Jessy, Golden Finance

In 2024, some major financial centers in the world will have increasingly clear regulations on stablecoins. With regulatory clarity came the explosion of stablecoins.

The situation in which USDT is the dominant player has gradually changed. For example, in 2024, emerging stablecoins such as USDe will appear. Major traditional financial institutions have also entered the game. For example, payment giant Stripe has begun to accept USDC as a payment medium. In Hong Kong, Standard Chartered Bank has also begun to explore stablecoin-related businesses. As the encryption industry and traditional finance become increasingly integrated, stablecoins are becoming more and more widely used in the real world.

Changes are also taking place on the chain, and USDT on the Ton chain is quietly emerging; although the total amount of USDC is growing steadily, the distribution among chains has changed, and the Base chain has become its new favorite, with shares on Ethereum and Solana There have been adjustments, which reflect the diversified choices of users and capital flows.

All of the above have created a more diverse and fierce competition in the stablecoin market in 2024.

Clear supervision

In 2024, one of the most striking features of the stablecoin track is the gradual clarity of supervision. This clarifies the legal dos and don’ts for those institutions that are preparing to invest in stablecoins. With rules, these institutions that are preparing to issue stablecoins can flex their muscles.

First of all, in the United States, regulatory agencies such as the U.S. Securities and Exchange Commission (SEC) have gradually clarified their regulatory attitude towards stablecoins, and have strengthened their review and supervision of stablecoin-related businesses. For example, stablecoin issuers are required to comply with strict registration and compliance requirements to ensure that the issuance and operation of stablecoins comply with laws and regulations. . Relevant stablecoin legislative processes are also continuing to advance. For example, the Payment Stablecoin Act is at a very advanced stage, and the introduction of this bill will provide a clearer and more specific legal framework for the supervision of stablecoins.

The development of Hong Kong Web3 has also entered its second anniversary. In 2024, the two biggest events in the development of Hong Kong Web3 are the launch of Bitcoin and Ethereum spot ETFs and the entry of stablecoins into the sandbox testing stage. In March 2024, the Hong Kong Monetary Authority announced the launch of a “sandbox” for stablecoin issuers, allowing testing of stablecoin issuance within the regulatory sandbox. The list of sandbox participants was announced in July, including JD Coin Chain Technology (Hong Kong) Co., Ltd., Yuanbi Innovation Technology Co., Ltd., Standard Chartered Bank, etc.

In addition, the Hong Kong Treasury Bureau is expected to submit a regulatory draft for legal currency stablecoins to the Legislative Council before the end of 2024. The draft establishes a 6-month transition period and clear licensing standards, aiming to ensure The issuance and operation of legal currency stablecoins comply with international regulatory standards.

In Europe, in the third quarter of this year, the EU came into effect based on new rules formulated by the Cryptoasset Market Authority (MiCA), proposing a series of regulations on the issuance, trading and operation of stablecoins.regulatory requirements.

In June of this year, the United Arab Emirates, a region that is more friendly to crypto-finance than other regions in the world, approved the issuance of stablecoin supervision and licensing regulations, clarifying that companies and merchants in the country can only accept currency equivalent to dirhams. The use of linked stablecoins as a payment method has strengthened the supervision of stablecoins in the payment field

It is the step-by-step approval of the above regulations that has formed the cornerstone for the proliferation of stablecoin projects.

Active bets from leading institutions and public chains in the crypto industry

Even if there is no regulation and is gradually and clearly liberalized, stablecoins have always been a battleground for military strategists in the industry. Major public chains, exchanges, and payment projects are also actively issuing their own stablecoins.

This year, with the clarification of regulations and the arrival of the bull market, competition has become more intense, and leading institutions have become more active.

Take Binance as an example. After its native stablecoin BUSD was suspended by the SEC in its early years, it has been making various related attempts. The first is to strengthen cooperation with FDUSD. This is First Digital Labs The stable currency launched by its subsidiary FD121 Limited was launched on July 26, 2023. It was launched on Binance on the same day. Initially, Binance not only launched a series of fee-free activities to support the stablecoin, but also provided it with a variety of trading services and functional support, including adding it to the Auto-Invest function, P2P trading platform and Binance Convert service, etc.

For Binance, the industry’s leading exchange, Binance has been working hard to have its own stable currency. In addition to FDUSD, Binance will also introduce partners’ TUSD in 2023.

In December 2024, Binance announced the establishment of a strategic partnership with Circle, the issuer of the stablecoin USDC; it also invested in and launched the Lista stablecoin: Lista, as the second phase of the Binance Megadrop project, It is the leader in the centralized stablecoin track on BNB. It has business forms such as stablecoin lending and pledge dual-mode engines. Since the launch of airdrop task activities and Binance, TVL has grown rapidly.

Not only that, Binance has also invested in Perena, the first stablecoin infrastructure protocol on the Solana network, with Quine Co behind the protocol, which focuses on real-world assets.

Other leading projects in the industry have accelerated the layout of stable currency projects this year. For example, the stable currency Ripple USD launched by the payment company Ripple will also be launched at the end of this year.

Major public chains are also actively promoting their own native stablecoins, such as TON, SUI, etc. The launch of stablecoins on their chains is the basis for their DeFi to flourish. For the development of their own ecology, major public chains have to actively compete for stablecoins.

CowTechnological innovation triggered by the market

In 2024, stablecoin projects will flourish. A very important feature is that crypto-native projects are actively carrying out technological innovation of stablecoins. The active innovation of crypto-native stablecoins is driven by the bull market.

This year, a typical project in protocol and technological innovation is Ethena. The project will officially start operations in February 2024. It has received a cumulative investment of US$25 million from Binance, bybit, OKX, Dragonfly Capital, Brevan Howard Digital, PayPal Ventures, etc.

In Ethena, there are three main key parts, namely USDe, sUSDe, and Internet Bonds.

USDe: is an Ethereum-based stablecoin backed by derivatives. Ethena allows users to create USDe using USD, ETH or liquid pledged tokens as collateral.

sUSDe: Rewards obtained by staking Liquid staking chips and funding rates. Initially 1 sUSDe: 1 USDe, over time, 1 sUSDe > 1 USDe.

Internet Bonds: Built on USDe, combining yields from Ethereum, as well as funds and underlying spreads from perpetual swaps and futures markets, creating the first on-chain crypto native "Bonds" may be used as permitted jurisdictions A US dollar-denominated savings tool for users

What is more innovative about this project is its stablecoin anchoring mechanism. It mainly makes three settings to anchor 1USDe to 1 US dollar. Among them, it is more innovative. One setting of is that it sets a mortgage asset portfolio with Delta hedging mechanism. This is an innovative mortgage method that anchors USDe to the U.S. dollar. An equal amount of long spot ETH and short futures ETH in the stablecoin together constitute the collateral assets. This collateral combination is designed to be "delta neutral". (Delta is a measure of the sensitivity of derivative prices to changes in the underlying asset price)

Under this setting, when the price of ETH rises, the value of the spot ETH long position increases, but the value of the futures ETH short position The value is reduced accordingly, as the short position incurs a loss when the price rises. Since their quantities are allocated in equal amounts, these two value changes cancel each other out. In the same way, when the price of ETH falls, the long value of spot ETH decreases and the value of short futures ETH increases, which can also offset each other. As a result, the value of the mortgage assets can remain relatively stable despite the price fluctuations of ETH, thus providing a stable value base for USDe.

It is precisely thanks to this innovation, as well as its vigorous airdrops and marketing activities, that the annualized rate of sUSDe is high. So that year-to-date, Ethena’s TVL has grown rapidly. According to DeFiLlama data, its TVL currently reaches an astonishing US$5.641 billion.

In addition to Ethena, there are also some other innovations, such as the launch of Lista, an open source decentralized stablecoin lending protocol whose native token is Lista. It allows users to stake and liquidity stake on Lista and lend lisUSD against a variety of decentralized collateral. The innovation of this project is to provide a new solution to the capital efficiency issues faced by over-collateralized stablecoins.

Traditional financial institutions enter the game

As the holy grail of cryptography, stablecoins will produce some new projects and innovations in every bull market. The biggest difference between 2024 and previous bull markets is the entry of traditional financial institutions or payment giants. This stems from the loosening of supervision and the gradual integration of encryption into real life.

The two most typical examples of the entry of traditional financial giants are the US dollar stable currency PYUSD launched by payment giant Paypal, and the acquisition of stable currency platform Bridge by payment giant Stripe in 2024 for US$1.1 billion.

PYUSD is 100% anchored by U.S. dollar deposits, short-term U.S. Treasury securities, and similar cash equivalents. It was first launched on Ethereum in 2023 and launched on Solana in May 2024. In terms of specific use cases, currently, eligible U.S. users can transfer PYUSD between PayPal and compatible external wallets, use PYUSD to make peer-to-peer payments, select PYUSD to pay at checkout, and exchange PayPal-supported cryptocurrencies with PYUSD. Convert. PYUSD can also be used for cross-border P2P payments on Xoom, providing users with a faster, lower-cost cross-border remittance method and more.

As early as October 10, 2024, Stripe officially announced that it would support the payment of the stable currency USDC, allowing more than 150 users from around the world to conduct stable currency transfers through Ethereum, Solana and Polygon. In November 2024, Stripe launched the function of B2B payment through stable currency. Users can create and send invoices that can be paid with stable currency on Stripe, which meets the needs of enterprises for more efficient and low-cost payment methods in cross-border transactions and other scenarios. needs.

In Hong Kong, Standard Chartered Bank, JD Coin Chain Technology (Hong Kong), etc. have already entered the Hong Kong dollar stable currency. The entry of traditional payment and financial giants will undoubtedly enable stablecoins to be more widely used in the real world.

This year is the year of the explosion of stablecoins. Looking to the future, with the clarification of supervision and the continuous innovation of technology, the role of stablecoins will become more and more important, whether in on-chain or off-chain finance. The heavierwant.