Jessy, Golden Finance
In 2024, the regulation of stablecoins in some major financial centers in the world has become increasingly clear. With the clarification of regulation comes the explosion of stablecoins.
The situation where USDT is the only dominant player has slowly changed. For example, emerging stablecoins such as USDe have appeared in 2024. Major traditional financial institutions have also joined the market. For example, payment giant Stripe has begun to accept USDC as a payment medium. In Hong Kong, Standard Chartered Bank has also begun to explore stablecoin-related businesses. As the integration of the crypto industry and traditional finance becomes closer and closer, the use of stablecoins in the real world is becoming more and more extensive.
The chain is also changing. USDT on the Ton chain has quietly emerged. Although the total amount of USDC has grown steadily, the distribution between chains has changed. The Base chain has become its new favorite, and the shares on Ethereum and Solana have been adjusted. This reflects the diversified choices of users and capital flows.
All of the above have made the competition landscape of the stablecoin market in 2024 more diverse and fierce.
Clear supervision
In 2024, one of the most notable features of the stablecoin track is the gradual clarification of supervision. This will clarify what the legal can and cannot be done for those institutions that are ready to invest in stablecoins. With the rules, these institutions that are ready to issue stablecoins can show their strength.
First of all, the United States, the U.S. Securities and Exchange Commission (SEC) and other regulatory agencies have gradually clarified their regulatory attitude towards stablecoins and strengthened the review and supervision of stablecoin-related businesses. For example, stablecoin issuers are required to comply with strict registration and compliance requirements to ensure that the issuance and operation of stablecoins comply with laws and regulations. . The relevant stablecoin legislative process is also constantly advancing. For example, the "Payment Stablecoin Act" is in a very in-depth stage, and the introduction of this bill will provide a clearer and more specific legal framework for the regulation of stablecoins.
The development of Web3 in Hong Kong has also entered its second anniversary. In 2024, the two biggest things in the development of Web3 in Hong Kong are the launch of Bitcoin and Ethereum spot ETFs and the entry of stablecoins into the sandbox testing phase. In March 2024, the Hong Kong Monetary Authority announced the launch of the "Sandbox" for stablecoin issuers, allowing the testing of stablecoin issuance within the regulatory sandbox. In July, the list of sandbox participants was announced, including JD CoinChain Technology (Hong Kong) Co., Ltd., Yuanbi Innovation Technology Co., Ltd., Standard Chartered Bank, etc.
In addition, the Hong Kong Treasury Bureau is expected to submit a draft regulation of legal currency stablecoins to the Legislative Council before the end of 2024. The draft establishes a 6-month transition period and clear licensing standards to ensure that the issuance and operation of legal currency stablecoins meet international regulatory standards.
In Europe, in the third quarter of this year, the new rules formulated by the European Union based on the Crypto Asset Market Regulatory Authority (MiCA) came into effect, proposing a series of regulatory requirements for the issuance, trading and operation of stablecoins.
In June this year, the UAE, a region that is more friendly to crypto finance than other countries in the world, approved the release of stablecoin supervision and licensing regulations, clarifying that companies and merchants in the country can only accept stablecoins linked to dirhams as a payment method, which strengthens the supervision of stablecoins in the payment field
It is the approval of the above regulations that has laid the foundation for the blossoming of stablecoin projects.
Active bets from leading institutions and public chains in the crypto industry
Even if there is no gradual and clear release of supervision, stablecoins have always been a battleground in the industry, and major public chains, exchanges, and payment projects are also actively issuing their own stablecoins.
This year, with the clarification of supervision and the arrival of the bull market, competition has become more intense, and the actions of leading institutions have become more frequent.
Take Binance as an example. After its native stablecoin BUSD was stopped by the SEC in the early years, it has been making various related attempts. The first is to strengthen cooperation with FDUSD, a stablecoin launched by FD121 Limited under First Digital Labs. It was launched on Binance on July 26, 2023. Initially, Binance not only launched a series of fee-free activities to support the stablecoin, but also provided it with a variety of trading services and functional support, including adding it to the Auto-Invest function, P2P trading platform, and Binance Convert service.
For Binance, the industry's leading exchange, Binance has been working hard to have its own stablecoin. In addition to FDUSD, Binance will also introduce TUSD from its partners in 2023.
In December 2024, Binance announced a strategic partnership with Circle, the issuer of the stablecoin USDC; it also invested in and launched the Lista stablecoin: Lista, as the second phase of Binance Megadrop, is the leader of the centralized stablecoin track on BNB. It has business forms such as stablecoin lending and pledge dual-mode engines. Since the launch of airdrop missions and Binance, TVL has grown rapidly.
Not only that, Binance also invested in Perena, the first stablecoin infrastructure protocol on the Solana network, and the investment target is Quine Co behind the protocol, which focuses on real-world assets.
Other leading projects in the industry have accelerated the layout of stablecoin projects this year, such as the stablecoin Ripple USD launched by payment company Ripple, which will also be launched at the end of this year.
Major public chains are also actively promoting their own native stablecoins, such as TON, SUI, etc. The launch of their on-chain stablecoins is the basis for the vigorous development of their DeFi. In order to develop their own ecology, major public chains have to actively seize stablecoins.
Technological innovation triggered by the bull market
In 2024, stablecoin projects flourished, and a very important feature is that crypto-native projects are actively innovating in stablecoin technology. The active innovation of crypto-native stablecoins stems from the promotion of the bull market.
This year, a typical project in protocol and technological innovation is Ethena. The project officially started operation in February 2024, and it has received a cumulative investment of 25 million US dollars from Binance, bybit, OKX, Dragonfly Capital, Brevan Howard Digital, PayPal Ventures and many other companies.
In Ethena, there are three key parts, namely USDe, sUSDe, and Internet bonds.
USDe: is an Ethereum-based stablecoin that is secured by derivatives. Ethena allows users to create USDe using US dollars, ETH or liquid pledge tokens as collateral.
sUSDe: Rewards earned by staking Liquid staking chips and funding rates. Initially 1 sUSDe: 1 USDe, over time, 1 sUSDe > 1 USDe.
Internet Bonds: Built on the basis of USDe, combined with yields from Ethereum, and funding and underlying spreads from perpetual swaps and futures markets, the first on-chain crypto-native "bond" was created, which can be used as a US dollar-denominated savings tool for users in permitted jurisdictions
The more innovative aspect of this project is its stablecoin anchoring mechanism. It mainly makes three settings to achieve 1USDe anchoring to 1 USD. One of the more innovative settings is that it sets up a collateral asset portfolio with a Delta hedging mechanism. This is an innovative collateral method that allows USDe to anchor the US dollar. In this stablecoin, an equal amount of spot ETH longs and futures ETH shorts together constitute collateral assets, and this collateral portfolio is designed to be "Delta neutral". (Delta is a measure of the sensitivity of derivatives prices to changes in the price of the underlying asset)
Under this setting, when the price of ETH rises, the value of spot ETH longs increases, but the value of futures ETH shorts decreases accordingly, because short positions will incur losses when prices rise. Since their quantities are configured in equal amounts, these two value changes offset each other. Similarly, when the price of ETH falls, the value of spot ETH longs decreases and the value of futures ETH shorts increases, which can also offset each other. As a result, the value of the collateralized assets can remain relatively stable in the case of ETH price fluctuations, thus providing a stable value foundation for USDe.
It is precisely thanks to this innovation, as well as its vigorous airdrops and marketing activities, that the annualized rate of sUSDe is high. Since the beginning of the year, Ethena's TVL has grown rapidly. According to DeFiLlama data, its TVL has reached a staggering $5.641 billion.
In addition to Ethena, there are some other innovations, such as the launch of Lista, an open source decentralized stablecoin lending protocol, whose native token is Lista. It allows users to stake and pledge liquidity on Lista, and lend lisUSD against various decentralized collateral. The innovation of this project is to provide a new solution to the capital efficiency problems faced by over-collateralized stablecoins.
Traditional financial institutions enter the game
As the holy grail of cryptocurrencies, stablecoins will produce some new projects and innovations in every bull market. The biggest difference between 2024 and previous bull markets is the entry of traditional financial institutions or payment giants. This stems from the loosening of supervision and the gradual integration of cryptocurrencies into real life.
The two most typical examples of the entry of traditional financial giants are the US dollar stablecoin PYUSD launched by payment giant Paypal and the acquisition of stablecoin platform Bridge by payment giant Stripe for US$1.1 billion in 2024.
PYUSD is 100% anchored by US dollar deposits, short-term US Treasury bonds, and similar cash equivalents. It was first launched on Ethereum in 2023 and launched on Solana in May 2024. In terms of specific use cases, eligible US users can currently transfer PYUSD between PayPal and compatible external wallets, use PYUSD for peer-to-peer payments, choose PYUSD payment at checkout, and convert PayPal-supported cryptocurrencies to PYUSD. PYUSD can also be used for cross-border P2P payments on Xoom, providing users with faster and lower-cost cross-border remittance methods, etc.
As early as October 10, 2024, Stripe officially announced that it would support payments for the stablecoin USDC, allowing users from more than 150 countries around the world to transfer stablecoins through Ethereum, Solana, and Polygon. In November 2024, Stripe launched the function of B2B payment through stablecoins. Users can create and send invoices payable in stablecoins on Stripe, meeting the needs of enterprises for more efficient and low-cost payment methods in scenarios such as cross-border transactions.
In Hong Kong, Standard Chartered Bank, JD Coin Chain Technology (Hong Kong), etc. have already entered the Hong Kong dollar stablecoin. The entry of traditional payment and financial giants will undoubtedly enable stablecoins to be more widely used in the real world.
This year is the year of the explosion of stablecoins. Looking to the future, with the clarification of supervision and the continuous innovation of technology, the role of stablecoins will become more and more important, both in on-chain and off-chain finance.
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