The Current Status and Future Development of Stablecoins

Recently, the stablecoin market has undergone significant changes. Compared to the previous cycle, this cycle exhibits the following characteristics:

• The variety of stablecoins has decreased, with fiat-backed stablecoins dominating.
• The total supply of stablecoins has surpassed $250 billion, exceeding the previous peak.
• Emerging stablecoins like Ethena's USDE adopt a wealth management model.
• Algorithmic stablecoins are gradually being phased out of the market.
• Large institutions and compliant channels dominate new stablecoin issuance

In terms of regulation, the United States and the European Union have successively introduced regulations for crypto assets. The U.S. Senate is currently reviewing the Genius Act, which aims to establish a regulatory framework for stablecoins. The main contents of the bill include:

• Clarify the qualifications of the stablecoin issuer
• Establish a layered regulatory system
• Restrict large tech companies from issuing stablecoins

These regulatory measures will have a significant impact on the stablecoin industry:

• Promote the entry of compliant financial institutions into the stablecoin field.
• Accelerate global stablecoin competition, countries speed up the launch of local currency stablecoins.
• Stablecoins are expected to become the "superconductor" of the US dollar, enhancing the circulation efficiency of the dollar.

Currently, in terms of stablecoin market share, USDT's growth far exceeds that of other competitors. The reasons for this pattern are:

• USDT is closer to a "shadow dollar" and has a wide range of application scenarios.
• USDT has obvious advantages in trading, OTC, and other areas.
• USDC is primarily used for deposits and withdrawals, with a relatively narrow application range.
• USDT does not require high channel fees.

For decentralized stablecoins, their development faces challenges:

• Hard to compete with fiat stablecoins in the payment field
• May shift towards specific scenarios, such as wealth management and inter-protocol accounting.
• Projects like DAI may retain part of the market due to the lack of a blacklist feature.

After the stablecoin bill is passed, it may have a positive impact on leading DeFi projects:

• Conducive to lending protocols like Aave gaining more liquidity
• Beneficial for DEXs like Uniswap to gain more trading volume
• Not beneficial for native stablecoin projects like Ethena.

The combination of AI and stablecoins is also worth paying attention to:

• AI agent needs stablecoin as a payment medium
• AI can assist DeFi in achieving more flexible logic design
• The combination of AI and DeFi may change the traditional DeFi development model.

Overall, stablecoins still represent a blue ocean, but the dominance is shifting from crypto-native teams to traditional financial institutions. The future development of stablecoins will rely more on institutional channels and will integrate with new technologies like AI to create new application scenarios.