Stablecoins have become the best tool for building global fintech due to their fast, virtually zero-cost and programmable nature, how should entrepreneurs and traditional finance participate? This article is from an article by Sam Broner a16z and has been compiled, compiled, and contributed by TechFlow. (Synopsis: Uber is considering "cryptocurrency payments" for passengers for the third time: stablecoins are very rich!) (Background addition: South Korea submits a "stablecoin bill" that allows domestic companies to issue and must have sufficient reserve assets) Traditional finance is gradually incorporating stablecoins into its system, and the trading volume of stablecoins continues to grow. Due to their fast, virtually zero-cost, and programmable nature, stablecoins have become the best tool for building global fintech. However, the shift from traditional to emerging technologies not only means a fundamental change in business models, but also the emergence of entirely new risks. After all, the self-custody model based on digitized registered assets is fundamentally different from the traditional banking system that has evolved over the centuries. So, what are the broader monetary structure and policy issues that entrepreneurs, regulators and traditional financial institutions need to address in this transition? This article will delve into three core challenges and their possible solutions to provide directions for entrepreneurs and builders of traditional financial institutions: the problem of the unity of money; the use of US dollar stablecoins in non-US dollar economies; and the potential impact of a better currency backed by government bonds. I. "Monetary Unity" and the Construction of a Unified Monetary System "Monetary unity" refers to the fact that in an economy, various forms of money can be interchangeable in a 1:1 ratio and can be used for payment, pricing, and contract fulfillment, regardless of who issued it or where it is stored. Monetary unity means that even if there are multiple institutions or technologies that issue similar monetary instruments, the whole system is still a unified monetary system. In other words, whether it's Chase's deposit, Wells Fargo's deposit, Venmo's balance, or stablecoins, they should always be exactly equal in a 1:1 ratio. This uniformity is maintained, despite differences in how institutions manage their assets and their regulatory status. The history of U.S. banking is, in part, a history of building and improving systems to ensure fungibility for the dollar. Monetary unity is embraced by banks, central banks, economists, and regulators around the world because it greatly simplifies transactions, contracts, governance, planning, pricing, accounting, security, and day-to-day economic activities. Today, businesses and individuals are accustomed to the unity of money. However, stablecoins are currently not fully integrated into the existing financial infrastructure, so "monetary unity" cannot be achieved. For example, if Microsoft, a bank, a construction company, or a home buyer tries to exchange $5 million in stablecoins through an automated market maker (AMM), users will not be able to complete the exchange in a 1:1 ratio due to slippage caused by insufficient liquidity depth, and the final amount will be less than $5 million. This scenario is unacceptable if stablecoins are to revolutionize the financial system. A universally applicable "par exchange system" could help stablecoins become part of the unified monetary system. If this is not achieved, the potential value of stablecoins will be greatly reduced. Currently, stablecoin issuers like Circle and Tether primarily offer direct exchange services for stablecoins such as USDC and USDT for institutional clients or users through the verification process. These services usually have a minimum transaction threshold. For example, Circle provides enterprise users with Circle Mint (formerly Circle Account) to mint and redeem USDC; Tether allows verified users to redeem directly, usually above a certain amount (such as $100,000). The decentralized MakerDAO acts as a verifiable redemption/exchange mechanism by allowing users to exchange DAI for other stablecoins (such as USDC) at a fixed exchange rate through the Peg Stability Module (PSM). While these solutions have worked to some extent, they are not universally available and require integrators to interface individually with each issuer. If direct integration is not possible, users can only convert between stablecoins or convert stablecoins to fiat currencies through market execution, and cannot settle at face value. Without direct integration, an enterprise or application may commit to maintaining tight exchange spreads—for example, always exchanging 1 USDC for 1 DAI and keeping spreads within 1 basis point—but that commitment is still dependent on liquidity, balance sheet space, and operational capabilities. In theory, a central bank digital currency (CBDC) could unify the monetary system, but the attendant problems (e.g., privacy concerns, financial surveillance, limited money supply, and slowing innovation) make it almost certain that a better model that mimics the existing financial system will win. The challenge, therefore, for builders and institutional adopters, is how to build systems that enable stablecoins to become "real money" like bank deposits, fintech balances, and cash, despite their heterogeneity in collateral, regulation, and user experience. The goal of incorporating stablecoins into monetary unity offers great opportunities for entrepreneurs. Broad availability of mints and redemptions Stablecoin issuers should work closely with banks, fintech companies, and other existing infrastructure to achieve a seamless, par access to deposits and withdrawals. This will provide fungibility at face value for stablecoins through existing systems, making them indistinguishable from traditional currencies. Stablecoin clearing centers Establish decentralized cooperative organizations – similar to ACH or Visa in the stablecoin space – to guarantee instant, frictionless and fee-transparent conversions. The Peg Stability Module is a promising model, but extending the suite protocol to ensure par settlement between participating issuers and fiat currencies will significantly improve the functionality of stablecoins. A trusted neutral collateral layer transfers the fungibility of stablecoins to a widely adopted collateral layer (such as tokenized bank deposits or packaged treasury bonds). In this way, stablecoin issuers can innovate in branding, market strategies, and incentives, while users can unpack and convert stablecoins as needed. Better exchanges, intent matching, cross-chain bridges, and account abstraction Leverage improved existing or known technologies to automatically find and perform deposits, withdrawals, or exchange operations at the best exchange rates. Build a multi-currency exchange to minimize slippage while hiding complexity, allowing stablecoin users to enjoy predictable fees even when used on a large scale. Dollar stablecoins: the double-edged sword of monetary policy and capital regulation 2. Global demand for dollar stablecoins In many countries, the structural demand for the dollar is extremely large. For citizens living under high inflation or strict capital controls, the dollar stablecoin is a lifeline — it protects savings and provides direct access to global business networks. For enterprises, the US dollar, as an international unit of denomination, can simplify and enhance the value and efficiency of international transactions. However, the reality is that cross-border remittance costs are as high as 13%, 900 million people live in high-inflation economies without access to stable currencies, and 1.4 billion people are underbanked. The success of the US dollar stablecoin reflects not only the demand for the US dollar, but also the demand for "better money" ...
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The Rise of Stablecoins: A Trillion Dollar Opportunity, How Entrepreneurs and TradFi Can Participate?
Stablecoins have become the best tool for building global fintech due to their fast, virtually zero-cost and programmable nature, how should entrepreneurs and traditional finance participate? This article is from an article by Sam Broner a16z and has been compiled, compiled, and contributed by TechFlow. (Synopsis: Uber is considering "cryptocurrency payments" for passengers for the third time: stablecoins are very rich!) (Background addition: South Korea submits a "stablecoin bill" that allows domestic companies to issue and must have sufficient reserve assets) Traditional finance is gradually incorporating stablecoins into its system, and the trading volume of stablecoins continues to grow. Due to their fast, virtually zero-cost, and programmable nature, stablecoins have become the best tool for building global fintech. However, the shift from traditional to emerging technologies not only means a fundamental change in business models, but also the emergence of entirely new risks. After all, the self-custody model based on digitized registered assets is fundamentally different from the traditional banking system that has evolved over the centuries. So, what are the broader monetary structure and policy issues that entrepreneurs, regulators and traditional financial institutions need to address in this transition? This article will delve into three core challenges and their possible solutions to provide directions for entrepreneurs and builders of traditional financial institutions: the problem of the unity of money; the use of US dollar stablecoins in non-US dollar economies; and the potential impact of a better currency backed by government bonds. I. "Monetary Unity" and the Construction of a Unified Monetary System "Monetary unity" refers to the fact that in an economy, various forms of money can be interchangeable in a 1:1 ratio and can be used for payment, pricing, and contract fulfillment, regardless of who issued it or where it is stored. Monetary unity means that even if there are multiple institutions or technologies that issue similar monetary instruments, the whole system is still a unified monetary system. In other words, whether it's Chase's deposit, Wells Fargo's deposit, Venmo's balance, or stablecoins, they should always be exactly equal in a 1:1 ratio. This uniformity is maintained, despite differences in how institutions manage their assets and their regulatory status. The history of U.S. banking is, in part, a history of building and improving systems to ensure fungibility for the dollar. Monetary unity is embraced by banks, central banks, economists, and regulators around the world because it greatly simplifies transactions, contracts, governance, planning, pricing, accounting, security, and day-to-day economic activities. Today, businesses and individuals are accustomed to the unity of money. However, stablecoins are currently not fully integrated into the existing financial infrastructure, so "monetary unity" cannot be achieved. For example, if Microsoft, a bank, a construction company, or a home buyer tries to exchange $5 million in stablecoins through an automated market maker (AMM), users will not be able to complete the exchange in a 1:1 ratio due to slippage caused by insufficient liquidity depth, and the final amount will be less than $5 million. This scenario is unacceptable if stablecoins are to revolutionize the financial system. A universally applicable "par exchange system" could help stablecoins become part of the unified monetary system. If this is not achieved, the potential value of stablecoins will be greatly reduced. Currently, stablecoin issuers like Circle and Tether primarily offer direct exchange services for stablecoins such as USDC and USDT for institutional clients or users through the verification process. These services usually have a minimum transaction threshold. For example, Circle provides enterprise users with Circle Mint (formerly Circle Account) to mint and redeem USDC; Tether allows verified users to redeem directly, usually above a certain amount (such as $100,000). The decentralized MakerDAO acts as a verifiable redemption/exchange mechanism by allowing users to exchange DAI for other stablecoins (such as USDC) at a fixed exchange rate through the Peg Stability Module (PSM). While these solutions have worked to some extent, they are not universally available and require integrators to interface individually with each issuer. If direct integration is not possible, users can only convert between stablecoins or convert stablecoins to fiat currencies through market execution, and cannot settle at face value. Without direct integration, an enterprise or application may commit to maintaining tight exchange spreads—for example, always exchanging 1 USDC for 1 DAI and keeping spreads within 1 basis point—but that commitment is still dependent on liquidity, balance sheet space, and operational capabilities. In theory, a central bank digital currency (CBDC) could unify the monetary system, but the attendant problems (e.g., privacy concerns, financial surveillance, limited money supply, and slowing innovation) make it almost certain that a better model that mimics the existing financial system will win. The challenge, therefore, for builders and institutional adopters, is how to build systems that enable stablecoins to become "real money" like bank deposits, fintech balances, and cash, despite their heterogeneity in collateral, regulation, and user experience. The goal of incorporating stablecoins into monetary unity offers great opportunities for entrepreneurs. Broad availability of mints and redemptions Stablecoin issuers should work closely with banks, fintech companies, and other existing infrastructure to achieve a seamless, par access to deposits and withdrawals. This will provide fungibility at face value for stablecoins through existing systems, making them indistinguishable from traditional currencies. Stablecoin clearing centers Establish decentralized cooperative organizations – similar to ACH or Visa in the stablecoin space – to guarantee instant, frictionless and fee-transparent conversions. The Peg Stability Module is a promising model, but extending the suite protocol to ensure par settlement between participating issuers and fiat currencies will significantly improve the functionality of stablecoins. A trusted neutral collateral layer transfers the fungibility of stablecoins to a widely adopted collateral layer (such as tokenized bank deposits or packaged treasury bonds). In this way, stablecoin issuers can innovate in branding, market strategies, and incentives, while users can unpack and convert stablecoins as needed. Better exchanges, intent matching, cross-chain bridges, and account abstraction Leverage improved existing or known technologies to automatically find and perform deposits, withdrawals, or exchange operations at the best exchange rates. Build a multi-currency exchange to minimize slippage while hiding complexity, allowing stablecoin users to enjoy predictable fees even when used on a large scale. Dollar stablecoins: the double-edged sword of monetary policy and capital regulation 2. Global demand for dollar stablecoins In many countries, the structural demand for the dollar is extremely large. For citizens living under high inflation or strict capital controls, the dollar stablecoin is a lifeline — it protects savings and provides direct access to global business networks. For enterprises, the US dollar, as an international unit of denomination, can simplify and enhance the value and efficiency of international transactions. However, the reality is that cross-border remittance costs are as high as 13%, 900 million people live in high-inflation economies without access to stable currencies, and 1.4 billion people are underbanked. The success of the US dollar stablecoin reflects not only the demand for the US dollar, but also the demand for "better money" ...