turning the tables, retreating to advance," as the U.S. effectively relinquishes part of its dollar minting and settlement rights, pushing this matter into the market. After the policy is implemented, U.S. financial institutions will merely serve as "samples," telling countries and regions like Japan, Vietnam, and the Middle East that as long as they have U.S. Treasury dollar assets, they can issue their own dollar stablecoins at a 1:1 ratio.

While the U.S. is reluctant to see overissuance, it has no choice but to accept it, as it is the cornerstone of balance sheet expansion. In the past, the dollar was based on gold and reserves, as well as the credit of the dollar; now, other countries have entered a new phase based on dollar assets and U.S. Treasury bonds. The essence of this policy is to retreat to advance, relinquishing the absolute issuance rights of the dollar, converting U.S. Treasury bonds into gold, and allowing the world to issue currency pegged to this.

This is a classic approach borrowed from the Web3 Restaking model. The core of the Restaking model is to stake currency on a certain asset, deriving shadow currencies that circulate and build ecological assets around them. The essence of crypto's development over the past two years lies here, and the U.S. government and financial system have quickly learned and applied this essence, effectively addressing the core issue of the declining global control of the dollar.

After the implementation of this policy, the U.S. financial system will experience a "quake." In the short term, dollar assets will fluctuate dramatically, affecting the asset issuance and circulation of traditional financial institutions, but in the long term, it will further promote the value of the dollar. The financial community in New York is in an uproar, and securities institutions in Hong Kong are flocking to Singapore to seek cooperation opportunities, which contain numerous new possibilities.

IV. The Key Role of Stablecoins in Finance and Market Impact

After understanding the introduction, background, and driving factors of the U.S. Stablecoin Bill, let's explore the impact of the Genius Bill on the subsequent market.

Stablecoins — RWA of Fiat Dollar

KK from Hash Global offers a different perspective on this stablecoin bill from an investor's viewpoint.

In the financial sector, stablecoins are a highly anticipated visible track that everyone has been looking forward to. We started investing in RWA exchanges three years ago and communicated with licensed institutions in Singapore, but the entire process has been very slow. We have always believed that this year, the main players that can stand out in the Web3 market will be stablecoins and money market funds.

The importance of stablecoins lies in the fact that they are seen as the Web3 version of the fiat dollar, with real assets corresponding to the dollar. Money market funds are what on-chain capital truly needs. The introduction of the stablecoin bill, in my opinion, will accelerate the process, leading to an increasing amount of on-chain capital. Only with capital on-chain can there be liquidity, and with liquidity, quality assets will be attracted to go on-chain.

Earlier this year, everyone anticipated that the U.S. and Hong Kong would successively pass stablecoin bills. Now that the bill has passed, we see traditional financial institutions, including the two largest payment networks in the world, Visa and MasterCard, actively embracing stablecoins to solve cross-border payment and payment endpoint issues. They will also put the power of stablecoins into practice.

I have previously discussed with some friends that issuing stablecoins now is somewhat akin to when banks first started issuing credit cards. Every bank wanted to engage in credit card business because they could share in the payment and settlement networks, whether as issuing banks or acquiring institutions. Now that regulations have been introduced, everyone meets the issuance conditions; since they can issue, why not? As long as there are scenarios and users, they can make money. This process will accelerate the influx of capital into the on-chain financial world of Web3. Only with sufficient capital and various institutions can the Web3 market truly develop.

The Integrated Development of Stablecoins and the Traditional Financial System

Similarly, Raymond, who has 20 years of experience in the cross-border payment industry, brings us profound observations on the development of the crypto industry, or rather stablecoins, as Web3 payments gradually move towards the mainstream.

At the recent Consensus conference in Toronto, we clearly felt that this year's venue was significantly different from previous years, with more people starting to pay attention to the Web3 payment track. This reflects that the payment sector has become a current industry hotspot. As practitioners, we have long been laying the groundwork and engaging in many beneficial discussions with industry insiders. For example, in 2022, as a traditional payment company, we built the PolyFlow platform and actively participated in developing the Web3 payment track.

In the past, there was a clear contradiction and opposition between the traditional financial industry and the crypto industry. Traditional finance held a reserved attitude towards the crypto industry, while crypto practitioners pursued freedom and resented the strict regulations of traditional finance. However, as the industry continues to develop, the interaction and connection between the two have become increasingly close, with more and more market demands prompting both sides to sit down and discuss how to achieve integration.

We have also been engaging in beneficial attempts with industry giants recently. For example, a few months ago, we collaborated with Ripple to explore how to connect XRP, stablecoins, and various fiat currencies within the global payment clearing network. The issuer of USDC has launched the CPN project, exploring how to build a clearing network through compliant inflows and outflows from two endpoints of financial institutions. At the same time, we have seen major exchanges launching their own payment tools, such as OKX's Pay.

In this process, we must not only focus on the efforts of practitioners but also recognize the active participation of traditional financial giants like Visa. We recently signed an agreement with Visa to explore how to utilize the Visa channel for cross-border payments, leveraging our global payment network. All developments in the crypto industry over the years point to one core issue: stablecoins and blockchain are not just accounting systems but also important tools for effective asset transfer.

Within a compliant and legal framework, how to further promote this effective transfer is the direction all practitioners are striving for. As an advisor to the Canada Development Bank and the People's Bank of China, I often communicate with regulatory bodies and banks. I frequently ask them one question: Is all the capital in traditional finance clean? The answer is clearly no. So, is all the external capital that flows in "dirty money"? The answer is also no. If all the money flowing in the crypto industry were "dirty money," this industry could not have developed to this day, nor would it have attracted numerous asset investments and smart individuals. This indicates that the industry addresses a significant pain point for a large portion of legitimate liquid assets in the world.

With this mindset, we look again at the stablecoin bills introduced by the U.S. and Hong Kong; these policies not only enhance industry confidence but will also encourage everyone to develop more industry solutions that truly address practical problems. This is my viewpoint.

The Huge Transformation of the U.S. Banking Financial System

Gary sees this as a tremendous opportunity, a transformation from traditional finance to stablecoins and then to crypto finance.

Essentially, the traditional financial system has established a series of rules over the past 100 years, but some of these rules have gradually become complex and rigid, hindering the sustained rapid development of finance. The emerging crypto industry has made many beneficial explorations over the past 16 years, especially in the rapid development of payment and settlement systems. However, due to a lack of effective regulation, the crypto industry has also encountered some non-compliance and even "dirty" issues.

Therefore, the current critical juncture is to regulate financial development under the existing national system through compliance legislation, combining flexible financial assets to promote the integration of traditional finance and emerging finance. This is not only necessary but has also gradually become a trend in industry development. The introduction of the stablecoin bill can be seen as a milestone event. These changes have exceeded the expectations of many traditional financial professionals and emerging financial practitioners, and the speed of advancement over the past year has been remarkable.

The subsequent implementation of the bill provides traditional finance with the opportunity to connect with emerging finance, allowing banks and financial institutions to gradually become entities similar to "public chains," capable of independently issuing currency and currency-based assets. This transformation has actually been brewing for a long time, and it has finally reached a critical juncture. In a sense, banks and financial institutions are beginning to build their own asset and income systems on a compliant basis, transferring traditional assets onto the blockchain to achieve transparent, recordable, and traceable transactions. This is not only a technological advancement but also a significant transformation of financial models. Over the past five years, banks like Goldman Sachs and Citibank have been required by regulatory bodies such as the Federal Reserve and FDIC to adopt blockchain technology for recording to ensure the transparency and authenticity of accounting.

After this change, the integration between banks and the blockchain ecosystem will become even closer. Banks issuing their own stablecoins and developing their own assets and ecosystems will greatly promote the connectivity between traditional finance and emerging finance. In the coming month, various asset management institutions and functional systems within the U.S. financial system will undergo significant changes, and everyone will quickly adjust their strategies to see who can stand out in this transformation.

In addition to the stablecoin bill and related implementation regulations issued by Hong Kong, other regions around the world, such as Japan, Singapore, and Dubai, will also respond quickly by introducing similar stablecoin legislation. Those who can quickly connect with these bills and integrate their financial systems will gain an advantage in future competition. Rapidly activating the ecosystem through shadow currencies will bring enormous historical opportunities. Therefore, it is not an exaggeration to call this transformation "Genius."

About PolyFlow

PolyFlow is the first modular PayFi infrastructure dedicated to connecting real-world assets (RWA) with decentralized finance (DeFi). As the foundational layer of the PayFi network infrastructure, PolyFlow integrates traditional payments, crypto payments, and DeFi, decentralizing the processing of real payment scenarios. PolyFlow provides the necessary infrastructure to create PayFi scenarios, ensuring compliance, security, and seamless integration of real assets, helping to build a new generation of financial paradigms and industry standards.

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