Stablecoin: The New Financial Infrastructure of the Web3 Era

Recently, stablecoins have attracted widespread attention as the new financial infrastructure of the Web3 era. As an experienced professional in the payment industry, Liu Peng has profound insights on this topic. He has been deeply involved in the design and promotion of a well-known mobile payment product, and now, as the CEO of a technology company, he is leading his team to research and plan the issuance of stablecoins.

Liu Peng believes that stablecoins are fundamentally different from cryptocurrencies and are more akin to "payment tools" like mobile payments. He stated that payment-oriented stablecoins will play an important role in areas such as international trade. Stablecoins have advantages such as decentralization, low transfer costs, and transparent, traceable transactions, and are moving from the crypto world into a broader traditional financial system.

Hong Kong officially published the "Stablecoin Ordinance" in May this year, marking the regulation of stablecoin activities related to Hong Kong and the Hong Kong dollar through a licensing system. As early as December last year, Hong Kong announced the implementation of a licensing system for fiat stablecoin issuers. In July this year, three institutions, including the company where Liu Peng works, entered the stablecoin issuer sandbox launched by the Monetary Authority for relevant testing.

Liu Peng revealed that their scenario testing in the sandbox is progressing smoothly, and they plan to launch stablecoins pegged to the Hong Kong dollar and other coins. Although the company has been established in Hong Kong for a relatively short time, he believes one of the company's first-mover advantages is having a "cold start" scenario from zero to one, which is the e-commerce ecosystem of the group it belongs to. If compliant stablecoins can be issued, a large number of merchants on the platform can use stablecoins for upstream and downstream settlements to enhance efficiency and manage funds more flexibly overseas.

In a market dominated by USDT and USDC, stablecoins issued by licensed issuers in Hong Kong need to find additional attractions, including use cases, beyond the "compliance" advantage. Cross-border payments are undoubtedly a key area of competition among many stablecoin issuers, while retail payments help enhance the market penetration and brand building of stablecoins.

Worldwide, regions such as Singapore, the EU, and the United States have successively brought payment-oriented stablecoins under regulation, and the stablecoin market, which is about $250 billion, is increasingly gaining attention. In the future, will compliant stablecoins promote further evolution of payment methods? Can Hong Kong leverage stablecoins to consolidate and enhance its position in international trade? In an era where various fiat currencies coexist with stablecoins, how will the global payment and financial systems change? These questions are worth our continued attention.

Liu Peng stated that they are testing the Hong Kong dollar stablecoin and will later test other fiat stablecoins. Based on market demand, it is expected that both stablecoins will be issued simultaneously. The current testing focus is on three practical scenarios: cross-border payments, investment trading, and retail payments. In terms of cross-border payments, they plan to expand their user base through both direct and indirect customer acquisition methods. Regarding investment trading, they are in talks with global compliant exchanges for cooperation. In the retail sector, users will be able to use the stablecoin for shopping on a certain e-commerce platform's Hong Kong and Macau site.

Regarding the licensing timeline and issuance scale, Liu Peng stated that the specific timetable depends on regulation, but he hopes to obtain the license in early Q4 this year and simultaneously launch the stablecoin. The stablecoin will be issued on the public chain, and at that time, anyone can publicly access data such as the issuance volume.

In the field of cross-border payment, Liu Peng emphasized that "compliance" is the core competitiveness. Their goal is not to compete in scenarios such as crypto-native or investment trading, but to explore new "battlefields", namely connecting the traditional cross-border trade settlement market. He expects that international trade in regions such as Asia-Pacific, the Middle East, Africa, South America, and Europe may first use stablecoins issued in Hong Kong for payment settlement.

Regarding the doubts about the limited value of stablecoins in G10 currency cross-border transactions, Liu Peng believes that stablecoins are a system engineering project, which not only involves low costs, high efficiency, and a good experience, but also comes with a stable custody mechanism, a secure clearing and settlement channel, and a trustworthy operational logic to protect the rights of holders. They are also willing to collaborate with cross-border payment companies to jointly build a stablecoin ecosystem.

In terms of application scenarios, a certain e-commerce platform's global sales site in Hong Kong and Macau will be the first to use stablecoin for payment settlement. For different industries, they plan to "customize" stablecoin payment solutions. Currently, their stablecoin can reduce transfer times from several days to seconds, with costs cut by at least half compared to traditional transfers, and on-chain fund turnover is also faster.

Regarding supply chain financial services, Liu Peng stated that they would discuss cooperation with qualified licensed institutions. They are currently sorting out scenarios of international logistics. Theoretically, after authorization from all parties, small and medium-sized enterprises going abroad can put data such as overseas warehouse orders on the blockchain and use stablecoins for payment and financing, improving the efficiency of the entire process.

Liu Peng believes that payment stablecoins are similar to mobile payments, both serving as payment tools aimed at reducing costs and increasing efficiency through advanced technologies and business models, enhancing user experience, and promoting inclusive financial development. On a technical level, stablecoins are based on a decentralized technological architecture; at the product structure level, stablecoins have an additional issuance system compared to mobile payment products. Therefore, the regulation of stablecoins is relatively complex and requires global compliance coordination.

Regarding the "critical point" of stablecoins and traditional financial infrastructure, Liu Peng believes that large transactions may be the first to adopt stablecoins, especially in cross-border payment scenarios where friction costs are high, exchange rate fluctuations are significant, and the time involved is long. From the perspective of individual users, there may need to be a phenomenal product and application, similar to the red envelope feature in certain mobile payments, to stimulate usage motivation.

Finally, Liu Peng believes that the key to improving the ecosystem of the stablecoin industry in Hong Kong is to establish a risk-based, pragmatic, and flexible open ecosystem. He suggests leveraging Hong Kong's role as an international financial center and trade center to expand the circulation and usage of stablecoins issued in Hong Kong across multiple regions, further transforming Hong Kong into an international stablecoin settlement hub.

Regarding offshore RMB stablecoins, Liu Peng stated that there is not much difference in product technology compared to HKD stablecoins, and potential application scenarios such as the Belt and Road Initiative are already in place. However, in addition to commercial logic, comprehensive considerations from legal compliance and other aspects are also needed, and whether it can ultimately proceed still depends on mainland regulation.