"Google Has Also Jumped In"…Global 'Crypto Finance' Infrastructure Race [Hankyung Koala]

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Stablecoins are in the U.S. national interest

The spread of dollar stablecoins aligns with the United States' national interest. Stablecoins serve as a solution to the U.S.'s chronic Triffin dilemma. The Triffin dilemma refers to the paradox in which the issuer of the reserve currency (the dollar) must tolerate structural trade deficits to maintain its hegemony, but resolving the trade deficit would weaken the dollar's reserve status. Dollar stablecoins promote global dollar usage and partially alleviate this dilemma. At the same time, even if China and Russia reduce purchases of U.S. Treasuries, stablecoin issuers can directly buy U.S. Treasuries to support demand.

In February this year, White House crypto czar (AI & Crypto Czar) David Sacks emphasized that dollar stablecoins are central to U.S. dollar hegemony and demand for U.S. Treasuries. Stablecoins, he argued, address two U.S. problems: the Triffin dilemma and fiscal deficits. Therefore, the U.S. government is pursuing support for dollar stablecoins and related regulatory reform as a national strategy.

President Trump issued an executive order in January to suspend central bank digital currency (CBDC) efforts and declare support for dollar stablecoins. The U.S. Congress also passed the bipartisan GENIUS Act, a basic stablecoin law. The Office of the Comptroller of the Currency (OCC) officially permitted banks to enter virtual asset businesses, and the Federal Reserve (FRB) and the Federal Deposit Insurance Corporation (FDIC) abolished pre-approval schemes for banks' virtual asset businesses. This explicitly ended the long-standing shadow regulation.

In this environment, major banks such as Bank of America, JPMorgan, Citi, and Wells Fargo are pursuing stablecoin issuance. Payment companies like Visa, Mastercard, PayPal, and Stripe have also introduced stablecoin payments, and major commerce companies including Amazon and Walmart have begun issuing their own stablecoins.

Why do Amazon and Walmart want to create stablecoins?

Of Amazon's and Walmart's annual revenues of $600–700 billion, net profit is $30–35 billion, about 4~5% of revenue. The financial cost required for payments alone is around $15 billion, more than 2% of revenue—about half of net profit. Reducing this cost would significantly improve price competitiveness and corporate value. Alternatively, this amount could be invested in adopting or issuing stablecoins. If a company successfully establishes its own stablecoin, it can also secure additional collateral yield. In this way, stablecoin payments can be a massive innovation for commerce companies' businesses.

What comes after the GENIUS Act?

Around the passage of the GENIUS Act, L1 (mainnet) networks specialized for stablecoins have been appearing one after another. Tether, issuer of USDT, is developing Stable; Circle, issuer of USDC, is developing Arc; and Stripe is developing its own network called Tempo. In the past, many networks claiming to be "Ethereum killers" emerged, but recently leading market companies are again creating their own networks because financial institutions' entry into the stablecoin market is becoming visible.

These networks differentiate themselves by meeting institutional-grade demand. They inherit advantages of past "Ethereum killers"—such as sub-second finality, high transactions per second (TPS), and eliminating or sufficiently lowering transaction fees (gas fees)—which are hard to achieve on Ethereum L1, while adding institutional-grade advanced features like batch processing and proprietary FX engines.

More notable are attempts to simultaneously satisfy transaction transparency and confidentiality for regulatory compliance. The conventional blockchain premise has been that all transactions are transparently disclosed on-chain. Put simply, if you know someone's wallet address, you can see how much they hold, when and to whom they sent funds, and what DeFi transactions they made in real time. Financial institutions would hardly welcome this. Some blockchains hide sender and receiver information, but these are classified as so-called "dark coins," and many older dark coins have been used for money laundering.

Stablecoin-specialized networks being created recently incorporate various features to meet financial institutions' regulatory compliance needs: encrypting transaction amounts with read-only access granted only to regulators, selective hiding of transaction details, protocol-level transaction rejection, freezing assets upon regulators' requests, and so on. Operating the network only with trusted network validators also appears to be part of regulatory compliance.

Broadening the scope, regulated financial institutions are also adopting blockchain. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is pursuing its own blockchain, and the U.S. Depository Trust & Clearing Corporation (DTCC) has launched Composer X, an integrated digital asset management platform. Google plans to release GCUL (Google Cloud Universal Ledger), a blockchain for financial institutions. Solana is positioning itself as an "on-chain Nasdaq" based on fast processing speeds.

With the Trump administration's deregulation and the GENIUS Act providing legal clarity, the blockchain industry is preparing for mass adoption of stablecoins by financial institutions.

Finance is being redefined

The "financial blockchain revolution" talked about during the ICO craze eight years ago is now becoming reality. Technology has advanced, regulations have improved, and companies that used traditional financial networks can save substantial costs paid to banks, card companies, and payment processors by using stablecoins. Major institutions that currently dominate regulated financial markets may fall behind if they do not change.

The "financial blockchain revolution" is no longer just a storm in a teacup for the blockchain industry. So how will finance change going forward? If global financial institutions and payment providers adopt stablecoins at an institutional level, remittances and payments used in everyday life worldwide will change. Furthermore, the tokenization of financial assets such as stocks is accelerating. The Securities and Exchange Commission's (SEC) proclaimed "on-chain-ification of financial markets" is underway. Just as cash turned into card payments and online remittances, global finance is being newly redefined.

What is our alternative?

This is why I am worried. The new standard of finance will also be held by the United States. The U.S. has established legal standards for stablecoins with the GENIUS Act, and the tech industry and financial institutions are rapidly building blockchain infrastructure that complies with regulations. Some institutional-grade networks are already operational, and others will soon be completed. In the not-too-distant future, U.S.-made stablecoins and networks are likely to replace large parts of the existing financial network because they are faster, cheaper, and more convenient.

In an era when blockchain finance becomes the new norm, we could become dependent on the U.S.'s new blockchain financial network. It's not only the penetration of dollar stablecoins that worries me. We may be forced to use stablecoin-specialized blockchains designed to serve U.S. national interests. Having experienced the Trump administration's unrealistic "demand for $500 trillion in cash" in real time, it's hard to shake off this concern.

There is no alternative domestically. Discussion on a basic stablecoin law in Korea is still in its early stages, and domestic financial institutions are still prohibited from investing in, holding, or trading virtual assets. This is because the 2017 "emergency measures on virtual currency" remain in effect. There is no way to even attempt building compliant stablecoins or infrastructure. To avoid dependence, we must have our own alternative. Right now, even attempts to create that alternative are prohibited.

Kim Minseung, Head of Korbit Research Center

Kim Minseung, Research Fellow at the Korbit Research Center, is...

A founding member and research fellow of the Korbit Research Center. He explains complex events and concepts in the blockchain and virtual asset ecosystem in an easy-to-understand way and helps people with different perspectives understand each other. He has experience in blockchain project strategy planning and software development.

▶This article is an external contributor column introduced to provide diverse perspectives to subscribers of the cryptocurrency investment newsletter and does not represent the position of The Korea Economic Daily.

Mihyun Jo mwise@hankyung.com