Author: Echo, MetaEra
Source: MetaEra
"Currency stability, global regulation, market capitalization growth" - these have become the hottest topics in the stablecoin world this year. However, in the current stablecoin market, users are increasingly confused: as market demand changes, can stablecoins break through the crypto constraints? With changes in the regulatory environment in various regions, will the usability and liquidity of stablecoins be affected?
To find the answers, MetaEra had an in-depth dialogue with Raymond Yuan, the founder of WSPN, discussing topics such as "Stablecoin 1.0 and 2.0", "Stablecoin license application", and "the role of stablecoins in the PayFi ecosystem".
The following is the full text of the interview:
MetaEra: You have proposed the new concepts of Stablecoin 1.0 and 2.0. In your view, what is the biggest innovation and improvement of Stablecoin 2.0 compared to Stablecoin 1.0?
Raymond:I think the most significant progress of Stablecoin 2.0 compared to 1.0 is in the product and user experience. Looking back on the 1.0 era, USDT and USDC, especially USDT, have existed for nearly 10 years, but if you ask non-cryptocurrency users about their impression of USDT today, most of them have only heard of it but have never actually used it. The current general phenomenon of Stablecoin 1.0 is that the degree of productization is not high, as they mostly do not have their own wallets or apps. In other words, the application scenarios of Stablecoin 1.0 are mainly limited to the cryptocurrency field. We believe that stablecoins should play a more important role in future payment systems. The goal of Stablecoin 2.0 is global asset allocation, covering a wider range of scenarios such as US stocks and daily consumption like booking flights and hotels, transforming from "electronic payment" to "digital payment".
MetaEra: WSPN recently completed a $30 million seed round of financing, and I would like to congratulate you and the WSPN team. Could you share what you think is the most attractive thing for investors?
Raymond:Thank you, we feel very fortunate to have received so much support in the early stage of the project. We have received investments from 6 well-known VCs, 2 strategic investors, and several exchanges. In the entire interaction process with investors, the feedback we received is:
First, we have built a strong enough team. In addition to myself coming from CTH, the team members also include professionals from Paxos, BUSD, Visa, Alipay, and UnionPay, among others. This diversified team composition can make up for each other's shortcomings and leverage each other's strengths. I have full confidence in our team.
Second, it is about our understanding of the medium and long-term development of stablecoins, that is, the clear depiction of the future vision of stablecoins. Our goal is not to compete with other existing stablecoins in the current $200 billion market, but to work together with the industry to expand the market boundaries, expanding the scale of stablecoins from the current $200 billion to $2 trillion or even $20 trillion in the next 5-10 years. This goal is the direction we are striving for together in the future. Our philosophy is more based on an incremental logic, that is, seeking market expansion and growth, rather than engaging in a zero-sum game in the existing market.
Third, it is our relentless pursuit of product and user experience, as well as our emphasis on diversified use cases. Because many of our investors are from the traditional payment field, they firmly believe that payment technology will continue to evolve with the progress of underlying technology. They believe that the payment field will undergo a new technical system upgrade about every 10 years. Our dedication to product and user experience, as well as our focus on broader use cases, are in line with their investment philosophy. This is also one of the reasons why we were able to impress them.
MetaEra: WSPN has already launched its first stablecoin WUSD, and also plans to launch the euro stablecoin WEUR. Could you introduce the design and issuance mechanism of WUSD, and how it ensures stability?
Raymond:WUSD is a fiat-collateralized stablecoin, pegged 1:1 to the real-world fiat currency. This means that to issue $1 of WUSD, we must deposit the equivalent $1 reserve into the designated custodian bank. Only after completing this step can we have the right to mint and distribute the corresponding amount of stablecoin. This mechanism is a notable feature of WUSD, similar to the operation of other fiat-collateralized stablecoins like USDC.
The operation mechanism of WUSD covers multiple aspects. On the one hand, it will continue to be closely related to digital currency trading and is expected to circulate on all major cryptocurrency exchanges in the future. In addition, we hope to apply WUSD to a wider range of areas, especially in cross-border payments and actual payment scenarios such as commodity trade transactions with real application needs, to increase the penetration of stablecoins in the payment field. Furthermore, we are also closely monitoring the market dynamics of the euro stablecoin, observing its gradual growth in market share. Europe has a relatively complete and friendly regulatory environment, and we look forward to the growth opportunities for stablecoins of other currencies when the regulatory framework and ecosystem are fully prepared. But for now, our work is still focused on the US dollar stablecoin WUSD.
MetaEra: WSPN has always adhered to the principle of compliance first in the stablecoin field, insisting on the concept of "no license, no operation". This is widely known in the industry. The company is actively applying for or has already obtained relevant licenses in various countries and regions around the world, including the US, the Netherlands, and multiple Asian countries and regions. In this process, are there any differences in the application process between stablecoin business and exchange business? Have you discovered any regional differences or interesting findings in the application process in various countries and regions that you can share with us?
Raymond:I believe that stablecoins are currently facing a huge development opportunity. Major markets and financial centers such as the US, Europe, Hong Kong, and Singapore have already or are in the process of introducing their own stablecoin regulatory frameworks. As one of the first applicants, we are actively applying for the corresponding stablecoin or payment licenses in these places, so that our business can operate within a good compliance framework.
My understanding is that the core of stablecoin licensing is to ensure the legality and compliance of the source of funds, as well as how to safely custody these reserve assets and ensure that they are under secure custody and supervision. At the same time, it is also necessary to ensure that the reserve assets and the issuing and management company can achieve bankruptcy isolation, so that even if the issuing entity encounters financial difficulties, it will not affect the safety of customer funds. This is a framework that we have been working hard to improve over the past few years.
Finally, regarding information transparency, how we introduce trusted audit firms and third-party institutions to provide asset proof and corresponding information disclosure mechanisms is crucial for all users. Users need to have a clear understanding of the custody and use of the reserve assets, which is also an important component of the stablecoin management process.
As for exchanges, since they are not within our business scope, we may not be very convenient to comment on them. But it is certain that the nature of these two businesses is very different, and they will correspond to different regulatory authorities and different license categories.
MetaEra: In the application process in various countries and regions, have you discovered any regional differences or interesting findings that you can share with us?
Raymond:This is an interesting question. We recognized very early on that to realize our grand vision of stablecoins being widely adopted globally, we must achieve compliance and implementation in multiple regions around the world. This inevitably leads to differences in details due to the differences in regulatory frameworks in each region. Therefore, how to complete this process with higher efficiency and lower cost is a problem we have been exploring.
We will soon start running an AI-driven internal governance framework - a compliance system, aimed at automatically adapting to different regulatory requirements around the world. The system has three key components:
First, we will treat the compliance requirements of regulatory regions around the world as the top priority, ensuring that our business can meet these basic compliance standards.
Second, we will leverage the self-learning capabilities of AI to track the latest changes and trends in regulations in each region, as well as their areas of focus.
Then, we will use AI to conduct extensive in-depth on-chain data analysis, enabling our internal compliance management to go beyond regulation, where we set a higher compliance standard for ourselves and achieve proactive prevention and more comprehensive risk management for many risks.
Through this AI-driven compliance system, we can respond to global regulatory challenges more efficiently and at lower cost, ensuring compliance and robust operations of our business worldwide.
MetaEra: The PayFi concept has been very popular recently, and WSPN has also joined the Conflux PayFi ecosystem. Can you share with us the role that WSPN's stablecoin will play in this ecosystem and its potential impact?
Raymond:As a stablecoin issuer, it is important for us to maintain a relatively neutral role. We need to be multi-chain compatible. We have also been closely following the development of Conflux. We believe that Conflux itself has the technical characteristics of high security and high throughput, which are very suitable for financial activities like stablecoins that require large-scale, high-speed, and high-security.
So at the time, we chose Conflux as our ecosystem partner, and we have also deployed the smart contract of our stablecoin on Conflux, actively promoting the use of our stablecoin in the entire Conflux ecosystem. Based on the development experience of the industry over the past 10 years, the success of a public chain is inseparable from the circulation of payment tools like stablecoins. Once these payment tools develop and grow on the public chain ecosystem, they will inevitably bring a large increase in transaction volume and on-chain transfer volume. In addition, it is very convenient for other developers on the chain to expand their applications, because they no longer need to issue their own stablecoins on the chain. If there is a high-quality stablecoin that is widely accepted in the ecosystem of a public chain, then in fact it can be automatically integrated into other applications, because on the same ledger, it will automatically access the stablecoin and develop their own ecosystem. This is our expectation for the future of Conflux. We hope to work together with the Conflux Foundation and all the developers in the Conflux ecosystem to develop and strengthen the Conflux public chain ecosystem.
MetaEra: WSPN has invited the former President of Visa to join the board of directors, and we have seen many senior executives with rich experience in the international payment industry join in the past six months. How does this align with WSPN's strategic layout?
Raymond:The full name of WSPN is Worldwide Stablecoin Payment Network, and our understanding is that stablecoins play a tool role in it, but our ultimate goal is to achieve the function of a payment network, that is, to use stablecoins as a circulating tool, and ultimately to transition the existing electronic payment to digital payment, and to establish a more efficient, lower-cost, and more secure global payment network system.
Therefore, we urgently need talents with global operational experience to join our team. As a leading global card organization and clearing and settlement institution, we expect to draw on the rich experience of the Visa executive team, and learn how to surpass Visa and the existing system in many aspects, which is the original intention of inviting them to join.
At the same time, we are also very grateful that we have gained the trust of many seasoned financial professionals in the early stage. They are willing to bring their resources, networks, and years of accumulated experience and insights to our platform, helping the platform to grow and develop.
MetaEra: You mentioned that the success of stablecoins depends on the prosperity of the entire ecosystem. What specific plans and actions will your CTH group take to build this ecosystem?
Raymond:In addition to payments, CTH also has an investment institution called Fundamental Labs, which has invested in over 200 companies since 2016, including some exchanges, infrastructure, and a large number of middleware and applications that are doing very well now. In the future, Fundamental Labs will focus on the Crypto payment and AI fields.
For the stablecoin itself, Fundamental Labs will focus on investing in upstream and downstream enterprises in the stablecoin industry chain, such as the many startups I just mentioned that provide off-ramp services for stablecoins, and some startups that provide digital banking and digital wallet services for stablecoins, these will be the focus of our future investments. We hope to create more opportunities for cooperation with other startups and innovative companies in the ecosystem through investment cooperation and other means. I often say that the realization of a grand vision does not depend solely on the efforts of one company, but on a joint force, on some excellent entrepreneurs and startups with an innovative spirit, all working towards the same direction, and then ultimately realizing the vision together.
In this process, as a company that has been cultivating in this industry for many years, we hope to be able to support other startups in the ecosystem, and to carry out various forms of cooperation with them, in order to jointly promote the realization of the vision.
MetaEra: What challenges do you think stablecoin 2.0 will face in driving the transformation of the global financial system, and how is WSPN preparing to address these challenges?
Raymond:I think challenges and opportunities coexist: First, the challenge is that traditional financial institutions need time to learn and understand this emerging field of stablecoins, which is a significant challenge. But we can see that major financial institutions, including Standard Chartered, JPMorgan Chase, have already started to take action. They are either using stablecoins to achieve inter-bank transfers, or collaborating with other stablecoin institutions in the market. We have also started collaborations with several well-known banks. So while challenges exist, as time goes by and cooperation deepens, the difficulty of these challenges is gradually decreasing.
Another challenge is regulation. A positive trend is that the US, Europe, Hong Kong, and Singapore have successively drafted and issued their own regulatory bills on stablecoins. By clarifying the boundaries and specific content of regulation, this will actually be beneficial for the long-term development of this industry.
Another issue is how regulators can maintain continuous communication with the market, listen to the voice of the market, and how to regulate the industry without harming innovation. I think this is a common topic. We are willing to work together with all regulators to always maintain open and transparent communication, to enhance mutual understanding, and to accelerate the entire learning process, so that regulation can be more in line with the market, and the industry can better understand the original intention of regulation.
In addition to discussing the challenges, I also want to talk about the opportunities. In fact, the growth opportunities that stablecoins bring to the global economy are very large.
In our current financial system, according to incomplete statistics, there are more than 1.7 billion adults who currently have no bank account and no form of financial services at all. Even for those who have already obtained a bank account, the types of financial services they can access are very limited.
In the future, if we hope to further deepen global integration, or to achieve high-speed growth in the digital age, solving the problem of financial inclusion, bringing more people into the financial system, is a must. That is to say, we must achieve financial inclusion, so that everyone has the opportunity and channel to access financial services, so that more people can have better financial services. This is a very big opportunity that stablecoins will bring.
In addition, another growth comes from the transactions between machines and machines in the future AI era. Our own judgment for the future is that a large amount of transfers and transactions will be initiated by machines, from the payer to the payee, and the existing financial system is unable to support this type of transfer under the current transaction type, but the proportion of this type of transfer in the entire economy will exceed 50% in the future, which is a huge incremental market, and we hope that our stablecoin can well serve the emerging automated machine transactions and machine transfers.
MetaEra: In your forecast, how will the future stablecoin market affect global investment trends, can you share your insights?
Raymond: The current scale of stablecoins is roughly around $200 billion. For the growth of stablecoins themselves, my personal judgment is that it will grow to $1 trillion in the next three years, and exceed $100 trillion in the next 5 years.
Regarding the impact of the growth of stablecoins on financial transactions and capital markets, I have the following views:
The growth of stablecoins is conducive to the construction of a globally unified financial market. Because the current stock market and a large number of other financial transactions are relatively fragmented regional markets. For example, the US stock market, A-shares, Hong Kong stocks, London stocks, and the Tokyo Stock Exchange, a large number of stock and asset transactions are limited to specific regions, which makes it difficult for some long-term institutional investors, even high-net-worth individuals and investors with global asset allocation intentions, to carry out very efficient asset management, their investments are forced to be divided into different regions, and they will use many platforms at the same time, which will lead to a large increase in their costs and a large increase in friction. We hope that the growth of stablecoins can quickly promote the formation of a unified trading market, such as trading stocks, crude oil, bulk futures, precious metals, and even foreign exchange on the same trading market.
We hope that after the introduction of stablecoins, trading will be a 24x7 globalized peer-to-peer transaction, which will turn a fragmented regional market into a globally unified market. Trading time will change from the current average of 6-8 hours per day to 24 hours per day tomorrow.
MetaEra: Hong Kong has also launched a Hong Kong dollar stablecoin, and multiple institutions have participated in the construction. How do you view the competition between Hong Kong and Singapore in the Web3 era, and who do you think will become the Asian center of the decentralized track of Web 3.0?
Raymond: I think the most important spirit of Web3 is the distributed spirit, so I don't think Web3 will have an absolute center, whether in Asia or globally. A more ideal architecture is that we see Web3 actively in multiple cities, such as Hong Kong and Singapore, which have already become very active nodes of Web3. In addition, New York, London, Berlin, Lisbon, Dubai, and San Francisco are also joining this ranks one after another. I think this is a more ideal architecture. In a more ideal architecture, there should be multiple nodes that remain active at the same time, rather than a single center.
As for the competition between Hong Kong and Singapore, I think it is very positive. Everyone is trying to maintain a balance, to achieve effective regulation and sufficient regulation, while not harming innovation, and how to continue to provide sufficient development space for emerging industries, I think this is what these two regions hope to achieve. On the one hand, they are competing with each other, and on the other hand, they are also learning from each other. I think this positive competition can promote mutual improvement, and in the end they will provide the industry with more intelligent and effective regulatory solutions, which will be very beneficial to the long-term development of the entire industry.
MetaEra: Because the recent hot topics have been focused on the United States. Previously, the CEO of WSPN US had expressed the hope that the United States would accelerate the pace of regulation. In the context of the gradually clarifying global regulatory landscape, can you express WSPN's attitude or call to action on this in one sentence?
Raymond: In the era of regulation, one thing we all need to understand is that regulation and industry development always progress in the same direction, regulation is not the enemy of innovation, but a responsible partner. This is my personal understanding.
