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Edited by Isha000 at 25-12-2023 12:46 PM
The U.S. House of Representatives voted this week on the stablecoin bill, marking the first time that cryptocurrency regulation has been put to a vote in Congress. This represents a significant milestone in Congress's efforts to compile federal regulations for the digital asset industry. The bill's discussion, which began a week ago, has been protracted, and it reflects not just caution but also strategic ambition. This vote is pivotal to the positioning of a major country in a new era of cryptocurrency, determining the role of sovereign nations in the integration of the crypto world.
Therefore, this article discusses the constructive and disruptive aspects of the stablecoin bill in the context of the integration of sovereign nations and the crypto world. This is the right moment for this discussion, as the spirit of the crypto world is increasingly pushing the boundaries of the real world, Web3 technologies and applications are entering industrial development, real-world financial markets and order are facing challenges, and the crypto market, especially DeFi, is showing signs of a lack of momentum. The integration of these two worlds is the best solution, driven by natural objective conditions that have brought both parties together for mutual benefit and development.
Let's begin with the disruptive aspects: when the stablecoin bill was initially introduced, the crypto world was on high alert. Discussions in the crypto market focused on specific requirements for stablecoin issuers and who would regulate them:
- If the bill passes, the approval requirements may pose additional problems. It could directly disrupt the composability of DeFi. For example:
- If USDC has already received approval from relevant regulatory authorities, does Compound need the same approval to issue cUSDC (an interest-bearing asset) on its lending platform?
- If I operate a bridge protocol, do I need approval for the bridged version of USDC?
- How will wrapped versions of stablecoins connect to real-world assets?
Since the introduction of the bill, discussions on how it would impact top decentralized stablecoins have been pervasive among participants in every stablecoin project. However, this is just a narrow perspective. Behind the differences between the Democratic and Republican parties is a high degree of strategic unity. As the crypto market continues to evolve and the crypto world and digital processes become more radical, the United States is attempting to strengthen the dominance of the dollar in the traditional financial order and the crypto economic system using stablecoins as the foundation.
Therefore, we must acknowledge the strategic efforts of sovereign nation-states in the crypto economic system, including the U.S.'s attempt through the stablecoin bill to establish the issuance status of the dollar. This may deviate from Satoshi Nakamoto's original intent, but in reality, such deviation has been occurring for some time. Especially now, mainstream stablecoins are all based on the traditional dollar system. The Federal Reserve doesn't need to issue a digital currency; it has already embraced the crypto market, transforming from "Gold, Power, Dollar" to "Power, Dollar," and finally to the crypto world - "Power, Digital Dollar." Without strong opposing forces, the era of "Digital Dollar" domination is fast approaching.
As we consider this integration process, we see not only the U.S.'s attempt to regulate and oversee the crypto market but also the process of empowering the integration of traditional financial markets and the crypto economic market. Clearly, the stablecoin bill's implications go beyond the multi-billion-dollar stablecoin market and extend to the multi-trillion-dollar DeFi market, the multi-trillion-dollar RWA market, and the entire crypto economic system.
In a prior analysis titled "Why 'Convergence' Is the Value Investment Theme for the Next Bull Market," we posited that after the pioneering work of early builders in the blockchain world, the crypto world's infrastructure has continued to improve, and the crypto ecosystem is transitioning from being active only in the fields of investment and speculation such as ICO, DeFi, and NFTs to integration in the realms of industry, financial confluence, and more. We believe that the keyword for the next bull market is "convergence" - the convergence of Web3 technologies and applications with various industry ecosystems, the convergence of the crypto economy with the traditional financial system, and the convergence of DeFi with non-financial use cases in Web3.
Now, RWA is gradually becoming the most valuable narrative in this convergence process. In the article "Decoding RWA: The Most Valuable Crypto Narrative in a Regulatory Context," published at the beginning of this month, we judged that the application ecosystem of Ethereum and other public chains would be the most powerful fundamental support during this cycle. However, it mainly gives us confidence, and the most significant support at the market level, we believe, will be RWA.
Returning to the U.S. stablecoin bill and the broader U.S. strategy, it is essential to focus on the financial layout of physical-world sovereign nation-states in the integration of sovereign finance and the crypto economic system. The strategies of the Chinese sovereign nation-state, the digital RMB, and Hong Kong's digital HKD are urgent. In the overall system with a total market value in the trillions of dollars, the digitization of the sovereign nation-state's currency, including the possibility of a digital HKD from the Hong Kong government (e-HKD), is critical. The e-HKD pilot program explores six use case categories, including Web3 settlements, tokenized assets, and tokenized deposits.
In terms of practical capital market activity, we can see that there are two major directions for the U.S. market: the RWA Treasury bond market and the Hong Kong stock market. They represent the market's self-born process of RWA capitalization. For instance:
- Ondo Finance announced the launch of tokenized funds in January of this year, bringing risk-free interest rates to the blockchain, enabling stablecoin holders to invest in bonds and U.S. Treasury bonds.
- Asset management company Matrixport launched the Matrixdock online bond platform, which includes government bond-related services, in late January of this year.
- OpenEden, created by former Gemini employees, launched tokenized U.S. Treasury bonds in April, allowing stablecoin holders to mint TBILL through OpenEden TBILL Vault to earn risk-free income from U.S. Treasury bonds. With rising interest rates, U.S. Treasury bond yields have now clearly exceeded DeFi yields.
ThePrimedia has been closely following the linkage between the Dubai RWA market and the Hong Kong market in the past month. In mid-June, China International Capital Corporation (CICC) issued 200 million digital RWA notes in the Hong Kong market through UBS, raising some questions - UBS originally mentioned the use of the "main Ethereum blockchain," which is not the Ethereum mainnet, but a centralized consortium chain deployed with Ethereum's open-source code. Given uncontrollable risks related to policy compliance, regulation, and transaction efficiency, the deployment of business by traditional institutions on public chains may still be a long way off, but even traditional financial institutions are showing increasing acceptance of tokenized RWAs.
It can be foreseen that traditional exchanges will play a role in the secondary trading of tokenized RWAs. For example, the Australian Securities Exchange may consider listing tokenized RWAs on its platform in the future. As this field continues to mature, regulatory developments will be a driving force for mainstream adoption. But the emerging RWA track is not limited to new native projects.
In summary, the main purposes of the U.S. stablecoin bill are two-fold: 1. To regulate the stablecoin industry; 2. To serve the digital dollar. |
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Post time 20-10-2023 07:32:59