Guotai Junan Report Debunks Six Stablecoin Misconceptions

Guotai Junan Securities Research recently published a report titled "Stablecoins: How They Reshape Global Currencies and Assets," which delves into the current state and future prospects of the stablecoin market. The report highlights six common misconceptions about stablecoins, emphasizing that their value is not as stable as many believe.

The first misconception is that the value of stablecoins is absolutely stable. In reality, stablecoins are anchored to assets and their value can fluctuate due to technical de-pegging risks and changes in the value of the underlying assets. Therefore, while stablecoins aim for stability, their value is not fixed but rather relatively stable.

The second misconception is that any fiat currency can issue stablecoins in large quantities. The report clarifies that the ability to issue stablecoins in large quantities depends on the acceptance of the fiat currency itself. Stablecoins pegged to widely trusted fiat currencies are likely to dominate the market, leading to a "winner-takes-all" scenario.

The third misconception is that the rapid development of USD stablecoins will weaken the USD's credit. The report argues that USD stablecoins actually strengthen the USD's status by expanding its functionality and scope. While they may impact the legal tender of other countries, especially those with significant exchange rate fluctuations, they do not undermine the USD system.

The fourth misconception is that USD stablecoins are a "lifesaver" for US Treasury bonds. The report explains that while USD stablecoins can slightly alleviate pressure on short-term US debt, they have minimal impact on the overall US bond market. The short-term debt market is primarily influenced by the Federal Reserve, and USD stablecoins cannot alleviate pressure on long-term US debt.

The fifth misconception is that USD stablecoins will significantly increase the supply of USD currency. Although USD stablecoins transfer some of the USD issuance authority to private companies, the Federal Reserve remains the main participant in currency supply. Similar to economies with fixed exchange rate systems, the monetary regulatory authority can still adjust the currency supply based on market conditions.

The sixth misconception is that stablecoins will drive rapid development of the Real-World Asset (RWA) market. The report notes that while stablecoins support RWAs at the transaction level, the development of the RWA market ultimately depends on the quality of the underlying assets. Currently, RWAs are still in the early stages of development, and the choice of path may exhibit characteristics of "credit priority" and "liquidity priority."