Assets typically consist of only one digital token, and digital currencies are typically only put on the chain upon transfer/withdrawal from the exchange. Therefore, on exchange transactions may be less secure than on chain transactions, but they are faster. There are currently about 10 licensed digital asset exchange licenses. 8. What is the relationship between stablecoins and Bitcoin? The original intention of Bitcoin (BTC) was as a means of payment, as can be seen from Satoshi Nakamoto's famous paper titled "Bitcoin: A Peer to Peer Electronic Cash System". However, due to the mechanism setting a limit of 21 million coins, BTC clearly cannot be used as a payment medium. If currency cannot be issued with economic growth, it will lead to deflation, and normal economic development requires a slightly inflationary monetary environment. It is precisely because BTC has a quantity limit, cannot be counterfeited, and is convenient for payment that it has gradually attracted the attention of investors. Its price continues to rise and fluctuate violently, and its investment attribute as an asset is increasing, while its attribute as a payment medium is weakening. Stablecoins are based on the same underlying blockchain technology, but their direction is towards a more pure payment tool. Their emergence further replaces BTC's payment function, representing a different direction for stablecoins and Bitcoin. In practice, one major use of stablecoins is precisely to trade BTC, which is also a cryptocurrency. One is a payment medium, and the other is a digital asset. Compared with stablecoins, BTC is a completely decentralized system, and its operation does not rely on any centralized institutions. All parties involved act according to established rules, and the more participants there are, the stronger the system stability. Stablecoins are operated by issuing institutions, and the exchange between fiat and stablecoins, as well as the investment of reserve fiat currencies, requires the participation of centralized institutions. The participation of centralized institutions implies trust and operational risk, which is one of the risk factors that stablecoin users need to consider. 9. What is the difference between stablecoins and central bank digital currencies? Stablecoins and central bank digital currencies (CBDCs) have similarities, but more importantly, they are different. Central bank digital currency is a purer form of electronic cash, which mirrors the physical and electronic worlds of cash in circulation in reality. Cash in circulation is essentially a "promissory note" issued by the central bank. The holder of the promissory note has the power to demand value from the central bank, and the size of the power is the face value on the promissory note. The reason why this promissory note can become a payment medium is because everyone believes that the corresponding value of the promissory note can ultimately be redeemed. Cash can be understood to some extent as an anonymous account of the central bank, while central bank digital currency is the electronic version of this account. Compared to cash, the electronic form of central bank digital currency is more user-friendly and eliminates the physical flow of cash. Traditional bank account payments are different from central bank digital currencies. Payment accounts are opened in commercial banks, representing the right to claim value from commercial banks, while stablecoins represent the right to claim value on the issuing institution chain. The central bank's digital currency is undoubtedly a centralized system, in which the central bank plays the role of a clearing institution, and payment for the central bank's digital currency must be confirmed by the central bank. Stablecoins still require the operation of issuing institutions and are not completely decentralized systems. In this regard, stablecoins have similarities with central bank digital currencies. However, stablecoins do not require the existence of a central settlement institution in the payment process, and enable direct peer-to-peer payments on a distributed ledger. From this perspective, they have certain decentralization characteristics compared to central bank digital currencies. 10. What are the risks of stablecoins? The main risks of stablecoins come from the compliance risks of issuers and operational management risks. The underlying layer of stablecoins is blockchain technology based on consensus and encryption algorithms, which is difficult to directly break through. Bitcoin, which has long performed robustly, can prove this. The greater risk comes from stablecoin issuers. The lack of transparency in reserve assets is a significant hidden danger. If the issuer fails to publicly and reliably prove that the anchor asset reserves are sufficient, investor confidence will be damaged, leading to the risk of a run on the bank. The top stablecoin USDT has been questioned due to insufficient historical information disclosure. In recent years, legal compliance risks have become increasingly prominent. Taking the BUSD jointly issued by Binance and Paxos as an example, although it claims to have 100% cash and US bond reserves and is regulated by the New York State Department of Financial Services, in early 2023, regulatory authorities still ordered Paxos to stop issuing BUSD due to unresolved compliance issues, resulting in a brief detachment of BUSD and a heavy blow to user confidence. Currently, BUSD has basically exited the historical stage. Stable coin issuers also face risks in their daily operations. Among them, liquidity management errors are common hidden dangers, and issuing institutions must ensure that there are sufficient high liquidity assets to cope with user redemptions. If there is a run on the market in extreme circumstances and the issuer's cash and other liquid assets are insufficient, the stablecoin price will fall below the anchor price. In addition, excessive concentration on a single exchange or platform is also a risk factor. Once problems occur in the main trading market, the liquidity of the stable currency will decline sharply, which is why the Huobi stable currency HUSD fell. The USD stablecoin USDC was once unanchored due to a run on the bank. The reason is that Circle, the issuer of USDC, is facing the risk of being unable to withdraw its US dollar reserves stored at Silicon Valley Bank due to the latter's collapse. This news triggered market panic, with a large number of holders rushing to sell or redeem USDC, and the price quickly fell below $1. During the period of March 11-12, 2023, USDC fell to a historic low of approximately $0.87-0.88 in the secondary market. In the face of the bank run crisis, Circle and other parties have taken emergency measures. Circle announced that it will use its own funds to fill the reserve gap and negotiate with US regulatory agencies to ensure the safety of SVB deposits; At the same time, actively destroying a large amount of USDC to shrink circulation and stabilize the coin price. On March 13th, the US Treasury Department, Federal Reserve, and others jointly announced plans to ensure the safety of SVB depositors' funds. Market panic subsided, and USDC prices quickly rebounded to around $1. Finally, the existence of stablecoins is based on three principles: 1. High transaction efficiency and low transaction costs; 2. Easy Internet payment; 3. Unregulated cross-border flows are allowed. Financial capital always pursues profit, and as players in the cryptocurrency industry, where do we first benefit from using our imagination?