Written by Linda Bell
The stablecoin market is constantly developing. Although traditional stablecoin solutions such as USDC and USDT still occupy a major market share, they also face challenges such as low capital efficiency and centralization. At the same time, many new stablecoin solutions have emerged in the market, such as high-yield USDe, RWA decentralized stablecoin Usual Money, and WSPN, which is committed to building a payment ecosystem network. These emerging solutions are intensifying market competition and promoting the emergence of more options.
In this context, ChainFeeds invited Raymond Yuan, founder of WSPN, to discuss the development of stablecoins, including the concept of "stablecoin 2.0", the stablecoin market structure and compliance.
Key Takeaways:
1) The “Stablecoin 2.0” proposed by WSPN aims to promote wider global payment applications and use digital technology to achieve large-scale market expansion.
2) The license is only a threshold to enter the market, and its main function is to integrate into the local mainstream economic system. The key to the success or failure of a project lies in whether it can bring real value to users.
3) As the stablecoin market scales to trillions of dollars, the market share will become more balanced, and even the largest stablecoin issuer may only have a market share of 20% to 30%. At the same time, there will be many smaller stablecoins, each occupying about 1% of the market share.
4) The success of stablecoins depends on the prosperity of the entire ecosystem, including continuous innovation and development in various fields such as payment services, KYC and AML tools. All efforts ultimately point to one core goal: maximizing the value of user experience.
WSPN: We hope to promote the application of stablecoins by building a payment network
WSPN (Worldwide Stablecoin Payment Network) is a digital payment company focused on building the next generation of stablecoin infrastructure. It is committed to promoting the widespread use of stablecoins in the global financial system by building a payment ecosystem network. The company's core team is composed of industry experts, including Raymond Yuan, founder of CTH, Austin Campbell, founder of Zero Knowledge Consulting, and John Partridge, former president of Visa.
At present, WSPN has launched its first stablecoin WUSD and plans to launch the euro stablecoin WEUR. Founder Raymond Yuan introduced that the "W" in the name of WUSD stands for "stable", symbolizing its stability. To ensure the stability of WUSD, WSPN has taken a number of measures. For example, in the issuance process, it adheres to the path of legal currency-collateralized stablecoins to ensure that each WUSD has 100% of its funds reserved in a bank account. In the storage process, private key sharding technology is adopted, and cooperation with third-party custodian platforms is ensured to ensure security. Finally, in the redemption process, WSPN has built a 24-hour operation system and established operation centers in North America, Asia and Europe to ensure that it can respond quickly to customer needs.
In addition, WSPN has cooperated with Visa and Mastercard to release stablecoin payment cards and has conducted tests in Japan. Users can use the card to pay in places such as convenience stores and supermarkets. At the same time, WSPN's stablecoins have been used for payment and settlement by some commodity traders and cross-border trade payment companies, and are actively expanding the financial management market based on stablecoins.
WSPN completed a $30 million seed round of financing on August 16 this year, led by Foresight Ventures and Folius Ventures, with participation from Hash Global, Generative Ventures, Yunqi Partners and RedPoint China. Raymond Yuan said that part of the funds raised will be used to expand the team, and the other part is to continue to invest in infrastructure construction.
From "Stablecoin 1.0" to "Stablecoin 2.0": WSPN's payment network concept
WSPN has proposed a new concept, "Stablecoin 2.0", which aims to build a payment network driven by digital technology and centered on users. Raymond Yuan said that although the scale of "Stablecoin 1.0" represented by USDT has exceeded more than 160 billion US dollars, its application scenarios are mainly limited to the field of cryptocurrency, and its growth space is limited. For example, in the current payment system, users still need to link real-name accounts and bind bank cards, and cannot pay freely around the world. Stablecoins can play a more important role in future payment systems, enabling them to transform from "electronic payments" to "digital payments." In the future, with the development of artificial intelligence and smart Internet, the world needs a new digital payment tool, and stablecoins may be the technology closest to this goal. Raymond Yuan predicts that in the next decade, the stablecoin market is expected to reach a scale of 10 trillion US dollars, thus realizing this vision.
Raymond Yuan also explained in detail the differences between “Stablecoin 1.0” and “Stablecoin 2.0” from four aspects:
- Productization level: "Stablecoin 1.0" has a low level of productization and has a high threshold for users outside the industry. The "Stablecoin 2.0" that WSPN hopes for is a product matrix, which should have more than ten, twenty or even dozens of products, which will eventually promote the large-scale application of stablecoins;
- Governance: The governance structure of "Stablecoin 1.0" is too centralized and does not conform to the decentralized spirit of Web3. "Stablecoin 2.0" emphasizes community governance to ensure a decentralized management model;
- Application scenarios: The application scenarios of "Stablecoin 1.0" are mainly concentrated in the field of cryptocurrency. The goal of "Stablecoin 2.0" is global asset allocation, covering a wider range of scenarios such as US stocks, daily consumption, and booking air tickets and hotels;
- User incentives: “Stablecoin 1.0” such as USDT and USDC fail to provide any form of incentives to users. WSPN plans to launch a governance token to capture most of the value of the ecosystem and return it to users.
How to survive in the stablecoin market competition: WSPN's compliance and profit strategy
Compliance has always been a core issue in the development of stablecoins. Raymond Yuan emphasized that since the establishment of WSPN, the company has established a clear principle: business can only be conducted with the permission of relevant local regulatory authorities. Between compliance and market expansion, WSPN prioritizes compliance and would rather sacrifice a certain degree of efficiency and development speed to ensure the legality and security of its operations.
To date, WSPN has successfully obtained key licenses and permits in the United States and the Netherlands, including the MTL (Money Transmitter License) in the United States and the EMI (Electronic Money Institution) license in the Netherlands. In Asia, WSPN is actively applying for a sandbox license in Hong Kong and has submitted an application for a stablecoin payment license (DTP) to the Monetary Authority of Singapore (MAS). In addition, WSPN is also communicating with regulatory authorities in Thailand and other Southeast Asian countries, and further progress is expected in the next three to six months. In the offshore market, WSPN expects to obtain a license in the British Virgin Islands in the near future, and is applying for relevant licenses in Dubai and Abu Dhabi, UAE, and plans to complete these applications in the first quarter of 2025.
Raymond Yuan also emphasized a point that the license is only a threshold to enter the market, but it is not the only key factor for success. The main function of the license is to integrate into the local mainstream economic system. In many mature regulatory markets, only licensed companies can obtain bank accounts and be accepted by mainstream institutions as partners or payment providers. This is equivalent to opening the "ceiling" for the company's development. But the key to determining the success or failure of a project lies in whether it can bring real value to users, including the ease of use of the product, the richness of application scenarios, and the effectiveness of user incentives.
Of course, on the basis of ensuring compliance, it is also important to ensure sustainable development in the face of an increasingly competitive stablecoin market. Raymond Yuan explained that WSPN's revenue model is diverse, and the growth of revenue comes from the widespread adoption of its stablecoins, rather than passive income from users not redeeming stablecoins.
The income from the underlying assets is the most common profit model for stablecoins, which is usually achieved through interest income from collateral. However, Raymond Yuan pointed out that some recent events (such as the decoupling of stablecoins caused by the Silicon Valley Bank incident) have exposed the potential risks of bank deposits. To avoid this risk, some companies have begun to transfer funds to government bonds to obtain relatively stable returns. However, it should be noted that the price of government bonds will still be affected by interest rate fluctuations. To this end, WSPN has adopted a more prudent strategy, hoping to diversify risks and optimize returns by building a diversified portfolio of highly liquid assets, including government bonds of different countries and other financial products with high-yield characteristics.
In addition to the income from the underlying assets, WSPN is also actively exploring other sources of income, such as collaborating with multiple public chains to deploy its stablecoins. At present, WSPN has successfully integrated 6 public chains and plans to expand to 20 public chains in the future. With the widespread use of stablecoins on these public chains, a large amount of transfer activities will be generated, which will bring in handling fee income. Raymond Yuan also mentioned that in the future, part of these handling fee income may be returned to users in some way to further enhance user engagement and loyalty. In addition, platform income is also one of the important sources of income for WSPN in the future. The company plans to connect stablecoins to various user platforms, such as e-commerce and games, so as to obtain handling fee sharing through the trading activities of these platforms.
Insights into the stablecoin market: The market size will expand to trillions of dollars, and the share distribution will become more balanced
According to DefiLlama data, the total market value of global stablecoins has exceeded 168.3 billion US dollars, of which USDT dominates with a market share of 70.09%. Raymond Yuan said that the current market structure does have the risk of over-centralization, but he is optimistic about the future development of the stablecoin market. He believes that as the stablecoin market scales to trillions of dollars, the market share will become more balanced, and even the largest stablecoin issuers may only have a market share of 20% to 30%. At the same time, there will be many smaller stablecoins, each occupying about 1% of the market share. Raymond Yuan also cited an example, saying that there is a principle in the traditional US banking industry that the deposit concentration of a single bank in the industry should not exceed 16%. Similar rules or distribution patterns may also appear in the future stablecoin market.
When discussing DeFi stablecoins, which can also bring more application scenarios and benefits to users, Raymond Yuan said that WSPN's main competitor is not these decentralized stablecoins, but the traditional payment field. WSPN's long-term goal is to build a compliant, secure and transparent payment network infrastructure, while decentralized stablecoins focus more on providing users with high returns based on cryptocurrencies. However, this income model is highly dependent on market growth, and these gains may not be sustainable once the market enters a bear market.
WSPN future blueprint: The core goal is to maximize the value of user experience
WSPN is actively responding to the increasingly fierce competition in the stablecoin market, and Raymond Yuan also explored the company's future plans in various fields. In terms of productization and user experience, WSPN has launched its own wallet application StableWallet, and plans to further expand its product line and launch more than 10 applications. These applications will form a product matrix to make the user experience more user-friendly. At the same time, Raymond Yuan also said that WSPN is actively exploring the introduction of AI technology into its products.
In terms of community governance, Raymond Yuan emphasized that the governance of many current stablecoins still relies on the industry's long-term trust in specific projects. For example, USDT has gained trust due to its long-term presence in the market, although it has experienced several decouplings. The trust of USDC comes more from its compliance positioning. Raymond Yuan said that in the Web3 era, trust should not be based on the morality of individuals or institutions, but on transparent rules and technologies. To this end, WSPN plans to build an API-first platform, record asset allocation information in real time through oracle technology, and introduce an on-chain voting mechanism to ensure that community members can truly participate in the decision-making process and further achieve transparency and security in governance. In addition, in terms of user incentives, WSPN plans to capture and distribute the value of the ecosystem through governance tokens.
Finally, Raymond Yuan said that stablecoins are not just about issuing tokens, but their success depends on the prosperity of the entire ecosystem, which includes continuous innovation and development in various fields such as payment services, KYC and AML tools. Of course, all efforts ultimately point to one core goal: maximizing the value of user experience, whether it is the continued construction of infrastructure, the acquisition of global licenses, or the expansion of the market and the launch of exchanges.
