The nature of stablecoins has changed. They are no longer just an engineering component within the crypto world, but are gradually evolving into a financial variable that needs to be taken seriously by the system. The question is no longer "whether to use them," but "how to manage them"; no longer "whether the technology is feasible," but "whether the system can support them."
Author: Liu Honglin, Attorney at Law , Mankiw Blockchain Legal Services
Cover: Photo by Logan Voss on Unsplash
introduction
Initially, stablecoins didn't have much of a grand narrative.
It's merely an "internal tool" in the crypto world: serving as a unit of account on exchanges, a foundation for liquidity in DeFi, and a settlement medium in on-chain transactions. Its creation is more like an engineering fix—faced with a highly volatile asset system, people need a relatively stable price anchor to allow trading, lending, and clearing to continue operating. Thus, stablecoins peg their prices to the US dollar, making a highly volatile system appear, at least partially, "like a normal market."
For a long time, this only happened within the crypto world. Stablecoins solved problems specific to the crypto market, and their risks, failures, and successes were all seen as "endogenous phenomena" of this emerging ecosystem. From the perspective of the traditional financial system, it was more like a technological byproduct—limited in scale, closed in use, and with controllable impact.
But in the past two years, these boundaries have begun to blur. Stablecoins have gradually moved beyond the crypto sphere and are increasingly appearing in documents from international organizations, central banks, and regulatory agencies, being placed within the framework of discussions about cross-border payments, financial stability, and monetary sovereignty. The question is no longer simply "how easy is it to use?", but "will it impact the system?" This shift is not due to a technological mutation, but rather because its scale and intensity of use have crossed a critical point: when a settlement tool consistently appears in cross-border capital flows, offshore markets, and real-world transactions in some emerging economies, it is no longer merely a negligible technological arrangement, but begins to possess spillover effects.
It was at this moment that the nature of stablecoins changed. They were no longer just an engineering component within the crypto world, but gradually evolved into a financial variable that needed to be taken seriously by the system. The question was no longer "whether to use it," but "how to manage it"; no longer "whether the technology is feasible," but "whether the system can support it."
From this point onward, stablecoins entered a completely new phase—for the first time, they truly stood at the threshold of "crossing the chasm."
This is precisely why this article introduces the perspective of *Crossing the Chasm*. The reason *Crossing the Chasm* is repeatedly cited in the history of technology and business is not because it emphasizes the importance of innovation, but because it captures a more sobering truth: the greatest risks of new technologies often lie not in their early stages, but in the middle stages of their transition to mainstream adoption. Early adopters are willing to take risks and experiment when systems are imperfect; the early adopters, on the other hand, want clear boundaries of responsibility, transferable risk, and redress in case of problems. The "chasm" in the financial and payments sectors is even deeper, because what is traded here is not information, but assets, credit, and responsibility.
Therefore, this article's discussion of "stablecoins bridging the gap" is not equivalent to discussing whether they will replace fiat currency, much less whether they are the "next-generation currency." This article focuses on a more verifiable and institutionally significant question: can stablecoins evolve from a tool serving the crypto market into a payment and settlement arrangement that can be accepted within the existing financial governance framework? To answer this question, we must shift the discussion from "what technology can do" to "what the system allows and what the system needs," and use traceable data and regulatory frameworks to dissect its true boundaries. The entire article will unfold along a clear path:
Chapter 1: Defining the Problem and Research Perspective;
Chapter Two provides institutional benchmarks for "bridging the gap" and public monetary arrangements;
Chapter Three uses on-chain and market data from the past two years to depict the establishment and limitations of the early stablecoin market;
Chapter Four breaks down the institutional gaps faced by stablecoins into three constraints: equivalence, flexibility, and integrity.
Chapter Five compares how the regulatory responses of the EU, the US, and Hong Kong build institutional bridges with "limited load-bearing capacity."
Chapter Six uses the "bowling pin" strategy to explain in which scenarios stablecoins are most likely to make partial breakthroughs first;
Chapter 7 discusses how the structure of the financial system will be rearranged once partial embedding occurs;
Chapter 8 returns to the Chinese context, clarifying institutional boundaries, practical compliance paths, and feasible professional roles;
Chapter Nine then consolidates these observations into a judgment framework for sustainable tracking.
This research report ultimately aims to present not an emotional stance, but a set of verifiable conclusions: the future of stablecoins resembles a process of institutional negotiation and structural adjustment. Whether it can bridge the gap depends on its ability to transform "self-assumption of risk" into "institutionally acceptable," "market trust" into "accountable responsibility structure," and "technological efficiency" into "regulatory infrastructure" within limited scenarios.
Chapter 1 Research Background and Problem Definition
1.1 Institutional and Real-World Background of Stablecoins as the Subject of Study
In the study of international financial and payment systems, stablecoins have gradually evolved from a technical arrangement within crypto assets into a research subject with clear public policy implications in recent years. This shift is not due to a disruptive breakthrough in the technological path of stablecoins, but rather to the fact that their actual scale of use, functional spillover effects, and potential systemic impacts have reached a level that regulatory agencies and international organizations can no longer ignore.
According to research and policy documents published by the International Monetary Fund (IMF) between 2024 and 2025 regarding financial stability, fintech, and payment systems, stablecoin-related trading activities have reached a considerable scale in some cross-border payment corridors, emerging markets, and crypto-asset-intensive scenarios. Although its share in total global payments remains limited, its growth rate and application concentration are significantly higher than most other forms of crypto assets.
Unlike highly volatile crypto assets, stablecoins are not designed for value appreciation, but rather to rebuild a stable value carrier in the digital environment by pegging to fiat currencies or low-volatility assets. As a result, stablecoins have rapidly assumed the functions of transaction pricing, settlement medium, and liquidity hub within the crypto ecosystem, objectively forming a payment and settlement layer parallel to the traditional banking deposit system.
More importantly, the use of stablecoins has clearly spilled over into areas of concern for the traditional financial system. The Bank for International Settlements (BIS) has repeatedly emphasized in its annual economic reports and related research that the development of stablecoins has presented new policy challenges to payment system architecture, cross-border capital flow monitoring, and monetary sovereignty arrangements. In this context, stablecoins are no longer merely a technical question of "whether they should be allowed," but rather an institutional question of "how to integrate them into the existing financial governance framework."
1.2 Choice of Research Perspective: From Technical Discussion to Institutional Adoption
Existing research on stablecoins can be broadly divided into two categories: one focuses on technological and efficiency advantages, such as low cost, high speed, and programmability; the other focuses on potential risks, including financial stability, money laundering and sanctions evasion, and threats to monetary sovereignty. While both categories provide important information, they fail to fully explain a persistent phenomenon: stablecoins are highly prevalent in the crypto-native market, yet have lagged behind in achieving systemic adoption among broader economic actors.
To understand this chasm, this paper introduces the technology adoption lifecycle analysis framework proposed in *Crossing the Chasm*. Since its publication in the 1990s, this book has become one of the most influential classic works in the fields of technology industry, venture capital, and innovation research, widely used to explain the "mid-stage stall" phenomenon encountered by information technology, internet products, and even fintech during commercialization. Its author, Jeffrey Moore, has long been engaged in research on high-tech corporate strategy and innovation diffusion, and his concept of the "chasm" has become a standard analytical tool for analyzing institutional and market disruptions in the process of new technologies moving from niche to mainstream.
The core insight of this theory is that the failure of new technologies to be widely adopted is often not due to the immaturity of the technology itself, but rather to structural differences among different user groups in terms of risk tolerance, expected responsibility, and reliance on institutional safeguards. Early adopters are usually willing to use new technologies first because they can bear the costs of failure themselves and do not rely on external institutional endorsement; however, when technology attempts to penetrate a wider range of economic actors, the decisive factors are no longer efficiency or functionality, but rather whether responsibility is clear, whether risk is transferable, and whether institutional trust has been established.
Applying this analytical framework to stablecoin research helps explain a long-underestimated reality: the success of stablecoins in the native crypto market does not necessarily mean they are ready to expand into the real economic system. The core constraint currently facing stablecoins is less about "insufficient market education" or "unclear regulations," but rather that they have not yet completed the crucial transition from "being used by a few entities at their own risk" to "being adopted by the majority of economic entities within an institutional framework."
1.3 Research Questions and Methodological Approach
Based on the above background, this study conducts a systematic analysis around three issues.
First, from the perspective of technology adoption lifecycle, what stage of development is stablecoin currently in, and what identifiable characteristics do its main user structure possess?
Second, in the process of stablecoins expanding from serving the native crypto market to enterprises, financial institutions and the public sector in the real economy, what specific institutional dimensions do they face in terms of the "gap"?
Third, are the current regulatory framework and industry practices that are gradually taking shape providing the practical conditions for bridging this gap, and what are their boundaries and inherent limitations?
Methodologically, this article will combine research reports from international organizations, documents from central banks and regulatory agencies, industry disclosures, and on-chain data analysis to cross-validate the development stages and institutional constraints of stablecoins, and retain verifiable source entry points at key judgment points so that readers can trace them.
Chapter Two: Theoretical Framework: Technology Adoption and Public Monetary Arrangements
2.1 Technology Adoption Lifecycle and Institutional Trust
The theory of "Crossing the Chasm" points out that the most critical breaking point in the process of technology diffusion occurs between early adopters and early majority. The former usually have professional knowledge and a high risk tolerance, and are willing to use new technologies in the absence of perfect institutions; the latter rely more on mature product forms, clear allocation of responsibilities, and predictable institutional guarantees.
This difference does not stem from varying levels of technological understanding, but rather from different sources of institutional trust. This difference is particularly pronounced in the financial and payment sectors, where the technologies directly involve asset security, legal responsibility, and public governance. The adoption threshold is often not determined by "ease of use," but by "who is responsible if something goes wrong, how accountability is pursued, and whether there are remedies."
2.2 Institutional Standards for Public Monetary Arrangements
In its research on the monetary and payment system, the BIS has proposed a set of core criteria for assessing whether a monetary form can assume broad payment functions. In its research on the future form of the monetary system and its annual economic reports, the BIS summarizes eligible public monetary arrangements into three interrelated institutional dimensions:
The first is the equivalence of money, which requires that different forms of currency should maintain a one-to-one equivalence in payments and settlements, and should not be subject to systemic discounts due to different issuing entities or carriers;
The second is elasticity, which requires the money supply to be able to adjust under stress situations in order to prevent the payment system from failing due to insufficient liquidity;
Thirdly, there is integrity, which requires the monetary system to be effectively embedded with governance mechanisms such as anti-money laundering, sanctions enforcement, and consumer protection.
This framework is not targeted at any specific technological path, but rather stems from an institutional summary of the long-term operational experience of the modern monetary system. Its value lies not in determining "which technology is more advanced," but in explaining "which arrangement is more likely to be institutionally adopted."
2.3 Institutional Definition of the Stablecoin "Gap"
In this study, "stablecoins bridging the gap" is defined as the following institutional shift: stablecoins are transformed from a technical value carrier that primarily serves crypto native users into a payment and settlement arrangement that can be viewed by a wider range of economic entities within the existing financial and payment system as an institutionally trustworthy, legally accountable, and scalable payment and settlement arrangement.
The key to this shift lies not in transaction speed or cost advantages, but in whether stablecoins can approach or meet the minimum requirements of public monetary arrangements in terms of equivalence, flexibility, and integrity. In other words, the real "leap" is not about users going from a niche to a mainstream audience, but about responsibility shifting from "self-assumed" to "institutionally acceptable."
Chapter 3 The Early Market for Stablecoins
3.1 The Functional Role of Stablecoins in the Crypto System
Within the crypto economy, stablecoins have established a clear and solid foundational position. Their role has long since transcended the category of "a type of low-volatility asset," and is closer to the underlying pricing, settlement, and liquidity of the entire system. From the perspective of on-chain structure and usage behavior, this position does not stem from price performance or market capitalization ranking, but is directly reflected in their issuance scale, usage intensity, and functional position.
In terms of total supply, based on a combination of data from on-chain platforms such as DeFiLlama and industry statistics, the global stablecoin circulation showed a clear structural expansion trend between 2023 and 2025: At the beginning of 2023, the total stablecoin supply was approximately $120 billion. After a period of decline following industry deleveraging in 2022, it rebounded in 2024 and stabilized at around $230 billion from the end of 2024 to the first half of 2025, reaching the $250 billion-$300 billion range under some statistical methods. This change indicates that stablecoins are no longer just short-term tools that fluctuate with market sentiment, but have formed a sustainable structural supply above historical averages.
In the decentralized finance (DeFi) ecosystem, the fundamental role of stablecoins is particularly evident. According to DeFiLlama's statistics, from 2023 to 2025, stablecoins consistently accounted for 30%-50% of the total value locked (TVL) of DeFi protocols, and played a major role in pricing and settlement in core modules such as lending, decentralized trading, liquidation, and profit distribution. In many mainstream DeFi protocols, stablecoins serve as important collateral on the asset side and as the benchmark unit on the liability and liquidation sides, with a significantly higher frequency of fund turnover and settlement than most non-stablecoin crypto assets.
At a broader on-chain usage level, the "settlement layer attribute" of stablecoins becomes even clearer. According to Chainalysis' annual tracking of on-chain data from 2023 to 2024, the annual on-chain transaction settlement volume of stablecoins reached trillions of dollars, far exceeding their nominal outstanding amount. In terms of transaction amount, stablecoin-related transactions accounted for 40%–60% of the total on-chain transaction volume in most years; in some years and regions, their settlement volume even exceeded that of single high-market-cap crypto assets such as Bitcoin or Ethereum. This "high turnover, low holding" usage characteristic clearly indicates that stablecoins are primarily used as payment, clearing, and cross-border transfer tools, rather than as risky assets held for long-term investment.
This functional division also holds true in centralized trading platforms. Whether in the spot or derivatives markets, stablecoins have become the primary unit of account and settlement medium, serving as the fundamental link between different crypto asset markets. From a market structure perspective, the stablecoin sector exhibits a highly concentrated pattern: USD-denominated stablecoins account for over 90% of the total stablecoin market capitalization, with USDT and USDC forming a long-standing duopoly, collectively holding 80%-90% of the core stablecoin market share as of the first half of 2025. This concentration further strengthens the network effect of stablecoins as a unified pricing and settlement tool.
Considering the overall scale of stablecoins, their usage intensity, and market structure, it's clear that the role of stablecoins in the crypto ecosystem is not to bear price risk or generate excess returns, but rather to provide a stable settlement platform for risky asset trading, leveraged activities, and on-chain financial operations. In this sense, stablecoins have acquired a functional status similar to a "base money layer" in the crypto economy: they may not be risky assets themselves, but they constitute the core infrastructure for the operation of the risky asset market.
3.2 The Establishment and Limitations of Early Markets
While stablecoins have established mature and indispensable use cases within the crypto ecosystem, this stage of success should be understood as the "establishment of an early market" rather than a "crossing of the chasm" in a technological or institutional sense. The widespread use of stablecoins does not mean that they have completed their transformation from a niche technological tool to a mainstream financial arrangement.
This judgment stems primarily from the structural characteristics of its preconditions for use. At the current stage, the main users of stablecoins are still native crypto users, crypto trading platforms, DeFi protocols, and some professional institutions. These entities generally possess strong technical understanding and have a high tolerance for on-chain operational risks, counterparty credit risks, and legal and regulatory uncertainties. In most use cases, these risks are not institutionally transferred but are primarily borne by individuals or institutions themselves; whether stablecoins enjoy a clear legal status or whether public relief mechanisms exist are not core considerations in their usage decisions.
Secondly, from a market structure perspective, the "mature use" of stablecoins is built upon a highly centralized issuance system. Although stablecoins exhibit strong decentralized characteristics in terms of functionality, their issuance and governance heavily rely on a few leading entities. As mentioned earlier, USD-denominated stablecoins hold an absolute dominant position in the market, with USDT and USDC long forming a "duopoly" structure, collectively controlling 80%-90% of the core stablecoin market share. This means that the stable operation of the stablecoin system largely depends on the reserve management, redemption mechanisms, legal structure, and compliance capabilities of a few issuers.
This structure is acceptable in the early market stages. On the one hand, the highly centralized issuance system strengthens network effects, enabling stablecoins to quickly become a unified pricing and settlement tool; on the other hand, early users do not require the issuing entities to assume responsibilities similar to public financial institutions, nor do they require them to have systemic risk management or macroeconomic stabilization functions. However, it is precisely this structure of "highly centralized functional importance and relatively limited institutional responsibility" that has kept the success of stablecoins in a market stage dominated by early adopters.
This very point constitutes a key constraint when stablecoins expand into the broader economic system. Unlike the native crypto market, the decision-making logic of enterprises, financial institutions, and the public sector is not based on "risk-bearing," but rather heavily relies on institutional safeguards, legal accountability, and clear risk allocation mechanisms. For these entities, the efficiency of a settlement instrument is not the sole criterion; more importantly, in the event of extreme circumstances, can the risk be absorbed institutionally, is responsibility clearly defined, and are remedies feasible?
Therefore, the early success of stablecoins in the market cannot be automatically extrapolated to their feasibility in the broader economic system. The problem that "bridging the chasm" aims to solve is precisely the transformation from a tool used by a few professional entities under imperfect institutional conditions to a financial arrangement acceptable to the majority of economic entities within a clear institutional framework. This migration cannot be accomplished simply by expanding usage; it inevitably involves deeper institutional restructuring and regulatory responses.
Chapter 4 The Institutional Gap of Stablecoins: The Triple Constraints of Public Monetary Arrangements
Whether stablecoins can move from the crypto-native market to the broader real economy depends not on whether they are faster, cheaper, or "technically superior" in specific scenarios. The real constraint comes from a more fundamental question: can they be regarded as a payment and settlement arrangement that can be institutionally accepted within the existing financial governance framework?
In this sense, the "gap" faced by stablecoins does not occur at the level of user experience or market education, but rather stems from the structural tension between them and the modern monetary system. To understand this tension, the discussion must shift from technological comparisons to institutional benchmarks, placing stablecoins back within the analytical framework of international monetary and financial governance.
4.1 Analytical Framework: Institutional Benchmarks for Public Monetary Arrangements
In its research on the future form of the monetary system, the Bank for International Settlements (BIS) has proposed a widely cited analytical framework for determining whether a monetary system possesses the institutional conditions to undertake broad payment and settlement functions. This framework does not focus on technological pathways, but rather on three fundamental institutional requirements: singleness of money, elasticity, and integrity.
The core value of this framework lies in shifting the discussion from "what technology can do" to "what the system must guarantee." Under this benchmark, the difference between stablecoins and central bank money or commercial bank money is no longer a difference in performance, but a distinction based on institutional attributes.
4.2 The First Gap: The Challenges of Equivalence Constraints and Currency Unity
In the modern financial system, the coexistence of different forms of currency without systemic stratification is not predicated on spontaneous market arbitrage, but rather on a set of institutional arrangements backed by the public sector. Commercial bank deposits, electronic money, and cash are considered equivalent by the public because they are ultimately embedded in the same clearing system, with the central bank acting as the final settler and providing a credit anchor.
In its research on "monetary unity," the European Central Bank has repeatedly emphasized that the stable operation of the payment system depends on the public's shared expectation that "one unit of currency is always of equal value." Once this expectation is broken, structural discounts will appear between different payment instruments, the payment network effect will weaken rapidly, and financial risks may be amplified through changes in confidence.
In contrast, the equivalence of current mainstream stablecoins primarily relies on market-based arrangements: the quality and liquidity of reserve assets, the issuer's ability to fulfill redemption commitments, and market trust in the continued effectiveness of these arrangements. Although some issuers have strengthened confidence by increasing transparency in information disclosure and introducing third-party reviews or audits, from an institutional perspective, this remains a market-based equivalence mechanism rather than a publicly committed equivalence mechanism.
This difference may not be apparent under normal circumstances, but it is particularly critical under stress. The IMF's financial stability analysis points out that once the market raises questions about reserve assets, custody structures, or legal arrangements, stablecoin prices may deviate rapidly from their peg, and their stability is highly dependent on whether external conditions continue to hold.
Therefore, in terms of equivalence, stablecoins do not yet have the same institutional guarantees as bank or central bank currencies, and their acceptability is inherently conditional.
4.3 The Second Gap: Lack of Flexibility Constraints and Liquidity Support
Flexibility is a key institutional feature that distinguishes the modern monetary system from commodity money or full reserve money. Through the central bank's rediscount mechanism, open market operations, and lender of last resort function, the money supply can be adjusted in the event of a shock, thereby preventing the payment system from being disrupted due to a liquidity crunch.
In multiple studies, BIS has clearly stated that the robustness of a payment system does not require that the currency be fully asset-backed at all times, but rather that there be a reliable source of liquidity support at critical moments.
From a design perspective, most stablecoins adopt a fully or highly asset-backed model, with a structure closer to that of narrow banks or money market funds. This arrangement helps limit credit expansion under normal circumstances, but it also brings clear institutional constraints: in the absence of central bank liquidity support or an equivalent mechanism, the stablecoin system can only rely on the liquidity of its reserve assets when facing concentrated redemptions or market shocks. Once the liquidity of these reserve assets is restricted, its stability will be quickly tested.
In its research on digital currencies, the IMF points out that this lack of flexible support makes stablecoins unsuitable for functioning as economic stabilizers at the macro level. They can serve as a supplement to settlement tools, but are unlikely to become a core component of the monetary supply system.
4.4 The Third Gap: Insufficient Embedding of Integrity Constraints and Governance
The modern monetary system is not merely a collection of payment instruments, but a network of institutions deeply embedded in national governance and international cooperation. Anti-money laundering, counter-terrorism financing, sanctions enforcement, and consumer protection are not optional extras, but prerequisites for the widespread acceptance of a currency.
Both the BIS and the IMF have emphasized in multiple studies that the integrity of the monetary system is directly related to the legitimacy and sustainability of the financial system. A monetary form that cannot be effectively regulated, is difficult to enforce, and has unclear boundaries of responsibility, is unlikely to gain institutional recognition, even if it is technically feasible.
Although some stablecoin issuers have invested significant resources in compliance in recent years, the stablecoin system as a whole still lags significantly behind the traditional financial system in terms of legal liability attribution, cross-border regulatory cooperation, and enforcement. Particularly in cross-border use cases, disagreements exist among different jurisdictions regarding the legal characterization and regulatory authority of stablecoins, making it difficult to establish a stable and predictable governance structure.
In its analysis of cross-border payments and stablecoins, the IMF points out that insufficient governance embedding is not a peripheral issue, but one of the core institutional risks facing stablecoins, and also the factor that regulators are most concerned about when assessing their systemic impact.
4.5 Summary: The Institutional Nature of the Divide
In summary, the "gap" faced by stablecoins does not stem from a single risk or localized flaw, but rather from a systemic gap between them and public monetary arrangements across three institutional dimensions: equivalence, resilience, and integrity. This gap does not deny the real-world value of stablecoins in specific scenarios, but it clearly indicates that, at the current stage, they cannot yet be considered a fully institutionalized and widely accepted monetary arrangement.
The future of stablecoins does not depend on whether technology continues to advance, but on whether and to what extent they can gradually narrow the aforementioned institutional gap through institutional design and regulatory responses.
Chapter 5 The Emergence of Institutional Bridges: A Comparative Analysis of Regulatory Responses to Stablecoins
As Chapter Four has demonstrated, stablecoins face not a single risk, but a set of structural constraints rooted in the modern monetary system. In this context, whether stablecoins can continue to expand their applications no longer depends primarily on the issuer's market strategy or technological capabilities, but increasingly on the public sector's willingness and method of integrating them into the existing financial governance system.
Over the past two years, a key shift has been underway: major economies and international financial centers are moving from early risk warnings and principled statements to enforceable regulatory and legislative arrangements. This shift does not mean that stablecoins are being redefined as "security innovations," but rather that regulators are beginning to answer a more practical question—given the inability to eliminate institutional gaps, can they be confined to a controllable, accountable, and intervened-in-progress operating range through rule design?
In this sense, these regulatory responses constitute an "institutional bridge" in the process of stablecoins bridging the gap.
5.1 The overall logic of institutional response: from observation to "conditional inclusion"
From the perspective of comparative law and comparative regulation, different jurisdictions have significant differences in institutional design, but their underlying logic is highly consistent.
First, stablecoins are no longer simply categorized under the broad term "crypto assets," but are instead identified as a special financial arrangement that may undertake payment and settlement functions. This shift in positioning signifies a change in regulatory focus from price volatility and investor protection to the more fundamental issues of payment system security and financial stability.
Secondly, the focus of regulation has generally shifted upstream. The initial emphasis has shifted from primarily regulating trading platforms and the secondary market to a systemic approach to regulating issuance, reserves, redemption, and governance structures. Regulators are no longer just concerned with "who is trading," but rather with "who is committing to equivalence, who is managing risk, and who bears responsibility in extreme situations."
More importantly, the way regulatory objectives are phrased has changed. Major jurisdictions are no longer attempting to "eliminate all risks of stablecoins" through regulation, but rather to design systems that ensure their operation falls within a predictable, accountable, and disruptive governance framework.
In this sense, the implicit premise of "institutional bridges" is not to encourage expansion, but to stop losses and provide a safety net: the bridge is not to make cars run faster, but to ensure that in the event of an accident, it knows who is responsible, how to brake, and whether it can be towed away.
5.2 The EU Approach: Responding to Equivalence and Integrity Issues with Comprehensive Rules
Among major jurisdictions, the EU has provided the most systematic institutional response to stablecoins, with the Crypto Asset Markets Regulation (MiCA) being a prime example. The core characteristic of this framework is not its technological orientation, but rather its institutional stratification.
MiCA does not attempt to cover all stablecoins with a single standard. Instead, it directly links regulatory intensity with institutional risk by distinguishing between "Asset Reference Tokens" (ART) and "Electronic Money Tokens" (EMT). The institutional implication is that whether a stablecoin poses a public risk depends on its anchoring method, scale of use, and potential systemic importance, rather than whether the blockchain is "decentralized."
In terms of equivalence, MiCA attempts to transform the equivalence commitment of stablecoins from a matter of market trust into an enforceable institutional obligation by making clear requirements on the quality, composition, custody segregation, and frequency of information disclosure of reserve assets. Crucially, setting higher capital, liquidity, and governance requirements for "significant" stablecoins clearly reflects the EU regulators' sensitivity to the issue of monetary unity: once a stablecoin occupies a key position in the payment system, its stability is no longer the private concern of the issuer.
In terms of completeness, MiCA systematically embeds anti-money laundering, counter-terrorism financing, consumer protection, and cross-border regulatory cooperation into the regulatory framework, and strengthens its enforceability through EU-level coordination. Its goal is not to promote the large-scale expansion of stablecoins, but to prevent regulatory arbitrage in areas where institutional boundaries are blurred.
5.3 The US Approach: Reshaping the Functional Boundaries of Stablecoins Around the US Dollar
Unlike the EU's systematic legislation, the US's institutional response to stablecoins is more function-oriented and gradual. In US policy discussions, stablecoins are almost always examined within the context of the dollar payment system and the dollar's international role.
The core issue in US regulatory discussions is not whether stablecoins "resemble securities," but rather whether their risks, if widely used for payments, are approaching those of bank money or other regulated payment instruments. This question directly determines the intensity and manner of regulatory intervention.
In terms of institutional design, the United States has not attempted to solve the elasticity problem through stablecoins themselves. Instead, it tends to indirectly compress the space for systemic risk by restricting the types of issuers, strengthening the security of reserve assets, and emphasizing connections with the banking system. This means that, in the US context, stablecoins are positioned as a payment layer innovation embedded in the existing dollar financial system, rather than an independent money supply mechanism. Their macroeconomic regulation functions are still undertaken by the central bank and the banking system. It is worth noting that US stablecoin regulation still exhibits characteristics of multiple institutions operating in parallel, with legislative and regulatory games intertwined. This uncertainty increases compliance costs in the short term, but it also reflects another aspect of the US institutional approach: reserving room for adjustment in institutional evolution without rushing to provide a final answer.
5.4 The Hong Kong Approach: An "Experimental Bridge" Centered on Issuer Responsibility
In the Chinese-speaking financial system, Hong Kong's regulatory approach to stablecoins holds special significance. Its uniqueness lies not in its lenient or aggressive stance, but in its strong focus on issuer responsibility as the institutional anchor.
Hong Kong regulators have explicitly defined stablecoin issuance as a regulated activity and, through a licensing system, centralized reserve management, redemption mechanisms, corporate governance, and risk control at the issuing entity level. The implications of this design are clear: the credibility of a stablecoin system depends first and foremost on the existence of a regulated, accountable, and legally binding center of responsibility.
By including issuers in the anti-money laundering, counter-terrorism financing, and financial regulatory systems, the Hong Kong approach provides a direct response in terms of completeness, helping to alleviate regulators' concerns about a "governance vacuum." From a broader perspective, the Hong Kong model is not about pursuing rapid expansion, but rather acts as an institutional experiment—observing the real-world performance of stablecoins in payment, settlement, and cross-border scenarios under strict regulatory conditions, providing verifiable experience for subsequent policy choices.
5.5 Comparative Analysis: The Effectiveness and Boundaries of Institutional Bridges
Combining these three approaches reveals that major jurisdictions have not attempted to eliminate all institutional gaps in stablecoins at once, but rather have prioritized addressing the most realistic risks across different dimensions.
The EU is focusing on equivalence and integrity, the US is emphasizing the functional boundaries of the existing monetary system, and Hong Kong is strengthening governance embedding through issuer responsibility. These institutional designs are building several limited-weighted bridges for stablecoins, enabling them to enter certain real-world scenarios under controlled conditions.
However, it is important to emphasize that these bridges do not signify a "complete crossing." Their effectiveness is highly dependent on the strength of implementation, market feedback, and the degree of cross-border regulatory coordination. Once the scale of use, functional spillovers, or risk exposure exceed expectations, the institutional bridges themselves may be quickly reinforced, restricted, or even dismantled.
Therefore, Chapter 5 does not reveal the process of stablecoins being "accepted," but rather how stablecoins are allowed to exist to a limited extent under institutional vigilance. This is also the premise for understanding Chapter 6's "Scenario-First" approach: the space for stablecoins to move forward is not determined by technology, but by the gradual opening up of institutional tolerance.
Chapter Six: Bowling Pin Scenario: Real-world Applications of Stablecoins Bridging the Gap
Within the analytical framework of "Crossing the Chasm," an often overlooked yet highly explanatory observation is that technologies that truly achieve a breakthrough are almost never implemented through "comprehensive rollout." Instead, they tend to first overcome the most resistance nodes in a few highly focused scenarios, and then gradually spread along adjacent needs.
This strategy is figuratively called the "bowling pin path": instead of trying to knock down the entire row of pins at once, it first knocks down the row most likely to create a chain reaction. Applying this methodology to the stablecoin field means that the focus of the discussion must shift. The question is no longer "whether stablecoins generally meet the institutional requirements of public monetary arrangements," but rather: given that existing institutional constraints have not been completely removed, in which specific scenarios have the conditions for "preliminary leaps" that are institutionally tolerable, risk-absorbable, and value verifiable?
6.1 Realistic Criteria for Scene Selection
In the early stages when the system is not yet fully mature, whether stablecoins will be adopted often depends not on whether they are theoretically "more efficient," but on whether three more realistic conditions are met simultaneously.
First, are the friction costs of the existing system high enough? Only when the frictions of traditional paths in terms of cost, speed, or accessibility have significantly suppressed commercial activities can the efficiency advantages of stablecoins outweigh their institutional uncertainties.
Second, whether the risk is primarily borne by professional entities. If the risk can be confined to enterprises, financial institutions, or other entities with the capacity to identify and absorb risks, regulators' concerns about policy spillover will be significantly reduced.
Third, are there clear interfaces for responsibility and compliance? Even if the system is not yet fully unified, stablecoins may gain limited space as long as the responsible parties are identifiable and accountable, and compliance obligations can be embedded in existing regulatory processes.
Based on the above criteria, the "realistically feasible scenarios" repeatedly mentioned by international organizations and regulatory agencies over the past year mainly fall into the following three categories.
6.2 Cross-border B2B Settlement: Tool-based Embedding in a High-Friction Environment
Among all application scenarios, cross-border B2B settlement is considered one of the areas with the most realistic potential for stablecoin breakthroughs. This is not due to the novelty of the technology, but rather to the long-standing structural frictions in the traditional cross-border payment system.
According to a joint study on cross-border payments by the World Bank and the BIS in 2024–2025, traditional cross-border B2B payments still face problems such as long settlement cycles (2–5 business days), multiple intermediary layers, and opaque fees in most corridors, especially in emerging markets and trade between small and medium-sized enterprises. These frictions provide a practical entry point for non-bank settlement tools.
In this scenario, stablecoins do not appear as "currency substitutes," but are instead embedded as optimization components in the settlement process. From an equivalence perspective, trading participants do not require stablecoins to possess long-term, unconditional value stability, but only focus on whether they maintain their pegged relationship during the contract fulfillment period. This "transaction-based" equivalence judgment is fundamentally different from the requirement for currency singularity in retail payments or public holdings.
In terms of elasticity, cross-border B2B settlement deliberately avoids issues related to macroeconomic monetary supply. The scale of stablecoin usage is determined by specific trade activities, rather than serving as a counter-cyclical regulator or liquidity guarantor. Its supply elasticity is compressed within the commercial logic, thereby reducing the institutional requirements for public liquidity support.
In terms of integrity, the governance foundation of this scenario is relatively clear. Participants are typically enterprises or financial intermediaries already included in the regulatory framework, the transaction background is clear, and anti-money laundering, sanctions screening, and compliance responsibilities can be allocated in advance. Stablecoins do not form a payment network independent of existing rules but are embedded within existing compliance processes.
It is precisely under these highly constrained conditions that stablecoins exhibit a "low institutional friction" availability in cross-border B2B settlements. This does not mean that they have overcome all institutional barriers, but rather that in specific business structures, some barriers can be temporarily circumvented.
6.3 Corporate Fund Management and Inter-institutional Settlement: A De-publicized Institutional Buffer Zone
Compared to cross-border trade, the use of stablecoins in corporate fund management and inter-institutional settlement scenarios further weakens their "currency attributes".
In this scenario, stablecoins often serve within corporate groups, between long-term partner institutions, or between specific financial infrastructure nodes, functioning more like internal or semi-internal settlement tools. According to a 2024 study on digital settlement tools by the IMF and several central banks, the core requirement for settlement tools in enterprise applications is not "whether it is legal tender," but rather "whether it is controllable, reconcilable, and auditable."
This closed or semi-closed environment allows the valuation of stablecoins to be integrated into a company's own financial control and risk management system, without relying on public credit backing. In this context, stablecoins are more of a settlement technology choice than a monetary form choice.
In terms of flexibility, these applications also deliberately avoid a macroeconomic role. Enterprises use stablecoins to improve the efficiency of fund allocation and extend the settlement window, rather than for credit expansion or asset allocation. Therefore, their supply mechanism is naturally "de-macro-ized," no longer touching upon the liquidity responsibilities of the central bank.
In terms of integrity, enterprise-level scenarios actually possess a stronger capacity for institutional embedding. Related transactions are typically already subject to audit, tax, and regulatory reporting obligations; the introduction of stablecoins has not created new spaces for anonymity, but merely changed the settlement medium. This allows regulatory focus to be placed on the issuer's qualifications, reserve security, and custody structure, rather than the transaction network itself.
Therefore, the "feasibility" of this scenario does not stem from the resolution of the institutional gap, but rather from the effective reduction of the gap to a controllable range.
6.4 The Demand for Dollarization in Emerging Markets: Bypassing Rather Than Crossing Over
The use of stablecoins in emerging markets follows a completely different logic. According to Chainalysis's 2024–2025 Global Crypto Adoption Report, stablecoins are widely used as a store of value and for cross-border transfers in some economies with high inflation, capital controls, or weak financial infrastructure, and their function in practice is close to that of an "informal dollarization tool."
This phenomenon is not a result of institutional design, but rather a spontaneous market response to the instability of the local currency and the limitations of payment channels. From the perspective of equivalence, users are more concerned with relative stability than institutional guarantees; from the perspective of flexibility, stablecoins serve a hedging function at the private level; and in terms of integrity, this scenario precisely exposes insufficient governance embedding, which is also the usage pattern that regulators are most wary of.
Therefore, this scenario is more accurately described as a "bypass" of the institutional gap rather than a true crossing. It reinforces the policy urgency of the stablecoin issue, but it does not constitute a path that can be actively replicated or recognized by the regulatory system.
6.5 Why isn't retail payments a priority area for breakthrough?
Contrary to intuition, retail payments for ordinary consumers are precisely the scenario where stablecoins are least likely to be able to take the lead.
First, from an efficiency benchmark perspective, retail payments are one of the areas with the lowest frictional costs in the current financial system. The BIS and World Bank's 2024 Payment Systems Study indicates that in major economies, retail payments are highly electronic, with instant payment systems boasting wide coverage, low failure rates, and near-zero user costs. In China, the EU, and some emerging markets, retail payment settlement speeds are near real-time, and stablecoins offer extremely limited marginal efficiency in local retail scenarios.
Secondly, from an institutional perspective, retail payments have the highest requirements for equivalence, consumer protection, and redress mechanisms. Several joint studies by the IMF and BIS have clearly pointed out that once payment instruments are used by the general public, their regulatory standards will quickly converge with those of bank deposits or electronic money. This means that stablecoins need to assume almost the entire responsibility of public money arrangements in retail payments, which is precisely the part they currently find most difficult to meet.
Secondly, in terms of usage structure, the high-frequency use of stablecoins is not concentrated in retail consumption. Chainalysis's classification of on-chain transactions in 2024 shows that stablecoins are mainly used for cross-border transfers, exchange settlements, DeFi interactions, and inter-institutional fund transfers, while the proportion of daily consumer payments remains relatively low.
More importantly, retail payments directly shift risk to ordinary consumers, requiring regulators to anticipate worst-case scenarios and ensure clear remedies in case of issuer failure or system malfunction. This risk-sharing structure makes retail payments the scenario with the lowest regulatory tolerance.
6.6 Summary: Scenario-first, rather than system replacement
The foregoing analysis shows that the expansion of stablecoins in the real world has not followed the traditional path of "first becoming eligible currency, then entering the payment system." Instead, its actual evolution is closer to being used as a tool in scenarios with high levels of institutional friction, and then subjecting itself to institutional constraints during its use.
The reason why cross-border B2B settlement and corporate fund management have become the first application scenarios for stablecoins is not because these areas have lower regulatory requirements, but because the risks can be contained among a few professional entities, responsibilities can be pre-allocated through contracts and compliance structures, and the costs of failure will not directly spill over to the public. Under these conditions, stablecoins do not need to assume the full functions of public currency to demonstrate real value in terms of settlement efficiency and accessibility.
In stark contrast, there are retail payment scenarios that directly reach the public. In this area, equivalence, flexibility, and integrity are not requirements that can be "temporarily set aside," but rather prerequisites for the existence of any payment instrument. This is why retail payments have not become the first area for stablecoins to break through; rather, they have become the area with the clearest institutional boundaries and the lowest regulatory tolerance.
This comparison reveals the true nature of the stablecoin expansion path: it does not expand by meeting the institutional standards of public monetary arrangements as a whole, but rather through a gradual, restricted, and highly conditional evolutionary process along a few high-friction, highly specialized, and risk-enhancing application scenarios. Stablecoins are not "replacing the system," but rather being used in a limited way within the gaps allowed by the system.
In this sense, whether stablecoins can "cross the chasm" is never a one-size-fits-all question, but depends on: in which scenarios are the institutions willing to make concessions first, while the risks remain controllable.
Chapter Seven: After Crossing the Chasm: The Structural Impact of Stablecoins on the Financial System
If the preceding analysis was understood as a discussion on whether stablecoins are capable of bridging the gap, then this chapter focuses on a more institutional question: once stablecoins are institutionally embedded in several key scenarios, how will they change the operating structure of the financial system, rather than simply adding a new technological option?
It is important to emphasize that this chapter does not discuss the complete replacement of the existing system by stablecoins, but rather the series of structural adjustments that cannot be ignored after stablecoins have entered some settlement and fund transfer processes in a restricted, back-office, and instrumental manner, based on the real path identified earlier.
7.1 Changes in Payment and Settlement Structure: The Settlement Layer is "Technically Removed" from the Account System
In the traditional financial system, the account system is highly coupled with payment and clearing: the account serves as both an identity document and the foundation for clearing and final settlement. This structure ensures both governance controllability and determines payment efficiency and operational boundaries.
The integration of stablecoins into cross-border B2B settlements and inter-institutional fund transfers represents, for the first time, a systematic loosening of this coupling at the technological level. The key lies not in "whether or not blockchain is used," but in the fact that the settlement function is being separated into an independently optimizable technological layer: account relationships still exist within the banking system, but some clearing and settlement processes can now be completed without relying on bank operating hours or going through multiple layers of correspondent banks.
The real impact of this change lies in the fact that the payment system is beginning to exhibit a layered structure of "account layer—settlement layer—compliance layer." The account layer continues to serve the functions of identity verification and asset custody, the compliance layer continues to incorporate regulatory and risk control requirements, while the settlement layer has room for technological upgrades and outsourcing in specific scenarios. Stablecoins have not negated the account system, but are reshaping the technological implementation of the settlement layer.
7.2 Repositioning the Role of Banks: From "Payment Channel" to "Institutional Interface Node"
In the early narratives of stablecoins, banks were often portrayed as intermediaries that could be bypassed. However, in institutionalized applications, stablecoins have not diminished the importance of banks; rather, they have changed the way banks are needed.
As stablecoins enter a regulated framework, their operation becomes highly dependent on several core banking functions: reserve asset custody, fiat currency deposit and withdrawal channels, audit cooperation, and compliance and sanctions interfaces. This means that the value of banks is no longer primarily reflected in "whether they control the payment path," but rather in their ability to serve as a trusted interface between institutions and technology.
The deeper meaning of this change lies in the shift of banks' role from "payment executors" to "institutional safeguard providers." In stablecoin-related structures, banks are no longer the essential channel for every transaction, but they remain a key anchor for the legitimacy, accountability, and interventionability of the entire system. This transformation does not weaken the banking system, but rather reaffirms its irreplaceable role in financial governance.
7.3 The Real-World Impact of Monetary Sovereignty: From "Whether it Replaces Others" to "How it Is Used"
The impact of stablecoins on monetary sovereignty is often misinterpreted as "whether they will replace the local currency." However, in reality, the more significant institutional change is not a substitution relationship, but rather a structural shift in the choice of settlement currency.
With stablecoins dominating the US dollar market, their use in cross-border settlements, institutional fund management, and emerging markets is objectively strengthening the dollar's settlement position in the digital environment. This strengthening is not achieved through official policy, but rather through market choices regarding efficiency, accessibility, and settlement certainty.
The result is not the formation of a "parallel currency system," but rather a change in the expectations of transaction participants regarding the "default settlement currency" in specific scenarios. This is why major economies are wary of stablecoins not because they challenge the legal tender status of their currencies, but because they could create an irreversible path dependence in key settlement processes.
7.4 Changes from a Financial Stability Perspective: Risks Have Not Disappeared, But Have Been Redistributed
The institutional embedding of stablecoins does not mean that financial risks are eliminated, but rather that the location and form of risks are shifted.
In the native crypto phase, risks primarily manifest as price volatility, technological failures, and the collapse of individual projects. In the institutionalized phase, however, risks are more concentrated in the issuance structure, governance arrangements, and infrastructure nodes. The highly centralized stablecoin issuance landscape allows a few entities to possess systemic importance at the settlement level; their reserve management, compliance errors, or legal disputes can all rapidly amplify their impact through the settlement network.
Therefore, the key challenge posed by stablecoins lies not in whether they are dangerous, but in whether the risks have been identified, whether there is a clearly defined responsible party, and whether there are institutionalized intervention tools available. This is precisely the fundamental reason why regulatory focus has shifted from user behavior to issuers and the infrastructure layer.
7.5 Long-term impact on the Web3 industry: Compliance capabilities replace narrative capabilities
As stablecoins gradually enter real-world economic scenarios, their impact on the Web3 industry itself lies not in the debate over technological routes, but in the fundamental change in the logic behind project success.
In the crypto-native stage, the growth of a Web3 project often depends on three things: whether the technological concept is novel enough, whether the token incentives are strong enough, and whether the market expansion speed is fast enough. At this stage, projects are rarely asked to answer questions about &quo
