Stablecoins have emerged as a pivotal innovation in the digital finance landscape, attracting attention from tech giants like Ant Group and JD.com. With recent regulatory developments in the U.S. and Hong Kong, and growing corporate interest, understanding what stablecoins are—and why they matter—is more important than ever.
This article breaks down the fundamentals of stablecoins, how they differ from other cryptocurrencies, their real-world applications, and the strategic motivations behind major companies entering this space.
Understanding Stablecoins: The Digital Form of Cash
Stablecoins are a type of cryptocurrency designed to maintain a stable value by being pegged to an underlying asset—most commonly fiat currencies like the U.S. dollar. Unlike volatile cryptocurrencies such as Bitcoin or Ethereum, stablecoins aim to minimize price fluctuations, making them suitable for everyday transactions and value storage.
According to Huatai Securities, “Stablecoins are effectively digital cash—equivalent to physical paper money but in digital form.” Their value is fixed relative to a reserve asset, meaning they don’t generate interest and have limited appreciation potential. This stability makes them ideal for use as a medium of exchange rather than speculative investment.
Core Types of Crypto Assets
As outlined by JD Group’s chief economist Shen Jianguang, crypto assets fall into four main categories:
- Digital currencies – including central bank digital currencies (CBDCs), tokenized deposits, and stablecoins.
- Tokenized securities – digital representations of traditional financial instruments.
- Real-world asset tokenization (RWA) – such as tokenized logistics or warehouse assets.
- Unbacked tokens – cryptocurrencies like Bitcoin and Ethereum that lack direct real-world asset backing.
Among these, stablecoins occupy a unique position due to their direct link to tangible assets.
How Do Stablecoins Maintain Stability?
The key to a stablecoin’s reliability lies in its asset backing. Most mainstream stablecoins are backed by reserves of fiat currency—typically U.S. dollars—or low-risk financial instruments like U.S. Treasury bonds.
CITIC Securities reports that while stablecoins can theoretically be backed by commodities (like gold) or even other cryptocurrencies, the vast majority rely on fiat collateral.
Market Leaders: USDT and USDC
As of June 21, the global stablecoin market was valued at approximately $261.5 billion, according to CoinGecko data. The two dominant players are:
- USDT (Tether): $162.2 billion in circulation
- USDC (Circle): $61.3 billion in circulation
Together, these dollar-pegged stablecoins account for about 85% of the total market.
These issuers maintain reserves equal to their outstanding supply and invest those funds in highly liquid, low-risk assets—primarily U.S. Treasuries—to generate returns while ensuring redemption capability.
Key Differences Between Stablecoins and Other Cryptocurrencies
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Stablecoins differ from traditional cryptocurrencies in several fundamental ways:
- Value Foundation: Stablecoins are tied to real-world assets like the U.S. dollar; Bitcoin derives value from market sentiment and scarcity.
- Price Volatility: Stablecoin prices remain nearly constant; Bitcoin is known for extreme price swings.
- Primary Use Case: Stablecoins serve as payment tools and stores of value; Bitcoin functions more as a speculative or investment asset.
- Issuance Model: Most stablecoins are issued by centralized entities (e.g., Circle issues USDC); Bitcoin is decentralized and mined algorithmically.
Beijing-based legal expert Xiao Sa emphasizes that stablecoins act as payment instruments within crypto ecosystems, functioning like “general equivalents” in digital economies.
Why Are Stablecoins More Efficient for Payments?
One of the most compelling advantages of stablecoins is their ability to enable fast, low-cost, and borderless transactions—especially across international borders.
Speed and Availability
Traditional cross-border bank transfers often take 3–5 business days due to reliance on SWIFT networks and intermediary banks. In contrast, stablecoin transactions settle in seconds to minutes, operating 24/7 regardless of time zones or banking holidays.
Lower Transaction Costs
World Bank data shows that the average global remittance cost was 6.62% in 2024. The UN’s Sustainable Development Goals aim to reduce this to under 3%. Stablecoin-based transfers typically cost less than 1%, offering significant savings—particularly for migrant workers sending money home.
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JD.com’s Shen Jianguang illustrates this with a real-world example:
“In traditional African trade payments, it takes 4–5 days with a 7.7% fee. Using stablecoins, funds arrive in just 24 seconds—with dramatically lower costs.”
Stablecoins vs. Central Bank Digital Currencies (CBDCs)
While both stablecoins and CBDCs represent digitized forms of money, their use cases differ significantly:
- CBDCs (like China’s digital yuan) are primarily designed for domestic retail use: utility payments, shopping, transportation, and government services.
- Stablecoins, on the other hand, excel in cross-border B2B settlements, offshore markets, DeFi (decentralized finance), and crypto trading.
Moreover, stablecoin transactions operate on decentralized blockchains where “payment equals settlement”—eliminating settlement delays and counterparty risk common in traditional banking.
Why Are Major Companies Entering the Stablecoin Space?
Recent moves by Ant Group and JD.com signal a strategic push into regulated digital finance infrastructure.
Regulatory Momentum
- On May 30, 2025, Hong Kong officially enacted its Stablecoin Ordinance, requiring licenses for issuing or promoting fiat-backed stablecoins.
- On June 17, 2025, the U.S. Senate passed the Lummis-Gillibrand Payment Stablecoin Act, marking the first major federal crypto legislation approval.
These developments create a clear path for compliant market entry.
Corporate Strategies
- Ant Group: Its blockchain arm has begun applying for a Hong Kong stablecoin license after multiple rounds of regulatory dialogue.
- JD.com: Chairman Richard Liu stated the company aims to secure stablecoin licenses in all major currency regions to cut global payment costs by 90% and achieve settlement in under 10 seconds.
- Other players include Standard Chartered’s joint venture Circle Innovation Technology (Circus), which is advancing its own stablecoin initiatives.
CITIC Securities identifies four key participant types in the stablecoin ecosystem:
- Banking IT service providers
- Telecom operators
- Crypto exchanges
- Financial institutions acting as transaction gateways
Revenue Potential Behind Stablecoin Issuance
Issuing stablecoins isn’t just about payments—it’s also a profitable business model.
When users buy USDC or USDT, they exchange real dollars for digital tokens. The issuer holds those dollars (or equivalent assets) in reserve and invests them—typically in short-term U.S. Treasuries.
Circle’s 2024 IPO filing revealed:
- $1.676 billion in revenue
- 99% derived from interest on USDC reserves
- Net profit: $156 million
This demonstrates the scalability of the reserve-interest revenue model when executed at scale.
Risks and Regulatory Challenges
Despite their benefits, stablecoins carry risks:
- Reserve Transparency: If issuers fail to prove full backing, panic redemptions ("bank runs") could occur.
- Liquidity Risk: Insufficient access to cash or liquid assets during high redemption periods may trigger defaults.
- AML Compliance: While blockchain transparency aids tracking, misuse for money laundering remains a concern.
Legal expert Xiao Sa notes that “a secure, permissioned blockchain can actually enhance AML oversight,” but vigilance is essential.
Huatai Securities warns: “Transparency and sound liquidity management are critical to maintaining trust.”
Frequently Asked Questions (FAQ)
Q: Are stablecoins safe to use?
A: Regulated stablecoins backed by transparent reserves (like USDC) are generally considered safe. However, always verify the issuer's credibility and audit reports.
Q: Can I earn interest on stablecoins?
A: Yes—many platforms offer yield through lending or DeFi protocols. However, higher returns come with increased risk.
Q: Do stablecoins pay dividends or interest directly?
A: No. Stablecoin issuers earn interest on reserves but do not distribute it to holders unless used in earning products.
Q: What happens if a stablecoin loses its peg?
A: A broken peg (e.g., dropping below $1 for a dollar-pegged coin) can cause panic and redemptions. Strong reserve management helps prevent this.
Q: Is owning stablecoins legal everywhere?
A: Legality varies by jurisdiction. Many countries allow holding them, but issuance requires licensing—especially post-Hong Kong and U.S. regulations.
Q: How are stablecoins taxed?
A: Tax treatment depends on location. In many regions, exchanging stablecoins for other cryptos may trigger capital gains events.
Stablecoins represent a transformative shift in how value moves globally. As giants like Ant and JD align with regulators to build compliant infrastructure, we’re witnessing the foundation of a faster, cheaper, and more inclusive financial system—one digital dollar at a time.