In the early morning of New York, the lights in the conference room of Circle's headquarters were on all night. CEO Jeremy Allaire rubbed his temples, and in front of him was the final version of the Federal Reserve's "Stablecoin Regulatory Framework" that he had just received. "100% reserves, banking license, monthly audits..." These keywords made him realize that the era of wild growth of stablecoins is coming to an end.
This is not a challenge faced by Circle alone. In 2024, the global stablecoin market is experiencing an unprecedented regulatory earthquake. From Washington to Brussels, from Singapore to Tokyo, regulators from various countries have turned their attention to this $80 billion market.
1. Industry pains under heavy regulatory pressure
"We had to make this difficult decision." Do Kwon, the founder of the small stablecoin project Terra, announced the cessation of operations on Twitter, with a tone of disappointment. This stablecoin, which was once ranked in the top five by market value, was forced to withdraw from the market in the first month after the implementation of the new regulations because it could not meet the reserve requirements.
Such stories are playing out around the world. Data shows that since 2024, major economies have strengthened stablecoin regulation:
37 small and medium-sized stablecoin projects have ceased operations
The total market value of the industry evaporated by nearly US$12 billion
More than 200 related startups have laid off employees or transformed
"This is like a big exam for the industry," cryptocurrency analyst Li Ming told PANews, "and there is only one exam question: compliance."
2. Survival Game of Giants
In an office building in the San Francisco Bay Area, Tether's technical team is working overtime to develop a new reserve audit system. "We must make every penny verifiable," said CTO Paul Ardoino, pointing to the real-time data on the screen, "Now transparency is the lifeline."
This transformation was not easy. This stablecoin giant, which occupies half of the market, was once questioned for its opaque reserves. Now, they have not only converted 20% of their reserves into US Treasury bonds, but also established a compliance committee led by a former Federal Reserve official for the first time.
Meanwhile, Circle chose another path. After obtaining the French digital asset service provider license, they worked with BlackRock to develop the institutional-grade stablecoin USDC-i. "This is a product prepared for the next decade," said Kevin Chou, head of Circle's Asia Pacific region, "It must meet the requirements of both Wall Street and regulators."
3. The real dilemma of ordinary users
For Lin Wei, a coffee shop owner in Singapore, these changes came a little suddenly. "The payment method that worked yesterday suddenly stopped working today," he said helplessly, pointing to the "USDT not accepted yet" sign on the cash register.
This scenario is becoming more and more common in the Asia-Pacific region. With the Monetary Authority of Singapore requiring that stablecoin reserves must contain 50% of the Singapore dollar, many small merchants have to readjust their payment systems. "We have supported cryptocurrency payments for three years, and now we may have to return to traditional methods," Lin Wei sighed.
However, in Hong Kong, the situation is completely different. Under the new policy that allows retail stablecoin transactions, businesses like "Crypto Cafe" have ushered in new opportunities. "Now there are customers buying coffee with USDC every day," said the owner, Ms. Chen, with a smile, "even my mother has started to use stablecoins to give red envelopes to her grandson."
4. Adaptive evolution of the DeFi world
"Regulation is not an enemy, but a catalyst." This is what Aave founder Stanislav has often said recently. At a technology summit in London, he demonstrated the newly developed "isolated mode" lending pool, a product designed specifically for compliant stablecoins, which has attracted dozens of institutional investors.
MakerDAO's transformation is more thorough. This legendary project in the DeFi field has now replaced more than 60% of its collateral with U.S. Treasury bonds and corporate bonds. "We want to prove that decentralized finance can be more transparent and safer than traditional banks," said its founder Luen.
These innovations are changing the industry ecosystem:
The proportion of compliant stablecoins in DeFi has increased from 20% to 65%.
Institutional investor participation increased 3 times
Demand for smart contract insurance products surges
5. Where does the future lie?
At a closed-door meeting in Davos, Switzerland, regulators from 20 countries reached a preliminary consensus on the "Global Stablecoin Regulatory Cooperation Framework". This concept, known as the "Crypto Basel Accord", may be officially implemented in 2025.
"It's like setting traffic rules for a highway," explained Maria, an expert at the Bank for International Settlements. "It has to ensure safety but not hinder innovation."
For ordinary investors, experts recommend paying attention to three signals:
When will regulatory policies of major economies converge?
Depth of participation of traditional financial institutions
Progress on cross-chain interoperability solutions
"Stablecoins are experiencing growing pains," concluded Zhang Wei, a veteran cryptocurrency observer, "but every pain is for the sake of running better." In this new era of regulation and innovation, the only thing that can be certain is that the projects that can survive must be those that understand both technology and rules.
