Against the backdrop of the accelerated digital transformation of the global financial system, why countries and institutions embrace stablecoins has become a hot topic of concern. As a crypto asset pegged to traditional legal tender, stablecoins are redefining the financial ecosystem with their stable value and efficient cross-border payment capabilities. From government policies to corporate strategies, more and more countries and institutions are beginning to take stablecoins into their sights. This article will delve into the reasons behind this phenomenon and analyze its far-reaching impact on the global economy and financial markets.
What are stablecoins and why are they important?
A stablecoin is a digital currency pegged to a legal tender (such as the U.S. dollar, the euro) or other assets (such as gold), and its value volatility is much lower than that of traditional cryptocurrencies such as Bitcoin or Ethereum. Common stablecoins include USDT (Tether), USDC (USD Coin) and DAI. They guarantee value stability through anchoring mechanisms and reserve assets, becoming a bridge between traditional finance and blockchain technology.
The importance of stablecoins lies in their ability to solve the high volatility problem of the cryptocurrency market while providing fast and low-cost cross-border transaction capabilities. This makes them show great potential in the fields of payment, remittance, decentralized finance (DeFi), and has attracted widespread attention from countries and institutions.
Why do countries and institutions embrace stablecoins? Five core reasons
Improve cross-border payment efficiency and reduce costs
Traditional cross-border payments rely on banking networks and the SWIFT system, with long transaction times (usually 3-5 days) and high fees (average 1%-3%). Stablecoins achieve near-real-time transactions through blockchain technology, with costs as low as a fraction of the original cost. Taking USDT as an example, its daily trading volume has exceeded tens of billions of dollars, significantly better than traditional payment systems. This is why many countries, such as El Salvador, are trying to incorporate it into their national payment systems, and institutions, such as PayPal, are integrating it into their payment platforms.
Fighting the hegemony of the US dollar and promoting financial sovereignty
As the dominance of the US dollar in the global financial system has become controversial, some countries are looking to reduce their dependence on the US dollar through stablecoins. For example, China is exploring the digital yuan (e-CNY), while other developing countries are considering issuing their own stablecoins to enhance financial sovereignty. Why are countries and institutions embracing stablecoins? Part of the reason is that they offer a decentralized alternative that allows countries to bypass traditional financial intermediaries in international trade.
Supporting Decentralized Finance (DeFi) and Innovative Economy
Stablecoins are a core component of the DeFi ecosystem and are widely used for lending, trading, and liquidity mining. Institutional investors (such as Fidelity and BlackRock) participate in DeFi through stablecoins to obtain high returns while avoiding the sharp fluctuations of cryptocurrencies. Countries also see the potential of stablecoins in promoting innovation in the digital economy. For example, the European Union is studying how to incorporate stablecoins into its MiCA (Crypto Asset Market Regulatory Framework) to support technological progress.
Coping with Inflation and Economic Uncertainty
As the global economy faces pressure from inflation and currency depreciation, stablecoins provide individuals and institutions with a means of storing value. Especially in economically unstable regions (such as Venezuela and Argentina), it has become normal for residents to use stablecoins such as USDC for risk hedging. By holding or supporting stablecoins, countries and institutions can protect the value of assets in turbulent times, which is also an important driving force for why countries and institutions should embrace stablecoins.
Regulatory compliance and digital currency strategic layout
As cryptocurrency regulation becomes stricter, stablecoins have become the first choice for policymakers in various countries due to their transparent reserve mechanism and regulatory nature. The U.S. Securities and Exchange Commission (SEC) and the European Central Bank are developing a regulatory framework for stablecoins to ensure their security and legality. Institutions such as Tether and Circle actively cooperate with supervision and optimize compliance, while countries compete with stablecoins by issuing central bank digital currencies (CBDCs) to seize the initiative in digital finance.
Global Cases: Specific Practices of Countries and Institutions
El Salvador: In 2021, El Salvador became the first country to use Bitcoin as legal tender and actively explored stablecoin payments, aiming to improve financial inclusion and international remittance efficiency.
China: Despite banning crypto transactions, China promotes the digital RMB while observing stablecoin technology to optimize cross-border payments.
BlackRock: In 2024, BlackRock launched a Bitcoin ETF and plans to integrate stablecoins into its investment products, showing the strategic layout of institutions for stablecoins.
Tether: As the world's largest stablecoin issuer, Tether has cooperated with a number of financial institutions to expand the global use of USDT.
Challenges and risks: Where is the future of stablecoins?
Despite the bright prospects, the development of stablecoins also faces challenges. The transparency of reserve assets, regulatory pressure and market manipulation risks (such as Tether’s insufficient reserves) are the main problems. When embracing stablecoins, countries and institutions need to balance innovation and risks to ensure systemic stability. In the future, stablecoins may merge with CBDCs to form a hybrid financial system, which will further promote the trend of why countries and institutions should embrace stablecoins.
Conclusion: The irreversible trend of stablecoins
Why countries and institutions should embrace stablecoins lies in its comprehensive advantages of improving efficiency, enhancing sovereignty, supporting innovation, coping with economic uncertainty and adapting to regulatory needs. From governments to enterprises, stablecoins are reshaping the global financial landscape. Whether it is individual investors or policymakers, paying attention to the development of stablecoins will become the key to future financial decision-making.
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