Circle (CRCL) had a strong opening on its first day of trading, triggering multiple circuit breakers, with the stock price briefly soaring to $103, becoming the first stablecoin issuer to successfully knock on Wall Street's door. This not only marks a capital leap for Circle but also signifies that stablecoins are accelerating their entry into the mainstream financial system.
At the same time, the global regulatory landscape is rapidly evolving: Hong Kong has officially launched a stablecoin licensing system, and the U.S. "Genius Act" is advancing quickly, with the regulatory map becoming increasingly clear. On-chain data shows that stablecoin trading volume has surpassed that of Visa and Mastercard, indicating a quiet shift in the power dynamics of the payment sector.
In this edition of Space "Circle IPO - Changes in the Global Crypto Landscape," we invite six guests: Kiwi, Head of Research at OKX Ventures; Bruce, Head of Investment at Summer Ventures; Kevin, Head of Chinese Operations at Frax Finance; Vava, Head of Market at Infini; Claudio, Founder of KODO; and Levis, CMO of APACX, to engage in a deep dialogue about Circle's business model, the regulatory game surrounding stablecoins, and the competitive logic between USDC and USDT, to uncover the real opportunities and challenges.
The full version can be accessed for playback: https://x.com/i/spaces/1RDGlzWoveqxL
1: Can Circle's successful IPO help USDC narrow the market share gap with USDT (currently about 5 times apart)? Can the listing change the competitive landscape of stablecoins, even challenging USDT's long-term dominance?
KiWi: Circle's business model exhibits structural characteristics: 66% of its revenue relies on interest from low-risk assets (with $1.6 billion over two years), and its profitability is deeply tied to interest rates; the cost side heavily depends on channels, with Coinbase's distribution fees alone reaching $908 million, and total channel costs exceeding $1 billion.
This "heavy channel, light product" model faces dual challenges: a lack of independent growth engines and slow conversion of compliance advantages. The $7 billion valuation reflects long-term market optimism, but for USDC to break through the USDT barrier, it must reconstruct its business logic—reducing channel dependence and establishing a self-sustaining ecosystem. This is a key turning point for future competition.
Bruce: I see it from two aspects. In the long term, the advancement of the U.S. "Genius Act" will significantly promote the growth of the stablecoin market. JPMorgan predicts that by 2028, the market size will grow from the current $250 billion to $1 trillion, with an average annual growth rate of about 50%. If USDC maintains its current share of about 24%, its market value and profits will increase significantly, with annual profits expected to grow several times from the current $150 million.
However, in the short term, USDT has clear advantages in emerging markets and exchanges, with over 30% of trading volume on the Tron blockchain, showcasing its adaptability to non-compliant markets. For USDC to surpass USDT, global regulatory coordination is necessary, which will take at least five years. The 2023 Silicon Valley Bank incident caused USDC to de-peg to $0.87, exposing its market confidence and liquidity issues, leading to a decline in market share.
While USDC's scale will expand, its market share may remain at 20%-30% in the coming years, making it difficult to truly challenge USDT's leading position.
Kevin: Circle's IPO aims to enhance transparency and institutional trust, attracting institutions like Ark Invest, but the gap between USDC and USDT's end users still exists. The network effects in the stablecoin industry make it difficult to break through liquidity barriers, and the current downturn in DeFi restricts USDC's development.
Although the listing enhances Circle's brand value, USDT's ecological advantages in scenarios like cross-border trade are unlikely to be replaced in the short term. Emerging players may break through in niche areas, but in the next five years, USDC may maintain the status quo, with limited potential to disrupt USDT's dominance. USDC's circulation increased from $24 billion to over $60 billion, with a growth rate of 154%, far exceeding USDT. If this trend continues, USDC may catch up in the $1 trillion market by 2028. BCG predicts that by 2030, the market size could reach $16-30 trillion.
The global regulatory trend is reshaping the landscape, with the U.S. incorporating stablecoins into the financial system, and Singapore following suit. USDC has become the preferred choice for pro-U.S. economies, contrasting with USDT, which primarily operates on unregulated chains. USDT has the upper hand in the short term, but as financial regulations tighten, USDC's compliance advantages may translate into market share within 5-10 years. We must recognize USDC's potential while also facing its short-term challenges.
Claudio: USDT users can be divided into two categories: smart hardware exporters who are aware of alternatives but continue to use it (considering ecological synergy), and traditional traders who may not even know USDC exists, giving USDT a first-mover advantage.
After the stablecoin bill is passed, user migration will still be constrained by inertia. Tech companies are reluctant to increase operational complexity, while traditional businesses rely on platform recommendations. For USDC to break through, it needs to build a complete application scenario network, especially by strengthening partnerships with payment platforms to change user habits. This kind of ecosystem construction requires long-term investment, making it difficult to shake USDT's dominant position in the short term.
USDC represents a compliant direction, while USDT focuses on the "underground economy," creating differentiated competition. USDC expands the incremental market, while USDT maintains its existing advantages. The Tron blockchain continues to optimize user experience (such as gas fee payments), and this scenario-based innovation is key to USDT's lead. In the long run, both models may develop in parallel, with market demand determining their boundaries.
2: How will the advancement of the U.S. "Genius Act" affect the industry landscape? What are the pros and cons?
Bruce: The implementation of the Genius Act marks a new phase in stablecoin regulation, with core requirements mandating that large issuers must be licensed and maintain 100% reserves in U.S. dollars/Treasuries. This will enhance industry transparency and eliminate risks similar to the Silicon Valley Bank incident. Circle, which meets these requirements, will significantly benefit, as traditional financial institutions are more likely to choose compliant stablecoins like USDC, expanding their institutional user base.
The act poses challenges for non-U.S. projects like USDT, as their lack of transparent reserves and registration qualifications may face risks of being classified as securities, affecting their operations in the U.S. market. The innovative models of decentralized stablecoins may also be hindered. Under tightening global regulations, compliant entities will gain developmental advantages, but this may stifle innovative vitality and increase market concentration.
Vava: The core purpose of the U.S. passing the Genius Act to regulate stablecoins is to maintain the dominance of the U.S. dollar and curb the influence of USDT, which acts like a "blockchain Federal Reserve." The act forces non-U.S. stablecoins to either comply or exit the market, allowing compliant projects like USDC to gain policy benefits.
As practitioners, we find that the implementation of stablecoins still relies on traditional banking settlement systems, revealing the contradiction between regulation and innovation: providing compliant pathways for innovations like RWA while potentially limiting native on-chain innovations. This dual effect will continue to impact the mainstreaming process of stablecoins.
Claudio: The core of the Genius Act is to strengthen the payment functionality of stablecoins, led by the Office of the Comptroller of the Currency, incorporating them into the existing banking regulatory framework. Long-term compliant Circle becomes the biggest beneficiary, aligning with its years of investment.
The act has differentiated impacts on various stablecoins: payment-type stablecoins like USDC gain institutional benefits, while financial-type algorithmic stablecoins like USDE face compliance barriers. USDT is at a strategic turning point; full compliance will solidify its position in the mainstream market but may sacrifice gray market operations. Its adjustment strategy will become an important case to observe the effectiveness of regulation. This division reflects market natural selection rather than regulatory flaws.
KiWi: The Genius Act clears obstacles for compliant projects like USDC through full reserves and foreign investment restrictions, but it also creates conditions for financial giants like BlackRock to enter the market.
This regulatory clarification will trigger a chain reaction of "rule establishment - resource aggregation - competition escalation," meaning that while Circle enjoys policy benefits in the short term, it will face strong challenges from traditional financial giants in the medium to long term. The current market landscape still holds significant uncertainties, and the ultimate outcome remains to be seen.
3: After Hong Kong implements the stablecoin licensing system, how will the global stablecoin landscape evolve? Do users trust state-regulated fiat stablecoins (like Hong Kong's HKD stablecoin) more, or market-driven USD stablecoins?
Levis: The stablecoin regulation in Hong Kong is unlikely to shake the 95% market dominance of USD stablecoins in the short term. History has shown that alternatives like the Euro and gold stablecoins have failed to break through the established ecosystem of the dollar, including infrastructure like OTC networks and exchange pricing mechanisms.
Emerging fiat stablecoins are more realistically positioned to create incremental value within the existing system rather than directly challenging USD stablecoins. Hong Kong can focus on optimizing cross-border payment services and finding differentiated spaces, but establishing an ecosystem independent of the dollar faces significant migration costs in terms of user habits and infrastructure. Market choice always holds more decisive power than regulatory intentions.
Claudia: Although the Hong Kong stablecoin bill is unlikely to shake the dominance of USD stablecoins, it signals a push for the internationalization of the HKD and RMB, providing important compliance identities for practitioners.
However, current regulations mainly govern the issuance phase, lacking specific constraints on the circulation phase, such as anti-money laundering guidelines. This "heavy issuance, light circulation" model means that the network effects of USD stablecoins will continue to dominate the market. A true change in the landscape will require more comprehensive circulation regulatory policies to be implemented.
KiWi: The development of stablecoins in Hong Kong is constrained by the internationalization process of the RMB rather than technical factors. Currently, RMB stablecoins mainly serve Chinese enterprises for cross-border settlements and need deep integration with the traditional financial system, which is challenging. The traditional use cases of offshore RMB are also difficult to directly migrate to the stablecoin system.
While strategically supporting RMB internationalization, HKD/RMB stablecoins still need to address practical obstacles like offshore clearing networks and international acceptance to truly break through. Therefore, Hong Kong's stablecoin layout is more of a hedging strategy rather than a short-term solution to replace USD stablecoins.
Kevin: The strategic positioning of Hong Kong's stablecoin is to provide a testing ground for the internationalization of China's digital currency, adopting a proactive model of "regulate first, then develop," contrasting with the passive regulation in the U.S. The upcoming HKD/USD dual-pegged stablecoin from JD.com relies on its e-commerce ecosystem to build application scenarios while seeking breakthroughs within the regulatory framework, reflecting this experimental characteristic.
This reflects the industry's consensus: an ideal stablecoin must balance regulatory recognition with market consensus. As a financial hub connecting China and the international market, Hong Kong's dual attributes help cultivate regional stablecoin benchmarks. While it may be difficult to shake the global position of USD stablecoins in the short term, it may form differentiated advantages in specific markets like Southeast Asian cross-border trade. The ultimate form of stablecoins will be a dynamic balance between regulatory and market forces.
Bruce: The U.S. dollar's dominant position in global payments (47%), trade financing (83%), and foreign exchange reserves (43%) determines the dominant advantage of USD stablecoins. The HKD stablecoin launched in Hong Kong is constrained by the linked exchange rate system (1:7.75-7.85), essentially remaining attached to the dollar system, and may even indirectly reinforce the dollar's position through regional applications like the Greater Bay Area, as cross-border trade still generally requires dollar settlements.
On-chain data shows that USD stablecoins account for 97% of trading volume, while HKD stablecoins face liquidity challenges. Although liquidity can be improved through partnerships with exchanges like Binance, the global network effects already established by the dollar create structural barriers that are difficult to overcome. Hong Kong's attempts are more of a tactical supplement rather than a strategic overhaul.
VaVa: The HKD stablecoin faces threefold challenges: the USD peg mechanism, lack of market consensus, and insufficient liquidity, which is similar to the situation of CIPS challenging SWIFT. Even with regulatory support, it is difficult to change user habits and network effects in the short term. In contrast, USDT is more competitive due to its existing ecosystem, and its advantages become more apparent after compliance transformation.
Changes in U.S. regulatory policies bring new opportunities. Although the Genius Act has vetoed provisions for tech companies to issue stablecoins, if U.S. tech giants (like PayPal) choose to establish compliance systems in Hong Kong, similar to Tesla's factory model in China, it could create new competitive variables in the Eastern market. Such fundamental changes, rather than gradual improvements, are what can truly challenge the dominance of USD stablecoins.
4: What is the actual implementation of stablecoins in on-chain payment scenarios? Can applications like PayFi break existing limitations? What are the key driving forces for breaking through next?
Kevin: The development of stablecoin payments has entered a critical period. Although on-chain transaction volumes have surpassed the total of Visa and Mastercard, applications in daily consumption scenarios remain limited. Applications like PayFi show great potential, but achieving large-scale implementation requires building a complete business ecosystem.
Taking FlexNet as an example, by connecting issuers, payment channels, and business scenarios, stablecoins can be embedded in actual transactions while utilizing U.S. Treasury yields to enhance the value of deposited funds, creating a unique advantage of "payment + yield." In the future, as more licensed institutions join and scenarios expand, areas like cross-border e-commerce and remittances may be the first to break through. The real breakthrough point lies in finding a killer application that satisfies both merchant efficiency and user returns.
Levis: PayFi shows differentiated development trends globally, particularly excelling in regions with weak financial infrastructure. For example, in Venezuela, local users have begun using stablecoins to pay for digital service subscriptions, reflecting that 1.4 billion unbanked individuals are establishing alternative financial channels through stablecoins. The current PayFi ecosystem is diversifying, including innovative models like cross-border acquiring and on-chain currency exchange. Notably, in regions with severe inflation, the combination of "stablecoin payments + RWA yields" (7-10% annualized) demonstrates unique advantages.
With the surge in global debt (an increase of $12 trillion over the past five years) leading to fiat depreciation pressures, this demand-driven development model is likely to be more sustainable than regulatory pushes and could become a key turning point for the widespread adoption of stablecoin payments.
Claudio: Stablecoin payments exhibit unique advantages in cross-border payments and financially underdeveloped regions. On one hand, they are breaking through the efficiency bottlenecks of traditional cross-border payment systems like SWIFT; on the other hand, in countries with severe inflation like Venezuela, they have become an important channel for residents to acquire USD assets.
However, in mature payment systems (like Alipay in China), stablecoins struggle to replace existing local payment methods. Therefore, corporate cross-border payments and individual remittances in specific regions become the most promising breakthrough points. The entry of large tech companies could be key to driving adoption, as they have ready user scenarios and can enhance the credibility of stablecoins through corporate trust. This "application scenario + credit endorsement" model is more market-disruptive than mere technological innovation.
5: Under the trend of stablecoin financial infrastructure, what kind of competitive and cooperative relationship will traditional banks and compliant stablecoin issuers (like Circle) present? Is it possible to give rise to a new form of "digital banking"?
Claudio: Stablecoins are upgrading to financial infrastructure, reshaping the relationship between banks and issuers. Circle's cross-chain settlement and merchant service modules challenge the intermediary business of banks, achieving "disintermediation." The relationship may go through three stages: short-term cooperation (banks accessing USDC liquidity pools), mid-term competition (banks building their own stablecoins), and ultimately mergers and acquisitions (banks acquiring stablecoin technology). This will give rise to "hybrid banks," combining DeFi efficiency with traditional compliance, reshaping banking operations through algorithms and smart contracts.
Industry mergers and acquisitions confirm this trend: Visa's investment in BBNK and Stripe's acquisition of Bridge show the bidirectional integration of traditional finance and Web3 payments. The Circle Payment Network targets SWIFT's pain points, achieving global fund flow through on-chain settlement. Compared to multi-country fund pool models like Airwallex, USDC's on-chain transfers + fiat withdrawals avoid fund fragmentation while maintaining compliance, offering structural substitution advantages.
Bruce: Compliant stablecoin issuers like Circle are giving rise to a new type of digital banking model, focusing on payment and settlement infrastructure rather than traditional deposit and loan services. Development shows three major characteristics: complementary cooperation with traditional banks, competition from large institutions building their own systems, and potential disruption from decentralized projects.
This will reshape the industry landscape, forming a three-tier competitive structure of "traditional banks - compliant stablecoins - decentralized protocols," with all parties engaging in a game across regulatory, technological, and user dimensions, driving the digital transformation of financial infrastructure.
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