Innovative PayFi protocol PolyFlow recently successfully held a Special Asia AMA focusing on the "US Stablecoin Act". With Bitcoin breaking through its all-time high of $110,000, the crypto industry is accelerating its integration into the traditional financial system, and the advancement of the US Stablecoin Act (referred to as the "GENIUS Act") is seen as a key step in the transformation of the global financial system. This AMA brought together four industry pioneers from different fields to discuss the deep impact and future opportunities of the bill.

Meet the Speakers: Four Industry Leaders

1. Raymond

Founder of GeoSwift, a cross-border payment company, co-founder of PolyFlow, and an early believer in the crypto industry. Raymond started investing in Bitcoin as early as 2011 and was also an early investor in Ripple. He witnessed the evolution of the crypto market from 0 to a trillion-dollar scale and has been deeply involved in cross-border payments and stablecoin practices.

2. Andrew

Partner of King & Wood Mallesons in Hong Kong, practicing lawyer in the United States, and adjunct professor at the Faculty of Law of the University of Hong Kong. He is mainly engaged in legal affairs including digital assets, structured financing, syndicated loans, financial supervision, capital markets and asset securitization, and is deeply involved in the research of financial policies in the United States and Asia.

3. Gary

CICADA Finance investor and senior practitioner of traditional VC/PE transformation to encryption. Gary has 15 years of investment experience, promoting the transformation of asset management from traditional models to on-chain protocols, focusing on DeFi and RWA tracks.

4. KK

Founder of Hash Global and an early investor in the crypto space. Focusing on stablecoins and payment tracks, he has led investments in over 80 Web3 projects and promoted the integration of technology and business scenarios.

1. Introduction to the US Stablecoin Genius Act

Attorney Andrew first introduced the basic situation of the Genius Act.

The bill aims to establish a comprehensive U.S. legal and regulatory framework to support the development and widespread use of stablecoins. As a bridge between the crypto asset market and the traditional financial market, stablecoins have stable value and flexibility and can be exchanged for legal tender on a one-to-one basis. However, due to its close relationship with the traditional financial system, governments and regulators around the world are concerned about the possible negative impact of the stablecoin market. Therefore, the bill is expected to be included in the regulatory scope and, after a vote in the U.S. Senate, it is expected to be sent to the U.S. President to be signed into law.

Key Takeaways from the Genius Act

• Definition and characteristics of stablecoins : The Genius Act defines payment stablecoins as digital assets whose value is anchored to the national legal currency and used for payment and settlement. Stablecoins have stable value and are suitable as payment tools in the Web3 field. They are also a bridge between the crypto asset market and the traditional financial market. Their reserve assets include bank deposits and government bonds.
• Regulatory framework: The bill establishes a dual-tier regulatory framework at the federal and state levels. Issuers with an issuance size of no more than $10 billion may choose to comply with the state regulatory framework, while other issuers must comply with the federal regulatory system. The main regulatory agencies at the federal level include the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
• Licensing system: The bill ensures that stablecoin issuers actively apply for licenses and stipulates that no person other than licensed issuers may issue payment stablecoins in the United States. Digital asset service providers may not provide or sell unlicensed stablecoins to U.S. persons. Qualified foreign stablecoin issuers may be exempted but must register with the U.S. government.
• Accounting and financial requirements: Stablecoins issued by licensed stablecoin issuers in the United States can be treated as cash in accounting and can be used for margin in derivative transactions and interbank settlement. Licensed issuers must maintain 100% of eligible reserve assets and publish the size and composition of reserve assets monthly, which will be reviewed by accountants. The CEO and CFO must confirm the accuracy of the information. Issuers with an issuance size of more than US$50 billion are required to prepare annual financial reports and audit them.
• Compliance and risk management: The bill imposes restrictions on business activities, capital liquidity, risk management, anti-money laundering and compliance requirements on issuers, and requires compliance with US economic sanctions, anti-money laundering, anti-terrorist financing and KYC laws. All stablecoin issuers must have the technical capabilities to comply with the legal instructions of the US government.

In short, the introduction of the Genius Act reflects the US government's emphasis on and support for the development of stablecoins. By establishing a comprehensive legal and regulatory framework, the bill aims to ensure the stability and security of stablecoins while promoting their widespread use in the financial sector. This will not only help promote the development of the crypto asset market, but also bring new opportunities and challenges to the traditional financial market. With the advancement and implementation of the bill, stablecoins are expected to play a more important role in the global financial system.

2. The History of Stablecoins

As one of the earliest participants in the industry, Raymond reviewed the reasons for the emergence of stablecoins and how they have developed from the early days to the present from a historical perspective. The core value of the US Stablecoin Act is to enhance market confidence and promote industry consensus, which is the fundamental driving force for the rapid development of cryptocurrencies from scratch.

The development history of stablecoins

The development of stablecoins can be divided into several stages. In 2010, someone used Bitcoin to buy pizza for the first time, marking that cryptocurrency could be used as a measure of value for goods to pay for the price of goods. This event was of symbolic significance. As early as 2013, many cryptocurrency payment methods had appeared on the market, such as ATMs that could withdraw cash with Bitcoin in Vancouver, Canada, and merchants in Tokyo, Japan also accepted Bitcoin payments in the same year. However, the large price fluctuations of Bitcoin have limited its use as a payment tool, and it is more regarded as an investment tool.

To solve this problem, some people began to try to issue stablecoins. In the stablecoin 1.0 era, stablecoins such as USDT and USDC appeared, which were pegged to fiat currencies at a 1:1 ratio. These stablecoins were collateralized by the U.S. dollar or other equivalent assets to ensure their stability. Subsequently, the stablecoin 2.0 era emerged, and people began to try to issue stablecoins using crypto assets such as Bitcoin or Ethereum as collateral. During this period, the collateral ratio was no longer 1:1, but 1.2 or 1.15:1 to cover the price fluctuations of crypto assets.

Further development, algorithmic stablecoins such as Luna and UST have emerged. These stablecoins are collateralized by digital assets issued by themselves, but this model is risky because its underlying logic is fragile and vulnerable to market shocks. These events show that the core of stablecoins lies in the stability of their anchor assets.

Key points of the US stablecoin bill

The core of the US Stablecoin Act is to clarify the definition and issuance requirements of stablecoins. The Act stipulates that stablecoins must be issued at a 1:1 ratio with fiat currency to ensure their stability. This provision helps to clarify the misunderstanding of stablecoins in the market and clarify the definition of stablecoins. Many project parties have tried to issue stablecoins with customer funds as collateral, but this does not meet the true definition of stablecoins. Stablecoins must be collateralized by their own assets, not customer funds.

From the perspective of the entire industry, the biggest contribution of the US Stablecoin Act to the entire industry is to enhance market confidence and expectations for future development. This confidence is built on the consensus of more and more people on the value of stablecoins. Just as gold has become a valuable object due to its widely recognized value, stablecoins are gradually accepted by the market due to consensus. This consensus has driven the rapid growth of the stablecoin market, from almost zero to the current scale of 3 trillion to 4 trillion US dollars.

3. Multi-dimensional Analysis of Stablecoin Policy Driving Factors

From the perspective of a frontline financial practitioner, Gary visited the front line of the US market and gave an essential analysis of the US dollar stablecoin policy.

The US dollar expands its balance sheet to enhance its global influence

One of the core goals of the US stablecoin policy is to allow countries to issue US dollar stablecoins based on US dollar assets and US bonds. Behind this is actually a strategy of large-scale balance sheet expansion. Unlike the previous Fed's direct issuance of currency to expand the balance sheet, this time the right to issue coins is granted to other entities, which means that the Fed has essentially given up part of the M2 coin issuance rights. So why did the United States make such a choice? Its fundamental purpose is to expand the balance sheet and thus enhance the global influence of the US dollar.

However, this move has also raised many questions. Since the purpose is to expand the balance sheet and enhance influence, why give up the right to issue, and even the settlement right that may be lost? At present, the proportion of SWIFT settlement is on a downward trend. It stands to reason that the United States should strengthen control, but why is it further relaxed at this time? For example, if the Japanese Financial Services Agency issues USDJ that meets the basic requirements of the Genius Act, it can not only meet market demand in Japan's domestic currency circulation, but also be over-issued and issued like stablecoins. The United States passed this bill to leave room for other countries to issue stablecoins, allowing them to be issued and further promoted abroad, which seems to have given up the potential power of coinage and settlement.

The decline of the US dollar's control and the impact of new trends

It is an indisputable fact that the United States has gradually lost control of global currencies in the past few years. From 2019 to 2023, the United States over-issued currency by 40%, and the currency depreciated significantly. In order to recover the over-issued part, the United States has adopted a variety of measures such as raising interest rates and increasing reserve ratios, but with little effect. Many places around the world have begun to break away from US control and build their own inter-currency settlement systems. The increasingly frequent discussions on Hong Kong's M-bridge are an example.

Over the past five years, the influence of the US dollar on the world has declined rapidly. This year, there has been a US debt crisis, a US dollar asset crisis, and an exchange rate crisis. People have turned their attention to currencies such as the Swiss franc, the Singapore dollar, and the Japanese yen. When Buffett was asked at the shareholders' meeting whether to buy US dollar bonds and US stock assets, although he encouraged everyone to buy, he invested in a 90 billion Japanese bond fund. This move undoubtedly hinted at the current risks of the US dollar.

There are two main reasons for the decline in the dollar's control. First, the United States has gradually lost control of Covid over the past 20 years, especially since 2019. 2019 became a key trigger point, leading to a decline in the dollar's global control. Second, the emergence of new trends is no longer under the control of the United States.

In the past four years, the proportion of settlements in crypto has risen sharply. Among Nigeria's 223 million people, more than 50% use crypto for settlement. Although these settlements are essentially in USD, they have nothing to do with the US dollar issued by the United States and are not subject to US regulatory agencies such as the FDIC. This is a trend that cannot be ignored. At present, countries and regions such as Jerry, India, Brazil, and Bangla University are developing rapidly in the global consumer finance daily settlement system, showing an exponential growth trend.

The same is true in the field of supply chain finance. A North American company I once invested in has a market value of tens of billions. In 2022, I suggested that it use USDT for settlement. At that time, it did not dare to try it because it was illegal. However, by 2023, its usage ratio had reached 0.5%, and in 2024 it rose to 5%. This shows that in the trade settlement of small and medium-sized enterprises, the proportion of crypto settlement has increased rapidly, and these were originally off-balance sheet assets in the US currency. The company expects that based on natural growth in 2025, the proportion of crypto settlement will exceed 15%, and this trend is already very obvious.

In general, whether it is the problems of the US dollar itself in the traditional financial system or the problems caused by the development of crypto, they all point to one fact: the control of the US dollar over the world is rapidly declining. This is also the background cornerstone for the introduction of the Genius Act. If the United States does not take action at this time, the influence of the US dollar will continue to decline.

The Deep Logic and Impact of the US Stablecoin Policy

This year, the Senate has vigorously promoted this policy, which shows the flexibility and adaptability of the US system. This seems to be a strategy of "taking advantage of the situation and retreating to advance". The United States has actually given up some of its rights to mint and settle US dollars and pushed this matter to the market. After the policy was implemented, US financial institutions only played a "proofing" role, telling countries and regions such as Japan, Vietnam, and the Middle East that as long as they have US debt and US dollar assets, they can issue their own US dollar stablecoins at a 1:1 ratio.

Although the United States does not want to see over-issuance, it has to accept it because it is the cornerstone of balance sheet expansion. In the past, the US dollar was based on gold, reserves and US dollar credit. Now other countries have entered a new stage with US dollar assets and US bonds as the cornerstone. The essence of this policy is to give up the absolute right to issue US dollars and replace US bonds with gold by retreating to advance, so that the world can issue currency based on this.

This is a classic practice of the United States borrowing from the Web3 Restaking model. The core of the Restaking model is to pledge currency on an asset, derive shadow currency and circulate it, and build ecological assets around shadow currency. The essence of crypto's development in the past two years lies in this, and the US government and financial system quickly learned and applied this essence, effectively solving the core problem of the decline in the global control of the US dollar.

After the implementation of this policy, the US financial system will experience an "earthquake". In the short term, US dollar assets will fluctuate violently, affecting the issuance and circulation of assets of traditional financial institutions, but in the long run, it will further promote the value of the US dollar. The New York financial community has exploded, and securities institutions in Hong Kong have also flocked to Singapore to seek cooperation opportunities, which contains many new opportunities.

4. The key role and market impact of stablecoins in the financial sector

After understanding the introduction, background and driving factors of the above-mentioned US stablecoin bill, let us discuss the impact of the Genius Act on the subsequent market.

Stablecoin - RWA for Fiat USD

KK from Hash Global, what different insights do you have from an investor's perspective on this stablecoin bill?

In the financial sector, stablecoins are a highly anticipated and visible track that everyone has been looking forward to for a long time. We started investing in RWA Exchange three years ago and communicating with licensed institutions in Singapore, but the whole process was very slow. We have always believed that the ones who can really stand out in the Web3 market this year are mainly stablecoins and money market funds.

Stablecoins are important because they are considered the Web3 version of the US dollar fiat currency, and their real assets correspond to the US dollar. Money market funds are what the on-chain funds really need. I think the introduction of the Stablecoin Act will accelerate the process and allow more and more funds to be on the chain. Only when there are funds on the chain will there be liquidity, and only with liquidity can high-quality assets be attracted to the chain.

At the beginning of the year, everyone expected that the United States and Hong Kong would pass stablecoin bills one after another. Now that the bills have been passed, we see that traditional financial institutions, including Visa and MasterCard, the world's two largest payment networks, are actively embracing stablecoins to solve cross-border payment and payment problems. They will also put the power of stablecoins to practical use.

I talked to some friends before. Issuing stablecoins now is a bit like banks starting to issue credit cards. Every bank wants to do credit card business because they can get a share of the payment network and settlement network, whether as an issuer or an acquirer. Now that the regulations have been introduced, everyone has the conditions to issue. Since it can be issued, why not? As long as there are scenarios and users, you can make money. This process will accelerate the introduction of funds into the on-chain financial world of Web3. Only with enough funds and various institutions can the Web3 market really develop.

The integration and development of stablecoin and traditional financial system

Similarly, Raymond, who has 20 years of experience in the cross-border payment industry, also brought us his profound observations on the development of the crypto industry, or stablecoins, and Web3 payments gradually becoming mainstream.

At the recent Consensus conference in Toronto, we clearly felt that this year's venue was very different from previous years, and more people began to pay attention to the Web3 payment track. This reflects that the payment field has become a hot spot in the current industry. As practitioners, we have already made early arrangements and had many useful discussions with people in the industry. For example, as a traditional payment company in 2022, we built the PolyFlow platform and actively participated in the development of the Web3 payment track.

In the past, there were obvious contradictions and conflicts between the traditional financial industry and the Crypto industry. Traditional finance was reserved about the Crypto industry, while Crypto industry practitioners pursued freedom and disliked the strict regulation of traditional finance. However, as the industry continued to develop, the interaction and connection between the two became increasingly close, and more and more market demands prompted both sides to sit down and discuss how to achieve integration.

We have also been making useful attempts with industry giants recently. For example, a few months ago, we cooperated with Ripple to explore the connection between Ripple's XRP, stablecoins and legal currencies of various countries in the global payment and clearing network. For example, the CPN project launched by the issuer of USDC starts from the two endpoints of financial institutions and explores how to build a clearing network through compliant deposits and withdrawals. At the same time, we have also seen major exchanges launch their own payment tools, such as OKX's Pay.

In this process, we should not only pay attention to the efforts of practitioners, but also see the active participation of traditional financial giants such as Visa. We have also recently signed an agreement with Visa to explore how to use Visa channels to achieve cross-border payments and use our global payment network. All the developments in the crypto industry over the years point to a core issue: stablecoins and blockchains are not only accounting systems, but also important tools for the effective transfer of assets.

How to further promote this effective transfer within a compliant and legal framework is the direction that all of us practitioners are working towards. As a consultant to the National Development Bank of Canada and the People's Bank of China, I often communicate with regulators and banks. I often ask them a question: Are all traditional financial funds clean? The answer is obviously no. So are all external inflows "dirty money"? The answer is also no. If the money flowing in the Crypto industry is "dirty money", this industry would not have developed to this day, nor would it have attracted many asset investments and smart people to join. This shows that the industry meets the pain points of a large part of the world's legal liquid assets.

In this context, we look at the stablecoin bills introduced by the United States and Hong Kong. These policies not only enhance industry confidence, but also encourage everyone to develop more industry solutions that truly solve practical problems. This is my point of view.

5. Great changes in the U.S. banking and financial system

Gary sees a huge opportunity in this, a transformation from traditional finance to stablecoins and then to crypto finance.

In essence, the traditional financial system has developed a series of rules in the past 100 years of development, but some of the rules have gradually become complex and rigid, which is not conducive to the sustained and rapid development of finance. The emerging Crypto industry has made many useful explorations in the past 16 years, especially in the payment and settlement systems. However, due to the lack of effective regulation, the Crypto industry has also seen some non-compliant or even "unclean" problems.

Therefore, the current key node is to regulate the financial development under the current national system through compliance bills, combine flexible financial assets, and promote the integration of traditional finance and emerging finance. This is not only necessary, but has gradually become a trend in the development of the industry. The introduction of the stablecoin bill can be said to be a milestone event. These changes have exceeded the expectations of many traditional and emerging financial practitioners, and the speed of advancement in the past year has been remarkable.

The implementation of subsequent bills has given traditional finance the opportunity to connect with emerging finance, and banks and financial institutions have gradually become similar to "public chains", able to independently issue currency and currency-based assets. This transformation has actually been brewing for a long time, and now it has finally reached a critical node. In a sense, banks and financial institutions have begun to build their own asset and interest-bearing systems on the basis of compliance, transferring traditional assets to the blockchain to achieve open, transparent, recordable and traceable transactions. This is not only a technological advancement, but also a major change in the financial model. In the past five years, banks such as Goldman Sachs and Citi have been required by regulators such as the Federal Reserve and the FDIC to use blockchain technology for recording in order to ensure the transparency and authenticity of accounting.

After this change, the integration of banks and blockchain ecology will be closer. Banks will issue stablecoins and develop their own assets and ecosystems, which will greatly promote the connection between traditional finance and emerging finance. In the next month, all kinds of asset management institutions and functional systems under the US financial system will undergo tremendous changes, and everyone will quickly adjust their strategies to see who can stand out in this change.

In addition to the stablecoin bill and related implementing regulations issued by Hong Kong, other regions around the world such as Japan, Singapore and Dubai will also respond quickly and introduce similar stablecoin legislation. Whoever can connect with these bills and integrate their own financial systems the fastest will have an advantage in future competition. Rapidly activating the ecosystem through shadow currency will bring huge historical opportunities. Therefore, it is not an exaggeration to call this change "Genius".