Zhu Jiaming: The deep logic and future prospects of stablecoins

Zhu Jiaming talks about the deep logic and future prospects of stablecoins

On June 29, at the closed-door seminar on "The Future of Stablecoins" held by the New Economist Think Tank, Zhu Jiaming, Chairman of the Academic and Technical Committee of the Hengqin Digital Chain Digital Finance Research Institute, gave an analysis on the historical origins and development momentum of stablecoins and their profound impact on the modern monetary system. From the dual perspectives of historical evolution and financial evolution, he outlined the context of stablecoins from classical forms to modern innovations. leaf="">, revealing the market power and inclusive ideals behind it.

Stablecoins are by no means a "new world": they have existed since ancient times and keep pace with the times

For the development of stablecoins, Zhu Jiaming proposed a unique historical analysis framework, which clearly divides the development of stablecoins into two essentially different stages.

Zhu Jiaming defined the long period from the formation of the modern monetary system to the birth of Bitcoin as the "classical stablecoin" stage. He pointed out that the monetary system of this period was essentially an anchoring system based on a certain form of wealth.

The gold standard is a monetary carrier and a form of wealth. All currencies based on the gold standard are actually stablecoins of gold. Before the establishment of the Federal Reserve in 1913, the US monetary system, like many other countries in the world, was based on the issuance of currency based on precious metals and implemented a gold-silver bimetallic standard. Gold and silver, as core assets, became the anchor of value, and the US dollar was essentially a "stable currency" relative to gold and silver. The Bretton Woods system established in 1944 was a new process of "classical stable currency". The core content of the Bretton Woods system was to establish a "double-peg" mechanism in which the US dollar was pegged to gold (1 ounce of gold was exchanged for 35 US dollars) and other currencies maintained a fixed exchange rate with the US dollar. Since then, the US dollar has become a stable currency anchored to gold, and currencies around the world have become stable currencies anchored to the US dollar.

In short, the history of classical stable currencies is long, and their scope of use is also quite broad.

In 2008, Bitcoin stimulated the emergence of stable currencies. The ideas and practices of stable currencies that emerged from 2013 to 2014 marked the entry of stable currencies into a new "modern stable currency" stage. The wave of stablecoins over the past decade was directly triggered by the revolution of encrypted digital currency, and showed characteristics that were completely different from those of stablecoins in the classical period. The core feature is that the current text has absorbed technological elements such as blockchain and distributed computing, and the technical content is showing a trend of continuous strengthening.

There are different opinions on the classification of stablecoins in the new stage. Zhu Jiaming divides them into two categories:

One is the low-risk collateral type, which is issued with real-world assets (mainly fiat currency) as reserves. For example, the well-known USD-anchored Tether (USDT) and USD Coin (USDC). This type of stablecoin has relatively low risks and is the mainstream of the current market.

The other type is the high-risk algorithmic type, which relies on algorithms and smart contract mechanisms (rather than full asset collateral) to maintain currency value stability. For example, the algorithmic stablecoin TerraUSD (UST). However, this type of stablecoin has significantly higher risks. In May 2022, the stablecoin experienced a tragic collapse in which the market value of nearly 50 billion US dollars was reduced to zero in 72 hours.

"Stablecoin is by no means a new world that appeared out of thin air. It has existed since ancient times and keeps pace with the times." Zhu Jiaming emphasized that the history of modern stablecoins did not begin with the current craze. Understanding the continuity and stages of the history of stablecoins is the key basis for grasping their future direction.

Symbiosis drive: The expansion of crypto assets has spawned the demand for stablecoins

When discussing the relationship between stablecoins and encrypted digital currencies, Zhu Jiaming disagrees with blurring the two into a "chicken or egg" relationship. He pointed out that the birth of stablecoins more than 10 years ago was not due to the design of the government or the needs of the traditional financial system, but was an inevitable product derived from the expansion of the encrypted digital currency ecosystem itself.

Zhu Jiaming analyzed that in 2009, when Bitcoin just entered people's field of vision, the price of 1 Bitcoin was only 0.0008 US dollars, while in 2024, the price of 1 Bitcoin has soared to more than 90,000 US dollars, with an increase of more than 113 million times. In 2025, it will stabilize at more than 100,000 US dollars. Although the price of Bitcoin continues to fluctuate violently, its fluctuations are fluctuations on a highly growing curve. History has proved that the encrypted digital currency represented by Bitcoin is a new asset class with strong vitality.

The real logic is: in the process of Bitcoin and other encrypted digital currencies experiencing significant appreciation and rapid expansion of market volume, holders have a rigid demand to convert their value into widely accepted legal tender, thus forcing the market to create a reliable tool that can serve as a bridge between the encrypted world and the legal currency world. Stablecoins are created and developed to meet the needs of exchange and value scale within the encrypted ecosystem.

The original intention of stablecoins such as USDT and USDC is to serve the cryptocurrency transactions, provide value scale and exchange medium for them, rather than directly serve the traditional legal currency system. The rise of companies such as BitGo and Circle from 2012 to 2014 was in line with this ecological demand and built a stable market structure. "Without the 'cause' of cryptocurrency, there would be no 'result' (stablecoin)." Zhu Jiaming pointed out that the continuous expansion of crypto assets such as Bitcoin has formed a new financial space of trillions of dollars, driving the growth of demand for stablecoins and forming a special self-reinforcing supply and demand mechanism. Therefore, what the current regulatory authorities (such as the United States) have to intervene in and regulate is a new financial currency ecology designed and cultivated by private enterprises, which has been formed after more than 10 years. Therefore, the Trump administration is more like a "peach picker".

Of course, government regulation is necessary and important, but the premise for its role is to recognize and adapt to this reality that has been shaped by the market. Understanding this "market nativeness" is the key to grasping the logic of stablecoin development and its future direction.

Innovation Space and Paradigm Shock:"Endogenousness" and "Non-neutrality" Essentially Subvert Mainstream Monetary Theory

When discussing the impact of stablecoins on the modern monetary system, Zhu Jiaming focused on the huge innovation space of stablecoins and their fundamental challenges to traditional monetary theory. He pointed out that the expansion of stablecoins is by no means an isolated phenomenon, but is rooted in the deep needs of the digital economic transformation and is dramatically reshaping financial thinking and practice.

Zhu Jiaming emphasized that the innovation space of stablecoins is essentially a product created by the encrypted digital currency ecosystem. This space has formed a huge market of at least 2 trillion US dollars and is still expanding. Encryption technology has not only spawned a new financial space, but also profoundly transformed the way the digital economy exists. As a key component, the development space of stablecoins forms a functional relationship with the scale of the crypto ecosystem - the larger the crypto space, the greater the profitability and development potential of stablecoins.

However, the real growth fulcrum lies in the transformation of the times. The current world is moving from a post-industrial society to an information society and an artificial intelligence society. The traditional monetary system framework, whether it is the Bretton Woods system or the monetary system pattern of absolute monopoly of legal currency after its collapse, is no longer able to support the development needs of the new economy. This fundamental contradiction has given rise to a strong voice from civil society and the business community, forming a historical trend of demanding a change in the financial ecology. From the perspective of thousands of years of monetary history, the rise of stablecoins is the key fulcrum to conform to this trend.

Zhu Jiaming believes that the far-reaching impact of stablecoins is concentrated in two subversive challenges to mainstream monetary theory.

On the one hand, it is endogenous in nature. Stablecoins are by no means exogenous variables of the economic system, but an inevitable product endogenous to the needs of economic transformation. It does not passively adapt to the environment, but actively "stimulates changes in the entire economy" and becomes a driving force for shaping the future economic form.

On the other hand, it is non-neutral in nature. The rise of stablecoins proves that money has a strong "non-neutral" characteristic. Its impact far exceeds the function of transaction medium and can deeply change resource allocation, market structure and economic power distribution. The Federal Reserve and other major central banks lack decisive voice in the development direction of stablecoins. History has proved that in the face of this new financial form driven by the market and technology, the central banks of most countries tend to be relatively conservative and choose a passive mode, making it difficult to play a leading role.

Zhu Jiaming emphasized that the practice of stablecoins will completely shake the cornerstone of the long-standing debate in monetary theory-is money neutral or non-neutral? Is it an endogenous variable or an exogenous variable? Stablecoins, with their distinct endogenous and non-neutral characteristics, have given practical answers. This reality will force the financial theory community to break through the traditional framework. More importantly, the development of stablecoins may have some deep integration and interaction with modern monetary theory, and eventually give birth to a new financial situation that adapts to the digital age and integrates technological innovation and economic thinking. This integration process marks that the monetary system paradigm is undergoing a historic reconstruction.

The United States is creating a "Trinity"parallel monetary systemand its potential

Zhu Jiaming said that the United States is currently forming a "Trinity" parallel monetary system in the field of digital assets.

The first is the de facto legalization of Bitcoin. Although the United States has never recognized Bitcoin as a currency, it has never declared it illegal, but defined it as an asset, and even some Bitcoins are regarded as national strategic reserve currencies.

The second is to link stablecoins with innovation. In July, US President Trump officially signed the Guidance and Establishment of the United States Stablecoin National Innovation Act (hereinafter referred to as the Genius Act) at the White House. This is the first stablecoin legislation at the federal level in the United States.

The third is to legalize the regulation of stablecoins. Also in July, the House of Representatives will review and pass the 2025 Digital Asset Market Clarity Act (hereinafter referred to as the CLARITY Act), which will be transferred to the Senate after its passage. The bill will strictly define whether cryptocurrencies are securities or commodities, and involve the division of regulatory powers over digital assets, aiming to promote the transformation of the entire monetary system to adapt to the new framework of the digital market.

Zhu Jiaming said that the above three do not exist in isolation, and their deep intention is to build a "trinity" new monetary system parallel to the traditional financial and monetary system of the Federal Reserve, which also represents the United States' strategic layout for the future in the field of monetary finance.

In response to the question from the New Economist Think Tank about the relationship between the US dollar stablecoin system and the US dollar system, Zhu Jiaming pointed out that the US dollar system has long had branches such as "Eurodollar" and "Petrodollar", which are essentially classified extensions of the US dollar by region or industry. The current stablecoin can be regarded as a new variant of the US dollar - "stablecoin dollar".

The current global regulatory system prohibits the derivative interest of stablecoins to avoid the deposit attributes of stablecoins. However, the United States allows stablecoin issuers to invest their reserves in US bonds, which indirectly converts the stable return rate of US bonds into the "hidden interest" of stablecoins, attracting people and commercial institutions to hold them for a long time, and enhancing their attractiveness with the synergy of crypto assets.

Under the premise that quantum computing has not yet threatened encryption security, the rising price trend of encrypted digital currencies (such as Bitcoin) provides users who hold stablecoins and participate in the encryption ecosystem with a "double compensation" of asset appreciation - both enjoying the income of US bonds and the appreciation potential of encrypted assets.

Zhu Jiaming concluded that stablecoins are not subverting the US dollar system, but an "upgraded version of the US dollar branch" enabled by technology. Its core innovation lies in creating the "interest-bearing currency" function with US debt as an anchor, becoming a liquidity bridge connecting traditional finance and the crypto ecosystem. This mechanism not only continues the foundation of the US dollar, but also expands the application scenarios and competitiveness of the US dollar in the digital age.

The application path in China is to coexist with the central bank's digital currency

In response to the question from the New Economist Think Tank about how China should respond to the wave of stablecoins, Zhu Jiaming believes that it is necessary to discuss it from three aspects.

First, further build a balanced strategy based on financial security and stability and financial innovation. In recent years, my country's regulatory authorities have continued to adjust the legal system and regulatory framework to cope with the era of drastic changes. Under the new historical conditions, especially in the face of the pressure from the United States to accelerate the dollar stablecoin, it is very necessary to strengthen the research on relevant development strategies and adjust policies.

Second, we should comprehensively summarize the experience of the central bank digital currency (CBDC) and start the research and sandbox test on the possibility and reality of studying the RMB stablecoin. Generally speaking, the digital RMB is backed by the national credit, focusing on the digitization of sovereign currency, strengthening financial supervision and monetary policy transmission; while the stablecoin is driven by the market and serves flexible scenarios such as cross-border payment and crypto ecological exchange. How the two work together and divide the work needs to be carefully designed by the relevant decision-making departments.

Third, we should pay attention to and understand the policy changes in the United States and the eurozone related to encrypted digital currencies and stablecoins. For example, the two parties in the United States (Democratic Party and Republican Party) have essentially the same cognition of encrypted assets, and the difference is only reflected in the pace of policy advancement. For example, during the Democratic Party’s administration, it tried to strictly regulate stablecoins through legislation, but it was shelved due to excessive controversy. It is worth noting that about 50 million people in the United States already hold encrypted assets, and the reality of Bitcoin’s continued expansion eventually forced the authorities to accept its existence. This confirms the logic of "market-driven regulation".

Zhu Jiaming specifically said that the history of modern monetary finance has repeatedly proved that technical routes are easy to understand, but institutional design is difficult. The "Stablecoin Ordinance" that has been announced in Hong Kong and implemented in August has an international significance that cannot be underestimated. Zhu Jiaming said that he personally has great attention and hope.

Stablecoins and Inclusive Finance

Zhu Jiaming specifically pointed out that most of the leaders who promote the development of cryptocurrencies are born in the 1980s and even in the 1990s. These promoters hope to solve problems for the poor and promote inclusive finance. When understanding the development of cryptocurrencies such as stablecoins, we must not only consider the national, geopolitical, and international financial competition levels, but also see its positive significance in inclusive finance, that is, helping those who do not have bank accounts to obtain financial opportunities.

According to Tether CEO Paolo Ardoino, Tether has established "the largest dollar distribution network in human history" with millions of physical touchpoints around the world. In Africa, Tether has completed 500 self-service kiosk pilot projects with solar panels and built-in rechargeable batteries. There are 400 million to 600 million people in Africa who do not have access to electricity. These self-service kiosks with solar panels and batteries, Tether sells monthly subscription services of 3 USDT to village residents, and currently has about 500,000 users and 10 million battery replacements. Tether expects to have 10,000 self-service kiosks by 2026 and 100,000 by the end of 2030. This means that by 2030, Tether will reach about 30 million households. Based on this calculation, 120 million people in Africa will rely on the US dollar in the form of USDT on a daily basis.

Zhu Jiaming said that as stablecoin operators provide basic payment, transfer and even energy services, those who are excluded from traditional finance have the opportunity to participate in the economy. The transformation brought about by stablecoins will be a long process. Enterprises, governments and the public have different needs, but they will all become important participants in the transformation and find their own position in this long and irreversible historical process.

Finally, Zhu Jiaming painted a grand picture of the evolution of stablecoins: it is rooted in the long history of currency, erupted in the market torrent of the expansion of crypto assets, impacted the inherent monetary theory and system, and carried the mission of the times to connect tradition with the future and serve inclusive finance. This transformation, which is market-initiated, technology-driven, and multi-party game, has the ultimate goal of seeking a new balance between liquidity, security and efficiency, and paving the way for building a more inclusive global financial ecology.