Stablecoins are the first step towards a fully tokenized economy.
The tokenization of every financial asset in the world is inevitable.
While this view may have been controversial in the past, the crypto industry is no longer alone in this fight. Larry Fink, co-founder and CEO of BlackRock, now frequently speaks about the inevitability of tokenization and its benefits to the global financial system. As the world's largest asset manager, BlackRock manages more than four times the assets of the entire crypto asset market ($10.5 trillion) ($2.5 trillion).
In other words, an institution that manages more capital than the entire crypto industry is telling the world that the global financial system and all its assets will exist in tokenized form on crypto rails. This signal cannot be ignored.
This tokenized reality is arriving sooner than most expected. BlackRock’s BUIDL fund, a tokenized basket of U.S. government securities on the Ethereum mainnet, has now surpassed $460 million, quickly becoming the largest tokenized fund ever issued on a public blockchain.
(See 21.co Dune Analytics for details)
Ironically, however, as more and more of the world’s largest financial institutions recognize the value of asset tokenization to the capital market and launch tokenized financial products, ordinary people still mainly view cryptocurrency as a “speculative casino” with no real social value.
Not unlike a hangover the morning after a heavy drinking binge, the 2021 crypto boom ended with the collapse of a $40 billion Ponzi scheme, the bankruptcy of nearly every retail lending platform, and the much-publicized FTX fraud. Billions of dollars in capital evaporated overnight, never to be recovered.
In 2024, the US court-mandated launch of the Bitcoin ETF spot, followed by the approval of the Ethereum ETF spot, and the fact that cryptocurrencies became the focus of bipartisan discussions during the election cycle brought a breath of fresh air to 2024. However, even so, people's negative views on cryptocurrencies have not subsided.
So, what can solve the information asymmetry problem between institutions and retail investors when it comes to asset tokenization?
Stablecoins may be the answer.
Digital Dollar: The Visual Salesmanship of Cryptocurrency
Cryptocurrency is an extremely difficult concept to explain simply to the general public. The industry covers a wide range of fields, including cryptography, distributed systems, game theory, economics, politics, etc. Most people don’t really understand how the financial system works (nor do they need to), so the problems that cryptocurrencies are trying to solve are mostly unfamiliar to them.
Imagine trying to explain what the Internet is to someone who knows absolutely nothing about computers.
As a result, there is no one universal explanation for cryptocurrencies. Instead, what often happens is that the crypto-curious are inundated with monologues about the historical failures of central banks and fiat currency debasement, while ingesting a near-lethal dose of industry jargon that is incomprehensible to anyone except those already fascinated by crypto.
But stablecoins are different, people can understand stablecoins.
Stablecoins are a powerful construct because they take a concept that people are already very familiar with and interact with every day (the dollar) and add something they are unfamiliar with (the blockchain). This not only creates a curiosity gap, but also makes the core differences and advantages of cryptocurrencies more transparent because people have a baseline mental model to compare stablecoins.
The existence of stablecoins avoids the entire existential question of "what is money" that inevitably arises when explaining crypto-native assets such as Bitcoin and its derivatives, and puts forward a core point: cryptocurrency is the best way to represent assets.
In fact, stablecoins allow anyone to transfer dollars to anyone else in the world with just an internet connection. Transactions are completed in one second and the fees are less than a penny. No rent-seeking intermediaries, no bank accounts required, no oppressive capital controls, no multi-day settlement delays, no nonsense.
For anyone who lives in a country with an overinflated local currency, has tried to send money across borders, or simply wants to conduct financial transactions on weekends or holidays, the benefits of stablecoins are obvious.
Once you start transacting in USD on a regular basis in a stablecoin format (digital USD), using traditional banking services will feel ridiculous and archaic. It’s like going back from Gigabit fiber optics to 56K dial-up.
Money should not have business hours, stablecoins are online 24/7/365.
In terms of market demand, the data speaks for itself. Stablecoins have objectively achieved product-market fit, as they are breaking all-time highs in terms of monthly active users, transaction volume, and circulating supply.
(See Visa Onchain analytics dashboard for details)
In contrast, stablecoins are the 16th largest holder of US Treasuries, with ~$145 billion in holdings. This is more than Norway, Saudi Arabia, and South Korea. Being one of the largest and fastest growing purchasers of US government debt, and the fact that stablecoins reinforce the dollar’s global dominance, provides a solid case that the US will only become more conducive to the existence and growth of stablecoins over time.
The convergence of fintech and stablecoins
One might think that stablecoins are designed to replace existing fintech payment applications, but the opposite is true. By issuing their own stablecoins, existing fintech companies can not only benefit from the cost and speed advantages of blockchain settlement, but also eliminate fragmentation in the payment industry.
For example, you cannot send funds from a Venmo wallet to a Cash App wallet, a situation that is patently absurd. Stablecoins, on the other hand, can be transferred between any two parties, regardless of the wallet software used. The improvement in user experience is obvious and will become a consumer expectation.
Furthermore, given their openness and programmability, stablecoins (issued by fintech companies) can be seamlessly integrated into existing DeFi protocols and on-chain financial applications. This makes existing fintech companies particularly suitable as an interface layer for consumers who want to interact with on-chain applications, such as earning yield, while still receiving dedicated customer support.
Just like tokenized assets, this reality is approaching faster than people realize.
Look at PayPal USD (PYUSD) — a $400M+ stablecoin launched by the world’s largest payment processor and available today on multiple public blockchains. PYUSD has been integrated throughout the DeFi economy, including decentralized exchanges and lending platforms.
According to PayPal, “PayPal USD is designed to reduce friction in the payment experience in virtual environments, facilitate the rapid transfer of value to support friends and family, send remittances or make international payments, enable direct flows to developers and creators, and facilitate the continued expansion of the world’s largest brands into digital assets.”
In addition to fintechs like PayPal issuing stablecoins directly, we’ve seen established payment card networks like Visa publish comprehensive research on improving stablecoin payments and actively participate in a live pilot that enables Visa card payments to be settled in Circle’s USDC.
Cuy Sheffield, Head of Crypto at Visa, put it this way: “By leveraging stablecoins like USDC and global blockchain networks like Solana and Ethereum, we are helping to increase the speed of cross-border settlements and providing our customers with a modern option to easily send or receive funds from Visa’s vaults.”
In short, stablecoins are here to stay. They are becoming more entrenched in the existing payments industry, thereby amplifying their utility by making it easier for consumers to spend stablecoins and for merchants to accept them.
Towards on-chain finance
With the above background in mind, my advice to help someone get into crypto is to have them download a crypto mobile wallet (such as Coinbase Wallet), generate a private key, and provision some stablecoins to trade.
While the cryptocurrency UX today is far from perfect, even in its current state, a stablecoin transaction is a far cry from a traditional international bank wire. Technical complexities will continue to be abstracted away, making the core benefits of cryptocurrency more obvious. This is where the Trojan Horse effect will finally come into play. Once someone experiences the tangible benefits of cryptocurrency firsthand, they will start demanding that all aspects of finance work like stablecoins. Globally accessible, fully transparent, minimally extractive, always online, and resistant to manipulation.
Starting from improving the way dollars are transferred to transforming the global financial system into an on-chain form based on smart contracts and tokenized assets.
The possibilities for a fully on-chain financial system are endless.
Payment processing solutions that enable merchants to accept any fungible or non-fungible asset as payment while only receiving their preferred currency (e.g. paying for groceries with stocks, Bitcoin, or tokenized digital art, while the recipient receives USD stablecoin).
The ability to support online creators, independent publications, or social causes through micropayments and real-time payment streams that can be transparently tracked end-to-end (e.g., supporting cancer research through payments of $0.000004 per second (~$10 per month) flowing to an organization with an on-chain auditable budget).
An autonomous network of robotaxis that collects its own revenue and automatically pays for things like electricity, tolls, mechanical repairs and upgrades (any service that is fully automated through AI will require an on-chain economic system).
Creating truly global capital markets where anyone with an internet connection can access the same investment opportunities and returns as the world’s largest and wealthiest entities.
These are just high-level concepts. Just as it was nearly impossible to accurately predict which Internet applications would scale to a global level in the early 1990s, the same is true for creating an on-chain financial system.
Ultimately, stablecoins are the first step towards a fully tokenized economy. Not only are they the first cryptocurrency application to achieve true product-market fit, they also serve as an indispensable tool that succinctly demonstrates the core value proposition of cryptocurrency and tokenization to newcomers.
So, next time someone asks you what cryptocurrency is, skip the long story and just point them to the digital dollar.
【Disclaimer】The market is risky, so be cautious when investing. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk.
