Stablecoin Foundries: The Foxconn of Digital Money

OKX CEO has emphasized that the company does not raise funds from users, but rather functions as a technology provider for user Earn. This model is not dissimilar to the stablecoin "foundry" concept emerging in the industry, where companies specialize in the complex infrastructure of stablecoin issuance for others. These stablecoin foundries, similar to how Foxconn operates in the manufacturing space, handle reserve custody, compliance audits, smart contract deployment, and other technical and regulatory challenges [1].

Stablecoin issuance is not a simple process. It requires a robust infrastructure involving compliance frameworks, bank custody, smart contract deployment, security audits, multi-chain compatibility, and KYC module integration. The cost of establishing such infrastructure is high, with initial investments reaching millions of yuan for a company starting from scratch. Annual operating costs can reach tens of millions of yuan, covering legal, auditing, operations and maintenance, account security, and reserve management [2].

To address these high entry barriers, a "stablecoin foundry" model has emerged, allowing businesses to outsource the complex processes of stablecoin issuance. These foundries handle the complete infrastructure, enabling clients to launch stablecoins without engaging in the entire process themselves. This model not only reduces costs but also significantly shortens the time required to launch a stablecoin, with some platforms allowing a white-label stablecoin to be issued in just a few weeks [3].

The core value of the stablecoin foundry model is threefold: cost reduction, time savings, and risk transfer. Foundries package the complex processes of stablecoin issuance into standardized services, reducing the marginal cost for each customer. This model also allows for quicker product launches compared to self-developed stablecoin projects, which can take over a year to implement. Additionally, the model transfers the risk of compliance and reserve management to the foundry, which is crucial given the stringent regulatory requirements [4].

Paxos is one of the key players in the stablecoin foundry market. It has been instrumental in providing stablecoin issuance services to major clients like Binance and PayPal. Its model focuses on building a standardized process around stablecoin issuance, ensuring compliance and custody responsibilities are met. Despite facing regulatory scrutiny, Paxos has continued to strengthen its compliance efforts and expand its services globally [5].

Bridge, a subsidiary of Stripe, is another major player in the stablecoin foundry market. It provides businesses and financial institutions with comprehensive stablecoin issuance capabilities, modularizing and packaging services from the traditional payment industry. Bridge’s platform allows clients to integrate stablecoin functionality into their front-end products through an API call, significantly reducing the time and resources required to launch a stablecoin [6].

Stably and Agora are other notable stablecoin foundries, each with different business models and market strategies. Stably targets the mid-tier market, offering a lightweight production line for stablecoin issuance that emphasizes speed and cost efficiency. Agora, with its Wall Street connections and Silicon Valley backing, aims to make stablecoin issuance as easy as registering a domain name [7].

As the stablecoin foundry industry continues to evolve, it is expected to play a pivotal role in the broader financial ecosystem. Foundries will not only help others issue stablecoins but will also build a global financial network by embedding stablecoins into real-world commercial chains at lower costs and higher speeds. This evolution will be driven by increasing demand from traditional financial institutions seeking to leverage stablecoins without the associated risks and compliance burdens [8].

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