The Future of Stablecoins from the Perspective of the History of the U.S. Banking Industry

Stablecoins, as a medium of value storage and exchange, are typically pegged to the US dollar. Despite being widely used, their definition and understanding still contain ambiguities. The development of stablecoins mainly follows two paths: from under-collateralized to over-collateralized, and from centralized to decentralized. As a payment innovation, stablecoins simplify value transfer and build markets parallel to traditional financial infrastructure.

To understand the limitations and scalability of stablecoins, the history of banking development provides a useful reference. Stablecoins may replicate the development trajectory of the banking industry, starting with simple deposits and notes, gradually achieving more complex credit expansion of the money supply.

In recent years, fiat-backed stablecoins have been widely adopted due to their simplicity and security. Asset-backed stablecoins have been slower to adopt but hold an important position in the traditional banking system. Some new forms of stablecoins, such as strategy-backed synthetic dollars, have also begun to emerge.

The historical development of the banking industry in the United States provides an important perspective for understanding stablecoins. Before the enactment of the Federal Reserve Act in 1913, there were significant differences in the actual value of different forms of currency. It was not until the enactment of this law that the concept of "one dollar equals one dollar" gradually took shape.

Currently, stablecoins can be divided into three categories: fiat-backed stablecoins, asset-backed stablecoins, and strategy-backed synthetic dollars. Fiat-backed stablecoins are similar to early American banknotes, supported by fiat currency and redeemable. Asset-backed stablecoins mimic the way banks create money through credit, and are a product of on-chain lending protocols. Strategy-backed synthetic dollars represent a combination of collateral and investment strategies, but should not be considered stablecoins.

As more economic activities move on-chain, it is expected that asset-backed stablecoins will take up a larger share. Meanwhile, the ongoing development of DeFi will create more strategy-supported synthetic USD for investors and improve the quality and quantity of asset-backed stablecoins.

Stablecoins have become the most economical way to remit money and are expected to reshape the payment industry. They create opportunities for existing businesses and offer startups the possibility to build on new payment platforms.