Over the past decade, the global financial system has undergone significant transformations, with the rise of stablecoins standing out as one of the most noteworthy developments. Stablecoins, a type of digital currency pegged to fiat currencies (usually the U.S. dollar), are designed to maintain price stability and avoid the high volatility associated with other cryptocurrencies like Bitcoin. This stability has made stablecoins an increasingly important financial tool, playing a growing role in global payments, cross-border transactions, and financial inclusion. Aiying has frequently discussed the regulatory policies and operational logic of stablecoins in various countries in previous articles. For more detailed information, please refer to:

• Special stablecoin album、Crypto payment album
• [10,000-word long article research report] Stablecoin track: models, operating principles, trends and thoughts on Hong Kong’s stablecoins
• French financial institution SG Forge is qualified to issue stablecoins under the MiCA Act and white paper analysis
• Hong Kong Monetary Authority and Financial Services Bureau: Stablecoin License Supervision Guidelines and Recommendations
• The IRS finalizes new regulations: Cryptocurrency and stablecoin transactions require tax reporting, detailing gross income and basic reporting

Today we look at the development trajectory of stablecoins in the global market and their far-reaching impact on the economy through the “Ten Years of Digital Dollar” report written by the Center for Economics and Business Research (Cebr). Aiying sorted out the core content of the report by sorting out and studying the content of the report, so that everyone can have a comprehensive perspective on the role of stablecoins in promoting global financial innovation and efficiency.

Part One: The Birth and Evolution of Stablecoins

1. The Origin of Stablecoins

The concept of stablecoins emerged as a response to a significant challenge in the cryptocurrency market: price volatility. While Bitcoin and other cryptocurrencies offer benefits such as decentralization and transparency, their extreme price fluctuations make them unreliable as a stable store of value or a medium for everyday transactions. This volatility not only hindered the widespread adoption of cryptocurrencies but also limited their application in financial markets.

To address this issue, stablecoins were introduced. Stablecoins are cryptocurrencies pegged to fiat currencies (like the U.S. dollar), designed to maintain a stable value by anchoring it to relatively stable assets. The main types of stablecoins include fiat-collateralized stablecoins (such as USDT and USDC), crypto-collateralized stablecoins, and algorithmic stablecoins. The common goal of these stablecoins is to offer a stable and predictable store of value, reducing the impact of price volatility on users.

2. Early Development

In the early stages, the development of stablecoins primarily focused on cryptocurrency traders and trading platforms. Given the high price volatility of Bitcoin and other cryptocurrencies, traders needed a stable asset for hedging and value storage. Stablecoins provided this functionality, allowing traders to quickly convert within the cryptocurrency market without exiting the ecosystem. This feature was especially useful on platforms that couldn’t directly convert cryptocurrencies to fiat money.

Over time, the application of stablecoins expanded into broader scenarios. Key early development phases include:

• Adoption by Trading Platforms: Major trading platforms began to support stablecoin trading pairs, enabling users to avoid price volatility risks during transactions. This greatly enhanced market liquidity and stability.
• Cross-Border Payments: Due to their low fees and fast settlement, stablecoins began to be used for cross-border payments, particularly in regions where traditional financial systems were less efficient. The instant settlement capability of stablecoins made them an important tool for remittances.
• Decentralized Finance (DeFi): As blockchain technology advanced, the use of stablecoins within the decentralized finance ecosystem grew rapidly. Stablecoins became the primary medium of exchange on DeFi platforms, used for lending, borrowing, payments, and liquidity provision, among other financial services.

Through these early developments, stablecoins not only addressed the volatility issue in the cryptocurrency market but also offered new solutions for broader financial applications. The successful promotion of stablecoins laid the groundwork for their crucial role in the global financial markets, gradually becoming a key component of the digital finance era.

Part Two: The Growth of Stablecoins Over the Past Decade

1. Market Size and Trading Volume

Over the past decade, the stablecoin market has experienced remarkable growth. According to the “Decade of Digital Dollars” report, the total market value of stablecoins surged from less than $1 billion in 2014 to $165 billion in 2024. This growth reflects not only the increasing significance of stablecoins within the cryptocurrency market but also their expanding influence on the global financial system.

In addition to market capitalization, the trading volume of stablecoins has also seen explosive growth. In 2023, the total trading volume of stablecoins reached nearly $7 trillion, with Tether (USDT) accounting for approximately two-thirds of the market share. Data from Visa’s Onchain Analytics Dashboard indicates that, even when excluding factors like high-frequency trading and large institutional transfers, stablecoin payment settlements reached $2.5 trillion in the 12 months leading up to May 2024. These figures demonstrate the growing use of stablecoins in global payments and cross-border transactions, indicating strong market demand.

2. Major Issuers

• Tether (USDT):
  • Company Background: Issued by Tether Limited, USDT is the earliest and currently the largest stablecoin by market capitalization. USDT maintains price stability by pegging each token to one U.S. dollar.
  • Market Application: USDT is widely used across major cryptocurrency exchanges as a trading pair and hedging tool. Additionally, USDT is utilized in cross-border payments and decentralized finance (DeFi) platforms to provide liquidity support.
• USD Coin (USDC):
  • Company Background: USDC is issued in collaboration by Circle and Coinbase, making it the second-largest stablecoin by market capitalization. Circle aims to enhance USDC’s market credibility through transparent and compliant operations.
  • Market Application: USDC is broadly used in cross-border payments, DeFi, and enterprise payment solutions. Notably, in Visa’s cross-border settlement pilot project, Crypto.com used USDC for global settlements.
• First Digital USD (FDUSD):
  • Company Background: Issued by First Digital, FDUSD is a rapidly emerging stablecoin in the Asian market. First Digital focuses on providing secure and stable digital asset custody and tokenization services.
  • Market Application: FDUSD has performed particularly well in the Asian market, especially in countries like the Philippines and Indonesia, where it addresses the issue of underbanked populations. FDUSD, with its stable value and fast settlement speed, aids users in these countries with cross-border payments and value storage.

Part Three: The Economic Impact of Stablecoins

1. Mitigating the Costs of Currency Volatility

Currency volatility has had a profound negative impact on the economies of emerging market countries. According to the “Decade of Digital Dollars” report, currency fluctuations led to a cumulative GDP loss of $1.2 trillion across 17 emerging market countries from 1992 to 2022, which represents 9.4% of these countries’ GDP. Stablecoins, by providing a stable value pegged to the U.S. dollar, have helped these nations mitigate the uncertainties and economic losses associated with currency volatility.

Percentage of Long-Term GDP Loss Due to Currency Volatility (1992-2022):

• Indonesia: The report indicates that Indonesia lost $184 billion in GDP due to currency fluctuations between 1992 and 2022. By adopting stablecoins, Indonesia has been able to offer individuals and businesses a stable store of value, reducing the impact of currency devaluation and protecting savings and investments.
• Brazil: Brazil experienced a GDP loss of $172 billion during the same period. The use of stablecoins in Brazil has enabled businesses to hedge against exchange rate risks, ensuring the stable execution of commercial contracts, and enhancing the accuracy and reliability of financial planning.

2. Bridging the Dollar Gap

In many emerging market countries, accessing U.S. dollars can be both difficult and expensive, limiting these nations’ participation in international trade and financial activities. Stablecoins, acting as digital dollars, provide a stable and convenient alternative, meeting the demand for a stable currency in these regions.

Stablecoin Purchases Using Fiat Currency (June 2023 - April 2024)

Data from the period between June 2023 and April 2024 shows a general upward trend in stablecoin purchases, with a notable peak in March 2024, where purchases approached $5 billion. This trend indicates a growing demand for stablecoins in the market. The United States led in stablecoin purchases, followed by the European Union and the United Kingdom. The purchasing volumes in these regions far exceeded those in other countries, reflecting a high demand and acceptance of stablecoins. The marked increase in purchases at the end and beginning of the year likely correlates with corporate annual settlements and a surge in cross-border payment needs.

Percentage of GDP Spent on Stablecoin Purchases (2023)

In 2023, Turkey spent an amount equivalent to 3.7% of its GDP on purchasing stablecoins, far higher than any other country. This highlights the intense demand for stablecoins among Turkish residents and businesses, likely driven by severe local currency depreciation and economic instability. Other emerging market countries like Thailand (0.43%), Brazil (0.20%), and Indonesia (0.09%) also showed significant demand for stablecoins.

Stablecoin Premiums Across Countries

• The report notes that in 2024, emerging market countries paid a total premium of $4.7 billion to acquire stablecoins, a figure projected to rise to $25.4 billion by 2027. In Argentina, for example, stablecoin premiums reached as high as 30%, reflecting the intense demand for stablecoins in the country. Nigeria also exhibited a significant premium of 22.1%. These high premiums indicate that residents and businesses in these countries are willing to pay more for stablecoins than for fiat dollars, driven by the need to protect assets from local currency depreciation and economic uncertainty.
• Stablecoins offer businesses and individuals in these countries the ability to quickly and securely access and use dollars without relying on traditional banking systems, significantly reducing the cost and complexity of obtaining dollars. The willingness to pay higher prices for stablecoins—known as the “stablecoin premium”—demonstrates their value. Stablecoins can be transferred globally almost instantly, operate year-round, and require only an internet connection for access. This data shows that stablecoins have achieved significant growth and widespread adoption over the past decade, playing an increasingly important role not only in the cryptocurrency market but also in global payments, cross-border settlements, and financial inclusion.

3. Releasing Trapped Funds

Traditional cross-border payment systems are often inefficient, leading to significant amounts of capital being trapped in transit. This situation negatively impacts the liquidity and operational efficiency of businesses. Stablecoins, by accelerating payment settlement speeds, significantly reduce the time funds are immobilized, thereby releasing trapped capital.

Specific Data:

According to the report, global cross-border B2B payments are projected to reach $40.1 trillion in 2024, with $1.16 billion of that capital trapped during the payment process. Stablecoin payments can reduce settlement times from several days to just a few minutes, greatly enhancing the efficiency of capital turnover.

By 2027, the release of these trapped funds is expected to generate an additional $2.9 billion in economic returns for businesses, significantly improving their operational efficiency and market competitiveness.

Part Four: Policy and Regulation

The development of stablecoins is closely linked to supportive policies and regulatory frameworks. Aiying summarizes the regulatory attitudes and frameworks from different countries and regions regarding stablecoins.

• Hong Kong: On July 18th of this year, the Hong Kong Monetary Authority (HKMA) announced the list of participants in the “sandbox” for stablecoin issuers. Participants include JD Coinchain Technology (Hong Kong) Limited, Circle Innovative Technology Limited, Standard Chartered Bank (Hong Kong) Limited, Anmi Group Limited, and Hong Kong Telecom Company Limited. The official launch of stablecoins in Hong Kong is expected to be realized by the end of this year.

Details can be found at:

• [HKMA] 14 Questions to Understand Hong Kong’s Stablecoin Issuer Supervision System and Summary of Consultation on Legislative Implementation Proposals
• Hong Kong Monetary Authority and Financial Services Bureau: Stablecoin License Supervision Guidelines and Recommendations
• [Details] The Hong Kong Monetary Authority announced the list of participants in the “Sandbox” for stablecoin issuance, and five institutions were approved to participate.[10,000-word long article research report] Stablecoin track: models, operating principles, trends and thoughts on Hong Kong’s stablecoins

Singapore:Singapore is also at the forefront of digital asset regulation. On January 14, 2019, the Monetary Authority of Singapore (MAS) promulgated the Payment Services Act (PSA), which officially came into effect on January 28, 2020, providing for the issuance, trading and use of stablecoins and other digital assets. A clear regulatory framework has been established to promote the legalization and standardization of the market. The implementation of PSA is expected to attract more traditional financial institutions and enterprises to enter the stablecoin market and promote the widespread application of stablecoins in Singapore. Please learn more:

• [Long text illustration] Comprehensive interpretation of Singapore’s payment business regulatory framework and virtual asset DPT license requirements
• Paxos receives approval from the Bank of Singapore to issue stablecoins that comply with Singapore’s framework
• 24 years of Singapore fund structure establishment and regulatory requirements (virtual assets)
• Virtual asset fund management in Singapore in 2024: Overview of license application requirements and exemption guidelines

Europe: Europe is at the forefront of digital asset regulation. In 2024, Europe took the lead in launching a cross-jurisdictional digital asset regulatory framework - the “Crypto-Asset Market Act” (MiCA). The bill provides clear legal guidelines for the issuance, trading and use of stablecoins and other digital assets, promoting the legalization and standardization of the market. The implementation of MiCA is expected to attract more traditional financial institutions and enterprises to enter the stablecoin market and promote the widespread application of stablecoins in Europe. Details can be found at:

• An in-depth analysis and latest adjustments to the EU MiCA Act’s restrictions on the use of stablecoins
• French financial institution SG Forge is qualified to issue stablecoins under the MiCA Act and white paper analysis
• A long article analyzing the historical opportunities and starting points of Circle’s compliance with the MiCA Act and its qualification to issue USDC and EURC.
• Key dates, compliance strategies and transition period arrangements for each country under the European MiCA Act for Web3 enterprises
• A 10,000-word research report on the European MiCA Act: a comprehensive interpretation of its far-reaching impact on the Web3 industry, DeFi, stablecoins and ICO projects
• [Stablecoin] USDC will benefit from the new EU digital asset Mica regulations and seize USDT market share

USA: The regulation of stablecoins in the United States is relatively complex, and the regulatory attitudes of states and the federal government vary. Despite the uncertainty, agencies such as the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have gradually strengthened their supervision of the stablecoin market. The report mentioned that Circle has taken proactive measures to comply with regulatory requirements in the United States and Europe, which has won widespread market trust and adoption for its stablecoin USDC. Details can be found at:

• [Payment] An in-depth analysis of the legal basis and requirements for U.S. cryptocurrency payment licenses
• Is it significant for the state of Illinois to confirm that BTC and ETH are digital commodities? What are its regulatory policies for increasing reality?
• The IRS finalizes new regulations: Cryptocurrency and stablecoin transactions require tax reporting, detailing gross income and basic reporting
• What does the U.S. Stablecoin Bill mean for the regulatory market?

Other areas: In Latin America and other places, stablecoins, as an important tool for financial innovation, have gradually been recognized by governments and regulatory agencies. Regulatory innovations in these regions provide new impetus for the global application of stablecoins.

The report predicts that by 2030, the total stablecoin market value will reach US$1 trillion. As more financial institutions and enterprises adopt stablecoins, market demand will further grow, promoting the increasing importance of stablecoins in the global financial system. Aiying will also continue to pay attention to the dynamics of the global stablecoin payment market and provide optimal compliance solutions.

Source of information:

• https://cebr.com/service/policy-research/
• https://www.info.gov.hk/gia/general/202403/12/P2024031100521.htm
• https://www.hkma.gov.hk/eng/news-and-media/press-releases/2024/07/20240718-4/
• https://sso.agc.gov.sg/Acts-Supp/2-2019/Published/20190220?DocDate=20190220
• https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/markets-crypto-assets-regulation-mica

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