Let’s talk about STO again: What are the obstacles to the full implementation of the US stock chain?

Moderator: Alex , Research Partner at Mint Ventures

Guest: Mindao , founder of dForce

Recording time: 2025.3.14

Disclaimer: The content discussed in this podcast does not represent the views of the guests’ institutions, and the projects mentioned do not constitute any investment advice.

Hello everyone, welcome to WEB3 Mint To Be initiated by Mint Ventures. Here, we continue to ask questions and think deeply, clarify facts, explore reality, and find consensus in the WEB3 world. We clarify the logic behind hot topics, provide insights that penetrate the events themselves, and introduce multiple perspectives.

Alex: In this episode, we will follow up on a crypto narrative that was once a hot topic a few years ago, but then gradually cooled down, but has recently become popular again: STO, or the tokenization of securities, especially the tokenization of US stocks. The guest we invited today has extensive experience in traditional finance and DeFi, and is also an old friend of our program - Mr. Mindao. Please let Mr. Mindao say hello to everyone.

Mindao: Hello everyone, I am very happy to be back at Mint Ventures to discuss the topic of STO and security tokenization with you.

The ins and outs of Coinbase’s stock tokenization

Alex: The resurgence of STO as an old narrative mainly comes from the statement made by Coinbase's CEO and CFO last week, who said they would restart the work of Coinbase stock tokenization. I believe you have also paid attention to this news. Based on the information you have about the event, can you give us a brief account of the ins and outs of Coinbase stock tokenization, including some key details?

Mindao: Actually, the topic of Coinbase tokenization was not raised this year. I remember it was mentioned in 2020, but because the entire regulatory environment was very bad for the cryptocurrency circle, and Coinbase was later sued by the SEC, I remember Brian mentioned this concept after 2020, but it has not been implemented since then. When Coinbase went public, there was still debate in the community about whether to go public or issue coins. It was originally a Crypto exchange, so whether it should issue coins directly on the chain was controversial at the time. This topic was raised in January this year. The person in charge of Base was called Jesse. He proposed to consider deploying Coinbase's tokens on the Base chain. Then in February, the SEC gave up the lawsuit against Coinbase. This is also a friendly attitude of the new US government towards Crypto. I think it is a concrete manifestation. Before and after this incident, including its CFO and CEO, they all mentioned that they would tokenize stocks and issue them on Base. From the perspective of the entire time point, I think it is very hardcore. After Trump came to power, the new government's attitude towards Crypto, including the Crypto Summit, was attended by the CEO of Coinbase. So we can see that when the entire regulatory environment changes, I think it is very understandable for the largest exchange in the United States to take such a move, and it is very appropriate in terms of timing.

The value proposition of stock tokenization

Alex: In your opinion, if we say that STO or the tokenization of stocks is a product, what are its main value propositions? In your opinion, is it a relatively organic value proposition? If a large number of US stock assets are put on the chain, what kind of chemical reaction might it have with the current DeFi products?

Mindao: Yes, in fact, the topic of stock tokenization is not a new thing. It has been mentioned in the past two cycles. I remember that STO was mentioned in 2017, so this concept was mentioned very early. I think there are several reasons why it was brought up again in this cycle. On the one hand, we can see that when the currency circle stagnated due to regulatory reasons, Crypto has actually made great progress in the application of blockchain in the interbank system at the level of traditional finance Wall Street. I think from the perspective of traditional finance, it also sees the benefits of tokenization itself for traditional financial institutions. For example, JP Morgan has processed many interbank settlement systems through tokenization and tokenization. So this thing essentially saves banks a lot of settlement time. For example, even if it is the same bank, cross-state or cross-country settlement may take several days or a week. But you can use blockchain to settle immediately. The direct benefit is that your capital deposits are less and the cost of capital is greatly reduced, so traditional financial institutions can see where its advantages are. Then we see that the entire stock tokenization, if we talk about it from a pure capital channel, is definitely a global market from a single market. There is a blend of non-permissioned and permitted. But there are actually many conflicts, because traditional securities regulation is based on the principle of territoriality. The US market has its own set of regulations, and the Chinese market has its own regulations. Each place follows the principle of territoriality. But when it comes to the so-called crypto public chain market, how to deal with this principle of territoriality is a very big conflict. This is why the tokenization of stocks can be considered to be the fall of the Berlin Wall to some extent. How can the funds of the free world go to a stock market regulated by the principle of territoriality? There are many conflicts. But for companies doing STO and stock exchanges, at least turning this entire funding channel from a regional market into a global market is a very important point that most STO companies may consider.

The Coinbase we are talking about is very different from other general stock tokenizations. Because Coinbase itself is an exchange. In fact, Coinbase's stocks can be compared with Binance's BNB. BNB is actually a very good tokenized stock, and Coinbase is a pure exchange stock. But we can see that BNB has far more use value than Coinbase. From the perspective of traditional Coinbase stocks, it is a shareholder's equity and a shareholder certificate. But we see that BNB can be used to deduct handling fees in its trading market, and can also be used to receive airdrops, and has various functions. So I think the biggest significance of Coinbase's stock issuance is that it is not just to tokenize a stock and put it on the chain, but to empower traditional stocks. I think it is an empowerment movement. That is to say, it used to be a shareholder certificate. Now let's take a simple example. If Coinbase tokenizes your stock and puts it on the Base chain, and then Base can use Coinbase's stock as collateral, node verification, or gas payment in the future, then the stock is no longer a pure shareholder certificate, but something with a use function. Let's expand the Coinbase case to other cases. For example, if you expand it to Disney and Netflix, you can buy tickets with discounts if you hold Disney stock tokens. Why can't it be done in the traditional way? Because it is too complicated to do this in traditional finance. Without tokenization, it is very difficult to connect all these systems. But we can imagine that if Disney tokenizes its stocks, in the future, users with its stocks and tokens can directly buy tickets with discounts, and even have some preference things. Or Netflix, its subscription can also be based on your stock staking, or how many stocks you stake, I can give you a subscription exemption. For example, if a coal mining company is tokenized, it really doesn't see any practical value. But companies like Coinbase, Netflix, and Disney have a lot of interactions with users at the company product level. I think their stock tokenization has a great possibility that the stock can be greatly expanded, from a pure shareholder certificate to a usage certificate, and become a utility. This is what I think is a very important point for the native combination of STO and the currency circle, rather than just turning it into a stock and then putting it on the chain. This goes back to what I said before. It may be to expand the market of the capital pool, from a regional market to a global market. But we now know that the United States already accounts for a very large amount of financing in the world. How much does it mean to add such a market to the chain? It may not mean much. This is why you see many STO tokens traded on the chain, and there is actually no trading volume in the past few cycles, because the traditional market has already met the investment needs of most people who have capital needs.

Alex: I think the concept of stock rights expansion is very novel and reasonable. Let's expand on this topic. You just mentioned that JP Morgan has improved the efficiency of capital use after adopting the blockchain settlement system. I have a technical question. JP Morgan should use a system similar to the alliance chain. What specific technical designs can improve its capital efficiency or the efficiency of system operation? I have always been quite curious about this.

Mindao: Everyone knows that banks are dinosaurs in the technology world. Many of the traditional back-end systems of banks are decades old. Of course, I think it makes sense for financial institutions to maintain this conservative technology. First, it involves money, so older and more proven technologies may be more important to the security of the banking system, far more important than improving capital efficiency. Even for the same bank, settlement and clearing between different systems actually involve many problems, and cross-border is even more troublesome. For example, JP Morgan, the United States and the United Kingdom, each country has different fund supervision, and needs to use Swift or other external settlement systems to do it, not just within the bank. A bank's settlement between branches in different countries involves different regulatory issues, and there will also be time delays in settlement. For example, JP Morgan is just an inter-bank settlement. When it expands to the alliance chain, in China, like in the Greater Bay Area of the Pearl River Delta, a few years ago, China Merchants Bank and several core banks in that area formed a supply chain alliance, also for the purpose of using the blockchain system for settlement. It is more complicated between different banks, and each bank has a different design system. The advantage of blockchain is that it uses a ledger that is consistent in all states, and does not require each bank's different back-end system to match. Why do financial institutions see such good applications? Because traditional finance can see at a glance that blockchain design can basically completely replace the existing banking infrastructure. This is also why stablecoins can be used so quickly after they come out. Of course, this started from wild growth, and in the end, banks and US regulators are most concerned about stablecoins. Traditional finance can see at a glance that it has obvious advantages over the settlement between traditional banking systems.

Interaction between US stocks on the blockchain and Defi

Alex: I see. If a large number of such US stock assets are put on the chain, what kind of interaction might occur between them and our existing DeFi projects? Do you think this is a good idea, or do you think it is important for the development of the industry?

Mindao: I think the most critical point for DeFi infrastructure is that we see that most of the assets carried by DeFi in the entire crypto, such as dex, lending, and stablecoin projects, are still native to the currency circle, such as ETH and BTC. Trading and Meme assets are also native in crypto. So for the entire DeFi infrastructure, it is nothing more than saying that I support whatever upper-layer assets there are. And for the downstream DeFi infrastructure, this is definitely a benefit. For example, after the stablecoin came in, we saw not only stablecoins, but actually the largest scale of STO now is the tokenization of treasury bonds. And we have seen that the achievements of treasury bond tokenization in this cycle are very obvious, including Makerdao, Ondo, etc. Put it all on the chain. We can see that the tokenization of treasury bonds has brought a large number of so-called interest-bearing assets to Defi protocols in DeFi, including many pools in Pendo and Uniswap, which are now pools of interest-bearing assets. In terms of liquidity, RWA-type stablecoins and RWA assets actually provide very important liquidity for the entire DeFi. So we can imagine that the further tokenization of stocks is the same. The advantage is that the entire DeFi infrastructure is now complete, whether it is in the form of AMM, Order book, or perpetual contract, and various bridges have been built. After DeFi summer to now, the infrastructure has basically been laid and has been tested. All bridges and DeFi protocols have gone through a lot of hacking incidents, so now the entire DeFi infrastructure layer has been solidified to some extent. The solidification I am talking about is the technical solidification. The benefit of solidification is that security has been tested. From DeFi Summer to now, there has been a loss of about 10 to 20 billion US dollars, which is the money that was hacked. So this part of DeFi infrastructure is already in a ready state. Therefore, if STO and stock assets are connected, there is actually no need to rebuild these assets. This is a very critical issue, because the distribution channels and infrastructure are already here, and only new assets need to come in. This is different from banks or traditional institutions. If they want to promote these assets, they need to rebuild the public chain and DeFi system, which is very difficult. So now we look at this cycle, the entire crypto narrative, such as Bitcoin ETF and the tokenization of treasury bonds, has entered the traditional financial field of vision. If stocks come in, the best thing is that the infrastructure can be directly taken over. This will be a benefit for DeFi, with more assets to trade and better liquidity, which is definitely a benefit for all underlying DeFi protocols.

Is STO in the national interest of the United States?

Alex: So from a larger perspective, if STO is compliant and promoted, for those US listed companies, like the cases you just mentioned, such as Disney and Netflix, which have close relationships with consumers, they may be able to gain a lot of incremental benefits through the expansion of stock rights. So for the overall US listed companies, do you think they will be very interested in the concept of STO? And is this thing itself in line with the long-term national interests of the United States?

Mindao: I think if we look at it as a whole, we do need to look at different types of companies, because not every company is suitable for on-chain issuance, and not every company may attract everyone's interest. For example, in the early days, many DeFi and CeFi projects released some stock tokens. At that time, they mostly chose technology stocks such as Tesla, because they knew that investors in such stocks overlapped with investors in the cryptocurrency circle. You would not choose coal mines or industrial stocks, because these do not overlap with the cryptocurrency circle. So I think for those companies that overlap with cryptocurrency users, such as AI companies, such companies are definitely beneficial in expanding the capital pool and audience.

From the perspective of the United States, the alignment of this alignment with the interests of the United States is now very obvious. For example, the most important thing for U.S. regulation at present is the stablecoin bill, because it is consolidating the hegemony of the U.S. dollar. For STO, as the world's largest stock market, the United States will greatly save costs for these financial companies after tokenization. For example, various shareholder voting and dividends require a lot of backend support in traditional finance, which is very costly. So from a cost perspective, it can replace a lot of old infrastructure. In addition, treating U.S. stocks as stablecoins is actually expanding the influence of U.S. stocks on a global scale. From this point of view, it is completely in the interests of the United States. Of course, this may not necessarily be in the interests of some financial companies in the United States. For example, stablecoins may kill a lot of traditional banking business. After the tokenization of U.S. stocks, some of the companies that are now at the forefront may not necessarily be traditional companies. Traditional brokerages may be eliminated because many intermediate links on the chain are not needed and can be directly operated after accessing DeFi. Therefore, this may have a very big change in the structure of the U.S. stock market. This is why it is not easy to promote this matter itself, because it will affect many different players in the existing interest chain.

Alex: This involves a question I thought of before. You just mentioned the impact of stablecoins on the United States. The scope and application scenarios of the US dollar have actually received great support. But it seems that Europe or other countries are not very active in promoting stablecoins. For example, there seems to be no very active action in promoting euro stablecoins and yen stablecoins. For example, the RMB has been going overseas and wants to have more settlement scenarios, but it has not promoted the RMB stablecoin. Don't they realize this? Why are they not as active as the US dollar in this regard?

Mindao: To be honest, if it weren't for Trump's coming to power, I would not be so optimistic about the US dollar's stablecoin. And you will find that after Trump came to power, the United States did not want to promote the country's dollar token. Trump also issued an executive order prohibiting the United States from issuing so-called dollar tokens. Now the United States is actually promoting private sector tokens. For example, banks can issue them in the future, exchanges can issue them, but the US federal government is not allowed to issue them. Of course, there are concerns about the excessive power of the government. But we see that the European Union should also launch their stablecoin this year. The EU stablecoin is actually not the same as the US dollar stablecoin. The main stablecoins that the US dollar is currently promoting are all from the private sector, such as enterprises, banks, and exchanges, rather than from the state sector. The EU should launch a stablecoin at the government level. The biggest difference between the EU and the United States is that the euro, US dollar, and Japanese yen are all freely convertible. So from this perspective, for them, promoting freely convertible stablecoins has obvious benefits. But China is special because China is not freely convertible. Therefore, there will be contradictions. To make a freely circulated, non-permissioned stablecoin, such as USDT, which is largely non-permissioned, will seriously conflict with currency control. This is why it is awkward for China to promote this thing. If the stablecoin launched has various restrictions and returns to the restrictions of the fiat currency world, then it may not have much application possibility. In China, the digital RMB is actually not much different from the current wallet, so the application is very slow. This has a lot to do with the country's own monetary system. For freely circulated currencies such as the European Union and the United States, the key is how to promote it. Is it like the United States, mainly promoted by the private sector, and the government does not intervene; or like the European Union, the European Union directly issues digital euros as the main body. However, for China and other countries with currency controls, this will have a very big conflict with foreign exchange control and currency management goals, and this conflict is not easy to resolve. If a digital national currency is issued with strict KYC and circulation restrictions, and the account can be checked, then no one will choose this method, which is no different from traditional payment, so there is a big conflict between the goals.

Barriers to stock tokenization

Alex: I see. Indeed, after the launch of the digital RMB in China, not many people use it and the promotion speed is relatively slow. So let's go back to the topic of STO. In fact, after Coinbase proposed to restart the tokenization plan, a Swiss RWA service provider Backed was the first to issue a tokenized version of its own Coin on Base. But recent data shows that the transaction volume is not large, and there is a serious decoupling problem. As you said, not all stocks are suitable for tokenization. In addition to the type of stock company, what are the main factors that hinder this type of stock tokenization products?

Mindao: I think there are still many factors. Making a stock is actually the same as making other tokens or stablecoins. First of all, the issuer is very important. For example, if the stock token of Coinbase is not issued by Backed Finance, but by JP Morgan or Bank of America, it may be different. Because I think the biggest problem that the issuer will encounter is that when I buy your coin, who is behind it when I cash it out, and can I cash it out? In fact, when issuing this kind of token, FTX also issued Tesla tokens in the past, and they used a German broker. Whether the third-party institution has enough commitment to the issuer to cash out the underlying token is a very important issue. There is also the problem of depegging. If theoretically there are enough market makers to support and allow market makers to exchange the underlying tokens, serious depegging is unlikely to occur. Just like why stablecoins can maintain one dollar, because there are a large number of minters and market makers who have channels to Coinbase and Tether to redeem it back to one dollar. The reason for the depegging may be that there are not enough market makers, the liquidity is not strong or the redemption channel is not smooth, and the underlying stocks cannot be redeemed and sold in a short time. If Coinbase itself proposes to tokenize its token, it will be more credible. Just now, we talked about the expansion of stock tokens. This can only be done by Coinbase, and no one else can do it. For example, allowing the coin to do staking or gas on the Base chain is not something that Backed finance can handle. This must be a new attempt in the expansion of token rights. In crypto, many players can already buy US stocks through overseas accounts, which is not a very high threshold. Therefore, it is difficult to attract cryptocurrency users to buy. This is why there has been little demand for different token attempts over the past few years, including the synthetic stock tokens we have made ourselves. The reason is that if it is only used as a capital pool to allow cryptocurrency users to buy US stocks, the demand will not be as large as imagined.

Alex: I see. So, assuming that Coinbase finally officially launches a product like STO, which institutions need to participate in the structure of this product? In addition to Coinbase itself.

Mindao: I think the first thing that needs to be done is a market maker team, but it does not necessarily need to be a market maker designated by Coinbase. As long as Coinbase provides a good channel for stock and token exchange, there will naturally be market makers willing to provide liquidity. Just like the minting and redemption channels of stablecoins, this must be there. In addition to this, there is also the issue of liquidity depth. For example, the pool that Backed Finance built on aerodrome may not be as efficient as the order book in pricing, unless the pool is very deep. Therefore, different dex support is required, and official liquidity support is required. It is quite difficult to rely solely on a third party to do it. I think for Coinbase, it should be associated with the Base chain to a certain extent. Most people go to Base to play in the hope that there will be a token upside in the future. If they can be tied together, Coinbase will become the only exchange token that has both a listed company and the advantages of the currency circle. This will be a very interesting way to play, but this requires Coinbase to do other designs, not just simply putting stocks up.

Alex: Assuming his own stock issuance is successful, do you think he can attract other US listed companies, such as Strategy or Tesla, to issue their officially authorized STOs on Base? Is this possible?

Mindao: In theory, the issuance of stocks does not require the consent of these companies. Because this structure is actually a bit similar to stablecoins, just like if you issue a US dollar stablecoin, you don’t need the consent of the Federal Reserve. As long as the bank has US dollar deposits, you can issue a certificate. So in theory, as long as it meets the regulatory requirements of the United States, these so-called token issuances do not require the authorization and consent of the stock company itself. But the product design may be different. It depends on whether your product can only be purchased by KYC users, or it is completely share-based and can be purchased by everyone else. For example, Coinbase’s tokens should not have any KYC requirements and should be directly purchased on the chain. If users can purchase without KYC at the non-permissioned level, it will definitely attract many companies because it will create a new liquidity pool. But this also depends on the issue of supervision. I feel that this matter has not been clarified yet. For example, there was a T-bill token that was issued before. A pool was built on Curve, but only whitelisted users were allowed to buy it because it was completely a security token. So my understanding is that tokens like stocks are security tokens on the chain, and many people should not be allowed to buy them. So there will be many specific problems when it comes to implementation. If only KYC users are allowed to purchase, the audience will be limited, and they may compete with traditional channels such as Futu for customer traffic, which will become a competition for stock rather than an incremental market. This is the problem that stock tokens need to face in the go-to-market.

Alex: For example, how are the purchasing permissions of the Buidl tokens issued by BlackRock designed?

Mindao: It also needs to go through KYC. Buidl's distribution strategy is not for retail investors, but for Defi protocols. You can have an account that has been KYCed. After purchase, it can be passed to users. Buidl itself is a market for companies or institutions, targeting a business. For example, whether you are doing Defi protocols or other financial products on the chain, I will only distribute to KYC users like you. As for how to distribute to other retail investors after you synthesize, that is someone else's problem. In fact, I think it is a bit like the current minting model of stablecoins, which is aimed at minters and has a hierarchy of distribution, rather than directly facing retail investors. This model is relatively reasonable.

Factors behind the resurgence of STO and market performance expectations

Alex: I see. We just talked about the concept of STO. In fact, there were projects in 2017, such as Polymath, which tried to promote it but failed. Now many project parties and industry parties are paying attention to this track again. In addition to the regulatory policy shift after Trump took office, are there other demands or new factors that have made this field regain attention recently? And are you optimistic about its market performance in the next one to three years?

Mindao: In fact, stock tokens were earlier than 2017. In 2017 and 2018, including the last Defi cycle, such as Synthetix's synthetic assets, Luna's project Mirror, we also did it, issued four or five tokens, and finally found that the trading volume was not good. At that time, we analyzed that it might be a problem with the synthetic asset model. For example, Synthetix has a very high over-collateralization rate and low capital efficiency. Later, FTX also did some Tesla stocks, and the trading volume was also average. I think the core problem is that, for example, before Defi Summer 2022, we looked at the Crypto market structure and saw what kind of players were playing. Most of them had a slogan called "long crypto, short the world". I think many people entered Crypto because it is an industry with particularly obvious asymmetric returns, which was particularly obvious in the early days, and the upside of the entire return was particularly high. So people who come into this market look down on people in the traditional market, and look down on real estate, commodities, and stocks. What is the concept of selling stocks in this group? It's like selling ice in Antarctica. It's not that there is less demand for stocks, but that the audience is wrong. However, there are several important turning points this year. One is that after the Bitcoin ETF and the Ethereum ETF were launched last year, a large amount of traditional financial funds entered Crypto for allocation. In addition, in fact, on the chain, we see that the two major stablecoins now have a minting volume of about 230 billion or 240 billion US dollars. Only a few tens of billions of dollars of this funds are really left in Defi, and most of them are not played in Defi. Most of the people here are friends around us. Many people have no concept of currency at all, and they just hold stablecoins as US dollars. So I said that the market structure has actually changed a lot now. In the past, most of them were crypto natives, but now a large number of people come to the currency circle to hold stablecoins. But these people may have converted from traditional finance, and there is definitely a demand for stocks. The traditional account opening channel is very smooth, but I think if you really have a US stock trading market on the chain, which is very convenient for everyone to buy with stablecoins, this demand can easily replace the traditional approach like Interactive Brokers, which goes from RMB to US dollars, and then US dollars to exchanges, and there are many problems with bank account opening. We have encountered those problems in reality. If there is such a US stock trading market on the chain, I think there is still demand, and why do people feel that this demand will exist in the next three to five years? I think the biggest reason is that the market structure has changed. It is different from the market structure five or six years ago. At that time, these people were completely native to crypto. Now there are more and more non-crypto users. He doesn’t even care about meme, BTC or ETH, just treat stablecoins as US dollars. If you give him a traditional asset, and these people are very familiar with traditional stock buying, there is still a demand for this configuration. And it is indeed much more convenient on the chain than in the exchange. The only point now is that the entire US stock infrastructure is not so perfect. For example, we don’t have so many tokens to choose from, and the slippage is so high. So I think the entire US stock tokenization may still be like the Defi stage in 2017 and 2018, and it has not yet reached the Defi Summer. I am actually quite optimistic about this. I think there should be a relatively large market in three to five years. But the premise is that the asset can be issued. Now the question is whether the US stock asset can really be issued in a compliant manner. Everyone is still trying. Coinbase is still trying, so I think as long as there is a compliant framework that can be issued on the chain, this market can take off.

Beneficiaries of the STO Wave

Alex: So in the long run, assuming that this market can take off and there is a compliant framework that allows them to issue. Based on this premise, which projects or companies do you think can benefit from the STO wave? Is it DeFi, Layer1, Layer2, or some specific RWA projects?

Mindao: I think the best reference is to look at stablecoins, because stablecoins are essentially the largest asset class of RWA, tokenizing the US dollar certificate. In this track, the biggest beneficiary must be the asset issuer. The asset issuer I am talking about does not refer to companies like Tesla and Disney, but the party that actually issues their stock tokens. Because whether it is stocks or stablecoins, the most important thing is the network effect of liquidity. If liquidity reaches the Matthew effect, it will be difficult to be replaced. I think this is very critical. So, if someone can really tokenize the largest trading indexes such as QQQ and Nasdaq and put them on the chain, and the token itself forms a network effect of liquidity, just like USDT, it will eventually become necessary to use it. In this case, they must be the biggest beneficiaries. Because at the bottom layer, under the stablecoin, there are many things that can be done with stock tokenization, such as using the underlying tokens for margin trading, and charging some fees from the issuer. There are many business models that can be established, but I think the biggest beneficiaries should be those issuers, especially those that can quickly form scale. We can see that whether it is ETFs or some money funds, the market share is usually larger for the first issuer. For example, Bitcoin ETFs, those with the largest market share now will still be them in three to five years. The pie is constantly expanding, and the proportion will not change, and may even be higher. The network effect is very obvious. Because after the stock tokens are issued on the chain, many companies will synthesize them again, just like DeFi. Just like USDT and USDC, there are a large number of Defi products synthesized on them. This will form a very solid moat. Therefore, I think the issuer of the token should benefit the most.

Alex: Assuming that these issuers have a lot of assets to issue, which chain might they prioritize? Is it a chain with good credit and so-called legitimacy like Ethereum, or a chain with stronger performance like Solana or Base?

Mindao: I think Playbook already has one, which is to learn from USDT and issue it on any chain. This is the most typical example. The story of USDT is particularly interesting because it was first issued by Bitfinex, but it is particularly difficult for exchanges to issue stablecoins and get other exchanges to accept them. This is also why after DeFi Summer, Binance, OKX, and Huobi all issued their own stablecoins, but they did not recognize each other. However, USDT just existed when there were no other alternatives in the market, so other parties accepted it and it became a network effect. The tokenization of stocks is the same. I think whichever chain has demand will issue it, just like the early days of USDT, as long as there is demand, it will be issued, and the company will allocate inventory uniformly. I don’t think any chain has a unique advantage at the RWA asset level. For example, Ethereum USDT is issued a lot because of the large demand, that’s all, not because Ethereum has any special advantages at the application level. For the issuer of stablecoins, the market is large enough, the DeFi protocol is large enough, and it can accommodate more funds. I think this is a problem that asset issuers may need to consider. The market is large enough, so you can just issue it.

How to view the current policy environment of the crypto industry

Alex: I see. We have been talking about STO for most of the time. We also mentioned that there is a big policy shift behind it, which is the background of increasing possibility of compliance. In fact, it has been almost three months since we talked about crypto policy in the last show. A lot of things have happened during this period, such as Trump's issuance of coins, the Trump family's launch of the World Liberty project to purchase various crypto assets, and Trump's signing of the so-called BTC strategic reserve executive order. Some bad news has also come. The Bitcoin reserve plans of many states have failed to pass the test, and about four or five states have failed to succeed in legislation. Some people believe that most of the crypto industry policies promised by Trump before taking office have been fulfilled, and there may not be many subsequent benefits. What do you think of the policy environment of the crypto industry at this point in time? Are there any key events in the future worth looking forward to or paying close attention to?

Mindao: My feelings about this matter are mixed. Indeed, from the policy perspective, many positive factors have emerged, including the degree of benefits and the speed of implementation, which far exceeded my expectations. At the policy level, Bitcoin is regarded as a reserve asset of the United States. We know that the reserves of the United States can be divided into several categories, one is commodities with practical value, and there are financial ones like gold. Therefore, raising it to such a level, I think it has reached a very high level in terms of execution speed and definition. And many other assets are also included in the so-called stockpile. Therefore, there are indeed many positive factors on the policy side. But the other not-so-good thing is some operating methods. For example, if Trump had not issued the currency and World Liberty Finance had not done those things, I might have been more positive overall. Because Trump issued the currency, including the MELANIA coin, it seems that the Meme conspiracy group is behind it. World Liberty Finance has recently been looking for cooperation in the currency circle. I learned that the big project parties have been contacted for currency exchange transactions, that is, you buy his currency and he buys your currency. In addition, it is still discussing whether to invest in exchanges. This series of events are linked together, which makes me feel bad. Because Crypto itself has always been anti-fragile and disdains the government or regime. The rise of Crypto does not rely on the support of any regime, and this wild growth is the core of its anti-fragility. But now it seems that all this has been kidnapped by the Trump family. Imagine what will happen in 4 years? Moreover, Trump has used some public tools for private purposes, which is too closely tied to his family. If the Democrats come to power again, the revenge will be particularly fierce. It is particularly important to note that most of Trump's measures are implemented through EO (executive orders), which can be abolished with a piece of paper after the new government comes to power. Just like Trump once abolished more than 100 EOs in the Biden era. Therefore, the key in the next 4 years is to see how many EO-type policies can be formally embedded in the US legislative framework. If these policies can eventually become laws, approved by Congress and state legislatures, and form a legal framework, there is no need to worry about being easily abolished. It depends on how much of these things can be solidified in the next 4 years. When these measures are too closely tied to Trump's personal interests, once the Democrats come to power, Crypto may become a very negative thing and be suppressed. This is what I am very worried about. And think about it, all these things seem to have a very blurred line between self-interest and public power. If you are a Democrat, it is very convenient to attack him by using all his transactions as attack points. He issued coins, engaged in DeFi, and conducted these subsequent transactions, which are all particularly easy to be attacked. In this case, if the Democrats come to power, Crypto may become an important weapon to attack Trump or his family. In this case, will there be positive legislation? This is difficult. So, I think the market has also seen that the policy level is indeed very good, but these are all superficial. How many of them can eventually fall to the legal level and solidify as part of the system? These are too deeply tied to his family and have become a kind of private tool. For example, it was rumored that you could spend 1 million US dollars to buy a ticket for the Crypto Summit at that time. This is not only ridiculous in the United States, but also in developing countries. You have found that many OGs in the currency circle have not spoken recently. They don’t want to express whether this kind of thing is good or bad. It’s really hard to say. It depends on how many of them can fall to the legal level in the end. Of course, there are also some people in the currency circle who think that I will cater to the needs of Trump and his family and do whatever I should do, but what about you three or five years later? Attacks have already begun to emerge, and the Democratic Party in the United States has begun investigating Trump's issuance of currency, so I think it is a very complicated emotion.

Alex: Maybe everyone originally thought that Trump's promotion of this matter was a big positive, a big positive at the policy level. However, when he started issuing coins and proposed to include ada, SOL, and xrp in the national reserve like Bitcoin, the seriousness of this matter was completely eliminated.

Mindao: Yes, it has completely disappeared. We initially thought that it was truly a national policy to turn the United States into a part of the so-called Capital of Crypto. However, we suddenly discovered that all operations were private tools and became a pursuit of personal gain, which changed its nature. I think the biggest turning point in the market was after Trump and Melania issued the currency, including the subsequent issuance of Libra, and the so-called conspiracy group manipulation exposed by this incident. You can see that the entire market began to go down, which was a turning point. Everyone began to be confused about this matter, whether it was used as a private tool or became a real policy to be implemented. The consensus of the market is obviously divided.

Alex: Yes, many people were looking forward to a Bitcoin reserve bill at the federal level, but after all the chaos in January, it was difficult for most states to pass reserve bills in February.

Mindao: Trump’s meme tokens, including World Liberty Finance, have recently been rumored to acquire exchange tokens. The conflict between these private transactions and public power has led to a lot of opposition when the bill was implemented. Is this for the country or for individuals? Another contrasting case is Tesla. Tesla’s stock has fallen by about 50% from its high point because everyone thinks that Tesla is too closely tied to Musk. Tesla’s volatility is the volatility of Trump’s policies, and Tesla’s shareholders are certainly unwilling to do so. For example, some people are not satisfied with Trump’s policies in Ukraine, so they are unwilling to buy Tesla’s stock. I think it is not good to be overly linked to politicians, which is also the reason why many people have negative emotions now, that is, they are too closely tied to Trump’s family.

Alex: Especially since Trump is already in his second term, he won’t serve again. He will only serve for another three years at most.

Mindao: Even if other Republicans come to power, they may not implement these policies like him. To be honest, even though I have been in Crypto for so many years, it is difficult for me to distinguish whether these measures are for private or public benefit. I don’t think they are completely for the public benefit.

Alex: Okay, today we talked about STO and many policy-related topics. Thank you Mr. Mindao for participating. I hope to invite you again next time. Thank you.

Mindao: No problem, thank you.