Recently, the Hong Kong Monetary Authority announced that JD Technology Group's JD CoinChain Technology (Hong Kong) is one of the first institutions to enter the "sandbox" program for stablecoin issuers. This is undoubtedly a big news!
It is worth noting that behind JD's issuance of stablecoins, there are two Internet giants, Liu Qiangdong and Lei Jun. Tianxing Bank, a licensed virtual bank in Hong Kong under Xiaomi Group, will assist JD CoinChain Technology in developing cross-border payment solutions based on stablecoins. This means that JD and Xiaomi may cooperate in the field of stablecoins.
The in-depth layout of the two industry giants in the field of digital currency is not only a catch-up with past payment market opportunities, but also a forward-looking investment in future financial technology! This article will explore this event in depth and analyze the reasons why JD entered the stablecoin market.
01 The rise of stablecoins
1. What is a stablecoin?
A stablecoin is a cryptocurrency pegged to a fiat currency or other assets, designed to reduce price volatility, providing a relatively stable form of cryptocurrency compared to highly volatile cryptocurrencies such as Bitcoin. They are usually pegged to a fiat currency 1:1 to ensure the stability of their value.
2. The market structure of stablecoins
According to the latest market research by The Block, the total market value of stablecoins has exceeded 100 billion US dollars, becoming an important part of the crypto market that cannot be ignored.
Source: https://www.theblock.co/data/stablecoins/usd-pegged/total-stablecoin-supply
Currently, USDT (Tether) occupies 70% of the stablecoin market and has become the market leader. However, if a non-US dollar-pegged stablecoin is launched, such as JD-HKD, can it make a breakthrough in market share? In addition to the need for a suitable regulatory environment, it is more important to find use cases for Hong Kong dollar stablecoins. It is particularly important to expand market share through scenario-based applications.
02 Coinlink Technology: The promoter of JD.com's stablecoin issuance
JINGDONG Coinlink Technology (Hong Kong) is a wholly-owned subsidiary of JD.com Technology Group, focusing on the application and development of blockchain technology. It is the only stablecoin issuer under JD.com. The company was officially registered in March this year, and only 5 months later it was selected as one of the first batch of participants in the "Stablecoin Issuer Sandbox" of the Hong Kong Monetary Authority. It has developed rapidly, which shows JD.com's ambition!
JD Stablecoin, also known as JD-HKD, is a public chain-based stablecoin whose reserves consist of highly liquid and credible assets. The specific introduction is as follows:
Anchored to the Hong Kong dollar at a 1:1 ratio, for each unit of stablecoin issued, JD CoinChain Technology will hold an equivalent amount of Hong Kong dollars in its reserves accordingly.
Each JD-HKD can be redeemed at a 1:1 ratio. Its reserves consist of highly liquid and credible assets and are securely stored in independent accounts of licensed financial institutions. Regular disclosure and auditing are carried out to ensure the integrity of the reserves.
This means that users can use JD Stablecoin with greater confidence and enjoy a safe and stable digital asset experience.
03 JD.com's indissoluble bond with blockchain
JD.com's history with blockchain can be traced back to 2017. With the rise of blockchain technology, JD.com began to actively explore this emerging field.
In 2017, JD Finance cooperated with China UnionPay to successfully build the "Zhizhen Chain", the first cross-regional and cross-operator alliance chain based on the public network in China. The construction of this alliance chain not only improved JD.com's ability in blockchain technology, but also laid the foundation for subsequent multi-party cooperation. Subsequently, Wanda Group and China Merchants Bank also joined the alliance chain, forming a cooperation network covering multiple industries.
In 2018, JD Finance launched the "JD Digital Assets" based on blockchain technology. In the same year, it also released a blockchain anti-counterfeiting traceability platform, using blockchain technology to achieve full traceability of goods, and enhance consumers' trust in the quality of goods.
In 2021, JD launched its own NFT platform "Lingxi", which is another important attempt by JD in the field of blockchain. The platform aims to provide users with trading and collection services for digital artworks, further expanding the boundaries of JD's application of blockchain technology.
Until July 2024, JD Coin Chain Technology (Hong Kong) announced that it would issue a stablecoin anchored 1:1 with the Hong Kong dollar in Hong Kong.
So why did JD choose to enter the stablecoin market?
04 Reasons for JD.com's entry into stablecoins
Liu Qiangdong has said on many occasions that JD.com's layout in the payment field has many regrets, especially the failure to follow up in time during the golden period of rapid development of mobile payments. JD.com's vigorous development of stablecoins seems to reflect its determination to catch up after missing the opportunity to develop the payment market.
Therefore, the reasons can be analyzed from many aspects:
1. Enriching financial product lines: JD.com's layout in the field of financial technology has begun to take shape, and the launch of stablecoins will further enrich JD.com's financial product lines. Get involved in the crypto industry, attract more users to participate in its financial ecosystem, and provide more diversified financial services, such as lending, investment, etc.
2. Improve cross-border payment efficiency: On the one hand, with the passage of Bitcoin ETF and Ethereum ETF, cryptocurrencies have entered the public eye more quickly and attracted the attention of the global financial market. The introduction of stablecoins will improve JD.com's efficiency in the field of cross-border payments, provide support for JD.com's internationalization strategy, and make it more competitive in the global market.
3. Most importantly, the profit from issuing stablecoins is considerable: According to DeFiLlama data, the market value of stablecoins has risen by nearly 28.4% to US$166.96 billion since the beginning of this year (August 15). Tether, the issuer of the head stablecoin USDT, has a profit close to that of Wall Street giants! Net profit in the first half of 2024 reached US$5.2 billion, a record high. What's more shocking is that the entire team has only about 100 employees.
However, thinking about this further, the entry into the stablecoin market actually reflects the anxiety of Chinese e-commerce giants to go overseas collectively.
As the two giants in China's Internet industry, JD.com and Xiaomi have achieved great success in e-commerce and smart hardware respectively. After the epidemic, the competition for going overseas has become increasingly fierce, among which cross-border payment has become a top priority. However, challenges such as efficiency issues and geopolitical risks in cross-border payments have always plagued these companies going overseas. Perhaps in order to seek new growth points, both companies have begun to pay attention to the fields of financial technology and cryptocurrency.
Against such background, the issuance of JD.com's stablecoin is particularly important. It is not only a strategic move for JD.com to cope with market changes, but also an attempt to improve the efficiency of cross-border payments. Through stablecoins, JD.com hopes to provide users with more convenient payment solutions and overcome existing payment barriers. At the same time, this also provides support for JD.com and even other Chinese e-commerce giants to enhance their competitiveness in the global market.
05 Summary
The strong cooperation between JD.com and Xiaomi to enter the stablecoin market marks a new round of layout of the two industry giants in the field of financial technology. This move is not only a catch-up with past payment market opportunities, but also a deep investment in the future digital economy.
With the continuous development of the stablecoin market, whether JD.com and Xiaomi can achieve a counterattack in this wave is worthy of our continued attention!
WenJun
