A Brief History of Stablecoins: From Technical Patch to Disruptor of Global Financial Order

Introduction: The Millennium Leap of Currency Forms

The history of currency is humanity's eternal pursuit and game of "efficiency" and "trust". From the natural scarcity of shell money to the power imprint of bronze coins, from the unified currency system of the half tael coins in the Qin and Han dynasties to the breakthrough of the metallic currency limitations by the Jiaozi in the Song Dynasty, each transformation reflects the resonance of technological breakthroughs and institutional innovations.

During the Northern Song Dynasty, the Jiaozi replaced iron coins with paper currency, pioneering the concept of credit currency. In the Ming and Qing Dynasties, the monetization of silver shifted trust from paper contracts to precious metals. After the collapse of the Bretton Woods system in the 20th century, the US dollar reestablished global hegemony as a pure credit currency, shifting monetary power from physical anchoring to national credit. The emergence of Bitcoin, with an average daily volatility exceeding 10%, has torn apart the traditional financial system, while the rise of stablecoins signifies a paradigm shift in trust mechanisms: replacing sovereign credit with algorithmic code, compressing trust into mathematical certainty.

Every transformation of the form of currency is reshaping the power structure: from the trust of barter in the era of shell money, to the centralization endorsement of metal currencies, then to the state credit compulsion of paper money, and finally to the distributed consensus of the digital currency era. When USDT is questioned as a "digital Ponzi scheme" due to reserve controversies, and when the SWIFT system has become a tool for financial sanctions, the rise of stablecoins has surpassed the mere scope of "payment tools". It unveils the beginning of the shift of monetary power from sovereign states to algorithms and consensus. In this fragile era of trust, code is becoming a more solid credit anchor than gold, with mathematical certainty.

Chapter One Origins and Budding (2014-2017): The "Dollar Substitute" of the Crypto World

In 2008, Satoshi Nakamoto published the Bitcoin white paper, proposing the concept of a decentralized digital currency based on blockchain technology. On January 3, 2009, the first Bitcoin block was born. Early Bitcoin transactions relied on peer-to-peer networks, lacking standardized pricing and liquidity.

In July 2010, the first Bitcoin exchange Mt.Gox was established, but the trading efficiency was extremely low: bank transfers took 3-5 working days, and the fees were as high as 5%-10%. This inefficient payment system severely restricted the liquidity of Bitcoin. In February 2014, Mt.Gox announced bankruptcy due to a hacker attack. Starting in 2022, global compliant exchanges like the US Coinbase and Hong Kong Hashkey began offering secure and compliant trading services to customers.

In 2014, Tether launched USDT, promising a 1:1 peg to the US dollar, breaking the barrier between fiat currency and cryptocurrency. USDT was initially named Realcoin and issued through the Omni Layer protocol on the Bitcoin blockchain. Its parent company, iFinex, also operates the Bitfinex exchange, which has sparked controversy. Early studies questioned the correlation between USDT issuance and Bitcoin price manipulation, but subsequent research suggested it was a normal market response to liquidity news.

In September 2018, Circle and Coinbase jointly launched USDC, aiming to provide a transparent and compliant dollar stablecoin. In March 2021, Visa announced support for USDC as a settlement currency. In September of the same year, USDC announced that its reserve assets would fully shift to cash and short-term U.S. Treasury bonds. After the FTX collapse in 2023, USDC further increased the cash ratio in its reserves. Circle went public in June 2025, with its stock price rising sixfold within ten days.

By 2017, USDT had rapidly captured 90% of trading pairs on exchanges, with its market capitalization surging to $2 billion. It facilitated cross-platform arbitrage, enhancing the liquidity of the cryptocurrency ecosystem, and even became a tool for some countries to combat inflation. However, the "1:1 peg" of USDT has always been controversial, with its reserve transparency and compliance continuously facing scrutiny.

Chapter 2 Barbaric Growth and Trust Crisis (2018-2022): Dark Web, Terrorism and Algorithm Collapse

The anonymity and cross-border liquidity of cryptocurrencies have gradually been exploited by criminals. After 2018, stablecoins became the "golden channel" for criminal activities. In 2019, the U.S. Department of Justice accused a North Korean hacking group of laundering over $100 million through USDT. In 2020, Europol cracked a case of ISIS using stablecoins for fundraising. These events prompted the FATF to release guidelines on the risks of virtual assets, but regulatory lag has led to more complex evasion tactics.

In May 2022, the UST of the Terra ecosystem collapsed, resulting in a market value of approximately $18.7 billion going to zero, along with multiple institutions facing crises. This disaster exposed the fatal flaws of algorithmic stablecoins: their value stability relies entirely on the fragile balance of market confidence and code logic.

Centralized stablecoins also face a trust crisis. In 2021, Tether's disclosure of reserve assets raised concerns over insufficient cash reserves. In the 2023 Silicon Valley Bank collapse, USDC experienced a sharp price drop due to frozen reserves, revealing the deep binding risks between the traditional financial system and the crypto ecosystem.

In the face of a trust crisis, the stablecoin industry is engaging in self-rescue through over-collateralization and transparency. DAI has built a multi-asset collateral system that alleviated massive risks during the Luna crash in 2022. USDC has implemented a "glass box" strategy to enhance reserve transparency. This self-rescue movement is essentially a compromise of cryptocurrency from the ideal of "code is credit" to the traditional financial regulatory framework.

Chapter 3 Regulation Integration and Sovereignty Game (2023-2025): Global Legislative Competition

In June 2025, the United States passed the GENIUS Act, requiring stablecoins to be pegged to US dollar assets and to be subject to regulation. Hong Kong subsequently enacted the Stablecoin Ordinance, becoming the first jurisdiction in the world to implement comprehensive regulation on fiat-backed stablecoins. This competition is essentially about countries vying for control over currency pricing power and payment infrastructure in the digital finance era.

The US GENIUS Act requires stablecoin issuers to be registered entities in the US, and reserve assets must be 1:1 matched with USD cash or short-term US Treasury bonds. The Act clarifies that stablecoins are not classified as securities or commodities, but it strengthens anti-money laundering, consumer protection, and other requirements.

The EU MiCA legislation will take effect at the end of 2024, covering 30 countries, and categorizes crypto assets into electronic money tokens, asset-referenced tokens, and utility tokens. The legislation requires stablecoin issuers to hold at least 1:1 fiat currency or highly liquid assets, and prohibits high-risk investments.

The Hong Kong "Stablecoin Regulation" will come into effect in May 2025, requiring issuers to apply for a license and meet requirements such as high liquidity of reserve assets and segregated management. The regulation covers both domestic and foreign HKD-pegged stablecoins and prohibits unlicensed institutions from selling to retail investors.

Regulatory approaches vary in other regions: Singapore allows banks and non-bank institutions to participate in stablecoin business; Japan limits issuers to licensed banks or trust companies; Mainland China prohibits virtual currency trading, but Hong Kong promotes compliant pilot programs; Russia permits the use of USDT for cross-border trade; some countries in Africa and Latin America encourage the use of stablecoins due to a shortage of US dollars.

The deepening regulation of global stablecoins is reshaping the financial system landscape, affecting the reconstruction of financial infrastructure, currency sovereignty games, and the transmission of financial risks. In the future, stablecoins may become an alternative infrastructure for CBDCs, but their long-term impact still needs to be observed.

Chapter Four Now and Future: Deconstruction, Reconstruction, and Redefinition

The ten-year journey of stablecoins is a microcosm of technological breakthroughs, trust games, and power reconstruction. It has evolved from a tool for solving liquidity issues in the crypto market to a disruptor challenging the status of sovereign currencies, constantly seeking a balance between efficiency and trust, regulation and innovation.

The rise of stablecoins has essentially redefined currency, from physical credit to sovereign credit, and then to code credit. Each of its crises and self-rescues is reshaping the rules of value: from centralized custody to transparent over-collateralization, from anonymous transactions to compliant regulation.

The controversy surrounding stablecoins reflects the deep contradictions of the digital age: the game between efficiency and security, the struggle between innovation and regulation, and the conflict between the ideals of globalization and the realities of sovereignty. It showcases the infinite possibilities of digital finance while exposing humanity's eternal pursuit of trust and order.

In the future, stablecoins may continue to evolve between regulation and innovation, becoming the cornerstone of a new monetary system in the digital economy era, or they may face significant restructuring. Regardless, it has profoundly rewritten the logic of monetary history, making currency a symbiotic entity of technology, consensus, and power. In this monetary revolution, we are both witnesses and participants. Stablecoins will be an important starting point for humanity's exploration of a more efficient, fair, and inclusive monetary order.