Stablecoin Curve Overdrive
The narrative of fully collateralized stablecoins has never been a rare thing in the crypto world. In 2023-2024, due to Tether's extremely high U.S. Treasury income, a batch of stablecoin projects has launched, all boasting shiny backgrounds, compliance, strong backers, and top-tier teams. However, even strong players like PayPal's stablecoin have struggled to gain traction. Most projects have top-notch concepts, narratives, and financing, but once launched, no one buys them. After the recent passage of the Genesis Act, it is believed that more stablecoin projects with golden spoons will emerge, as every internet company wants to issue its own currency, but under current trends, it is challenging to compete with Tether and Circle's positions.
Why is that?
The most crucial requirement for any currency is the use (yield) scenarios and distribution channels. USDT is favored partly because it was early to market and also found demand in the black and gray markets under sufficiently decentralized conditions, thereby expanding its business coverage. Circle, on the other hand, tightly grasps the compliance line, continuously incentivizing use cases with real funds. The problem with PayPal USD is that it has not found a good yield scenario in SOL (expected to offer Treasury rates by summer 2025) and has not fully integrated into PayPal's system, which prevents it from incentivizing actual distribution channels and even TVL. From the perspective of use cases in the crypto space, if these stablecoins were inserted into the existing DeFi puzzle, they would be unable to challenge USDT and USDC in terms of ecological niches, as the gaps are already filled.
So where is the opportunity for overdrive?
I believe it lies in a deep binding with public chains. The strongest financial backers in the crypto space are public chains, and they are also the ones most eager for transaction behaviors (able to collect taxes), making them potential backers for such stablecoins. The likelihood of having Sol officials provide incentives for PayPal USD is slim, but the chances are higher for other chains to introduce mining activities with some coins, thereby solving the use (yield) scenario. As for distribution channels, this is a problem that the combination can jointly address; ideally, the chain itself should have a solid background to bring some channels and traffic. Coupled with the channels of stablecoin issuers, they can find clients in real-world payments and cross-border transfers.
From this perspective, there are not many public chains that meet this standard. They first need a strong background, be willing to spend money, and have strong linkages with compliance stablecoin projects of large companies:
1. Kaia, the Kakao of East Asia, and Line, as ecological niches of these two national-level apps, are products of mergers in the crypto space, carrying the last hope for the Korean public chain. Recently, they are also preparing to issue their stablecoin. Given the popularity of Crypto in East Asia, they can promote the narrative of Korean won stablecoin payments. Moreover, with the relatively complete DeFi infrastructure on Kaia, employing a money-splashing strategy to acquire users will create a larger volume, leading to faster stablecoin adoption, with stablecoins and public chains spiraling up together, ultimately impacting stocks.
2. Aptos, in the Meta ecosystem, contrasts with Sui's focus on the Middle East, as Aptos is going all-in on the U.S. As a high-performance public chain, if the Meta ecosystem chooses to issue stablecoins, Aptos will definitely be one of the options. Furthermore, Aptos has been actively incentivizing mining activities on-chain recently, showing a strong determination to push this initiative.
As the number of stablecoins increases in the future, there will be a batch opting to issue on ETH and SOL, following the traditional DeFi route. However, I believe there will also be stablecoin projects choosing to collaborate with medium-sized public chains, where public chains provide TVL incentives for stablecoins, and stablecoins offer the required transactions and asset accumulation for public chains, ultimately achieving a win-win situation.