Talking about stablecoins with Xiao Feng again: Return to the essence of technology and avoid misunderstandings

On July 18, President Trump officially signed the GENIUS Act into law, bringing stablecoins into the global spotlight. After a decade of advocacy from blockchain pioneers and years of fluctuating mainstream discourse, the topic has finally gone mainstream. Virtually overnight, stablecoins have become the most discussed topic across internet industries, traditional financial circles, and policy forums. This surge has prompted a broad reconsideration of how mass adoption of digital currencies could impact the internet, AI, finance, and even the broader geopolitical and economic landscape. However, as interest has exploded, a flood of misconceptions, misinformation, and even misleading commentary has circulated widely—especially on social media—creating persistent misunderstandings. The underlying issue is that most debates take a sweeping approach, overlooking that stablecoins are a direct result of blockchain innovation and failing to address their technical logic or applications. To address this, I held another conversation with Dr. Xiao Feng focused on these issues.

Meng Yan: Dr. Xiao, since our last discussion, developments have progressed exactly as we anticipated. The GENIUS Act has passed, and I’m seeing a rapid surge in interest in stablecoins throughout Chinese communities—almost reaching universal debate. A friend just returned from Hong Kong and told me, “Everyone there is talking about stablecoins. I’ve never seen anything like it.” You’re based in Hong Kong, so you must be feeling this even more deeply.

Xiao Feng: This is something we haven’t seen in years. There’s not only discussion but also strong action. Hundreds of companies and institutions are lining up to join stablecoin projects, and news of RWA-related initiatives is updated daily. We’re now receiving a steady stream of partnership inquiries. The GENIUS Act is significant not just because it confirms the legal status and sovereignty of “U.S. dollar stablecoins” in the American legal system, but because it signals that blockchain and crypto assets are transitioning out of regulatory gray zones and into the core of mainstream financial infrastructure—a new revolution is truly underway. As a global financial center, it’s no surprise that Hong Kong is sensitive to this new trend.

Watching this unfold, I’m struck by the lesson that, historically, those who proactively embrace and experiment with new technologies almost always gain huge rewards. History consistently rewards the bold and optimistic in moments of technological change.

Meng Yan: Still, I see some worrying signs—the stablecoin boom has arrived so suddenly that many were unprepared, and there’s a real knowledge gap. Some people first heard about stablecoins just three months ago, only have a superficial or secondhand understanding, and are now presenting themselves as experts on social media, spreading views—some of which, I’m afraid, are outright misleading.

Xiao Feng: I’ve seen an explosion of self-published content and share your concern. That said, I’m glad to see such widespread discussion; this kind of mainstream public attention is something our industry has long hoped for. The sector is entering a new era. In the next several years, stablecoins, RWA, token economies, crypto-equity integration, and the blending of crypto with AI will make the landscape both lively and exciting.

But at times like this, we have to stay calm and reinforce our fundamentals. In my experience, when “spring arrives and the temperature rises,” plausible but false ideas flourish, and crowd-pleasing but incorrect views quickly go viral, planting seeds of risk. Mindset matters—every boom and bust in crypto, every industry misstep, every swing in sentiment, usually traces back to a fundamental misunderstanding.

The first priority is a realistic assessment of the environment. Many think that just because the U.S. passed legislation, crypto in Hong Kong or even mainland China will immediately open up—and they’re making business plans on that basis. That’s simply unrealistic. Major regulatory hurdles remain and solving them will take time. The eventual regulatory framework will require clear rules and boundaries—unrestricted free rein is impossible. Just one example: if stablecoins operate outside the banking system, will they make money laundering easier? Any responsible regulator will impose strict anti-money laundering requirements on stablecoins.

There are also major misconceptions and even errors in how people are understanding stablecoins, RWA, and blockchain. This surge has left many “riding the wave” as total newcomers—full of enthusiasm and attention, but with clear knowledge deficits and rough, simplistic judgments. We need to highlight these gaps.

Stablecoin Debates Must Stay Rooted in Technology

Meng Yan: Right now, stablecoin debates are almost entirely about financial narratives, with hardly any discussion of technology. Do people really believe blockchain tech is now so mature it can be ignored? When I talk to traditional finance professionals, I find that most have little or only the most basic experience with blockchain products, know almost nothing about DeFi, have never lost a private key or suffered a hack, and yet speak with great confidence about building stablecoin applications and systems—as if blockchain is a tool they already understand intimately. Many enter this “dark forest” with the overconfidence of “regulars,” assuming the familiar processes, models, and regulatory frameworks of mainstream finance can be simply “ported” to the chain. But they miss a key point: blockchain is a fundamentally new computing model with operating logic, system boundaries, risk structures, and user behaviors that are extremely different from traditional finance. They don’t realize that blockchain tech is still immature, grappling with user experience, security, and compliance challenges. On-chain systems are full of risks—from private key management and smart contract bugs, to phishing, bridge exploits, oracle attacks, regulatory arbitrage, and illicit fund flows. Any weak link can trigger a system-wide crisis. Without understanding these technical details and the true logic of on-chain operations, all those promising business plans and imagined ecosystem “loops” will quickly fall apart in real life, under a flood of user complaints, compliance issues, or security breaches.

More crucially, blockchain is still evolving at breakneck speed. Today’s leading protocols and products might be upended tomorrow by new architectures—modular blockchains, zero-knowledge proofs, account abstraction, on-chain governance, restaking economies, MEV management, and more are constantly redefining the landscape. Even veterans who have spent a decade in the field must keep learning or risk falling behind. You can’t hope to win this intense global competition without a deep, ongoing grasp of the technology’s development.

Xiao Feng: That’s an extremely important point. Recently I’ve seen a flood of skewed or simply wrong commentary about stablecoins and RWA tokenization, and the root cause is always a lack of engagement with the underlying technology. It’s technology first—blockchains, distributed ledgers, new financial infrastructure—then tokens (including stablecoins), then RWA and DeFi.

I’m a classic finance person—trained in economics after reform and opening, working in finance from day one. So I encourage my peers: prioritize understanding technology. You can’t discuss stablecoins in isolation from technology or you’re just building castles in the air.

I first dived into blockchain in 2013, and what fascinated me was the subtle but profound harmony between blockchain’s technical architecture and the deep structure of the financial industry. With years of practice, I’ve only become more convinced: this sector is technology-led at this stage. Financial insight helps, but if you don’t understand technology, you’ll hit a wall fast. That’s why I’ve spent years on blockchain fundamentals and cutting-edge developments.

I’m still learning even now. I keep urging founders: you don’t have to code, but you must be able to make technical judgments. Especially in DeFi, the fight isn’t between licenses or brands, but between protocols, architectures, and system efficiency. Whoever can iterate on account systems, cross-chain abilities, settlement speed, privacy protection, on-chain compliance, and risk modules will gain market share. If you don’t keep up with blockchain tech, your strategy isn’t just a dead end—it’s a mirage. This is the real state of industry competition. Technology is not just an advantage—it’s a lifeline. Miss the foundational logic and you’ll misallocate resources in commercial practice. Even the best-laid plans will stumble.

Meng Yan: Absolutely. The nature of stablecoins is ultimately defined by their technological underpinnings.

Xiao Feng: In fact, the nature of money has always been deeply shaped by technology. Money has experienced three pivotal transitions. First, we had commodity money—shells, silver, gold—whose value relied on physical scarcity and innate qualities. Second, we had fiat money, backed by national decree and sovereign credit, lasting for centuries. Now we’re seeing the rise of technology-driven money—Bitcoin and stablecoins—whose value is protected by cryptography, blockchain, digital wallets, and smart contracts.

So when analyzing stablecoins, we must never forget their origins. Blockchain technology innovation—distributed ledger innovation—paved the way for new financial market infrastructure, which in turn enabled stablecoins, RWA, and token economics. None of this depends on individual intentions. The U.S. recognized this trend and acted accordingly, passing legislation to give crypto legal recognition. The coming year will be a landmark as traditional financial institutions, funds (including pension funds), and investors begin entering the crypto market through formal channels.

You Can’t Build Next-Gen Stablecoins with a Legacy Mindset

Meng Yan: Precisely because this trend is so clear, traditional institutions are eager to jump in. But after joining many stablecoin payment and RWA project discussions, I’m struck by how little most participants recognize the disruptive impact blockchain and stablecoins will have at the financial model level. Many proposed designs simply ignore the distinctive features of blockchain infrastructure—they’re just “old wine in new bottles.” In their minds, stablecoins are a tool, but people, processes, models, and workflows carry on unchanged—they just use stablecoins or blockchain in specific spots to boost efficiency or cut costs.

This reminds me of early e-commerce. In the late 1990s, the internet seemed to lack a clear business model, and e-commerce was one of the few models people “got”—so every company wanted to do it. But most saw the internet as a tool, a smarter sales channel or a more efficient call center. They just added a “mall” page, created an e-commerce department, and thought they’d embraced e-commerce—without changing business processes, organization, or mindset. It wasn’t until titans like Amazon and Taobao rose that people realized e-commerce was a whole new paradigm, affecting consumer behavior, inventory management, fulfillment, and traffic flows. In the next decade, traditional retail was utterly disrupted. By 2013 or 2014, many owners bitterly regretted not seeing this change earlier.

It’s just the same today. Stablecoins may start as mere tools, but they’re much more. Put a billion users with digital wallets in the picture and you’ll realize: stablecoins aren’t just a payment tool. They’re the access point to a truly on-chain financial system and new economic logic. There’s no need for complex account hierarchies—the user entry point is a “wallet,” not an “account”; interactions happen via smart contracts, not manual approval; connections are based on on-chain protocols, not intermediaries. This changes everything—traditional “intermediation power” will evaporate and new gateways and hubs will emerge rapidly. The stablecoin economy isn’t about patching up old systems with fancy new tech—it’s about building new systems that replace, absorb, and ultimately rewire the entire financial industry. That’s the deep shift we must take seriously.

Many people seriously underestimate this. Some overstate the immediate impact of AI—laying off staff last year, replacing them with AI, only to rehire months later. But when it comes to stablecoins, they do the opposite—drastically underestimating their disruptive power. They see stablecoins and think, “I can use them to improve this process,” or “I can add stablecoin support to that business line,” without realizing that when stablecoins are deeply integrated, their processes, products, and even their job roles could become obsolete.

Xiao Feng: The real crux is still a shallow understanding of blockchain and distributed ledger technology. Distributed ledgers totally overhaul the underlying infrastructure of finance, but many underestimate how much this matters. They think, “No matter what’s going on under the hood, my business as usual continues above.” That’s not how it works—blockchain doesn’t let you upgrade painlessly, it triggers structural changes that force the whole superstructure to be re-examined. That’s what real disruption looks like.

To truly understand stablecoins, you have to review their evolution. They’re built on distributed ledger technology—the third revolution in human bookkeeping.

The first was single-entry bookkeeping, as evidenced by Sumerian clay tablets—recording only income and outflow.

Around 1300 AD, double-entry bookkeeping appeared in Italy, recording assets and liabilities as well as income and outgoings. Over the next 700 years, improvements were merely incremental—no fundamental change.

That changed in 2009, when the Bitcoin blockchain introduced distributed bookkeeping. The biggest difference? Previously, each institution kept its own private ledger, so any cross-border transaction required reconciliation between all ledgers—time-consuming and expensive. In contrast, a distributed ledger provides a single, public ledger for all, so transactions become direct, peer-to-peer, with no information reconciliation needed. That’s the revolutionary shift.

After Bitcoin’s emergence, stablecoins came onto the scene in 2014. As distributed ledger tech progressed, two trends appeared: since 2009, people created purely “on-chain digital native” assets like Bitcoin and Ethereum; since 2014, stablecoins like USDT introduced the “digital twin” trend, where real-world assets—like dollars—are tokenized and mapped onto the blockchain.

With the approval of Bitcoin ETFs in the U.S. and Hong Kong last year, we saw another development: digital native assets moving from on-chain to off-chain. The asset still exists on-chain, but its financial representation (ETF shares) trade in traditional markets. Bitcoin itself is on-chain, the ETF is off-chain—demonstrating on-chain/off-chain conversions and digital twin/native interactions.

Decades of distributed ledger experimentation have proven their value as transformative social infrastructure.

Since 2009, distributed ledger tech has driven major changes in the infrastructure supporting financial markets—payments, trading, clearing, settlement. What’s truly different? What sets the new mechanisms apart from the old?

Today’s financial infrastructure relies on central registration, custody, counterparties, and settlement—requiring at least three institutions to clear and settle a single trade. On a distributed ledger, all parties are writing to the same record, enabling direct, peer-to-peer trades—no intermediaries.

Current financial systems use net settlement; distributed ledgers use gross settlement, where every transaction is settled instantly and finally. For example, NYSE will soon run trades 5×23 hours with a one-hour clearing window; Nasdaq plans 5×24 but can’t yet achieve this because legacy infrastructure requires a pause for clearing. By contrast, Hong Kong’s crypto exchanges already offer uninterrupted 7×24 trading. This is a direct result of different ledger technology, underpinning the rise of the stablecoin economy.

Since January 2009, when the Bitcoin mainnet went live, this distributed ledger-based system has run continuously and stably for more than sixteen years—a remarkable achievement, even from an engineering perspective. It’s an FMI (Financial Market Infrastructure) that’s passed countless stress tests and is production-ready for the modern world.

Some may say, “Who cares if it’s ‘old’ or ‘new’ FMI? Don’t you still need clean rules, architecture, and oversight for payments, trading, clearing, and settlement? What’s the difference to my business model?”

In fact, the difference is profound. Distributed-ledger-based FMI deserves the name “next-generation” because it upends three core rules:

First, true decentralization replaces central counterparties (CCPs) with direct, peer-to-peer transactions.

Second, gross settlement replaces netting—each transaction is settled in full, individually.

Third, Delivery vs. Payment (DvP) is achieved at the protocol level via smart contracts, ensuring atomic, simultaneous transfer of assets (tokens) and funds (stablecoins), and guaranteeing instant finality.

This new architecture slashes process complexity, dramatically cuts costs, and drives exponential efficiency gains. Here’s real-world proof: today, NYSE and Nasdaq’s intraday trading makes up less than half of U.S. equity volume. After-hours and dark pools are eating away at old-school market share. Despite extending trading hours, legacy FMI (like the U.S. T+2 settlement system) still forces NYSE to set aside an hour a day for clearing—or the entire system would unravel. Meanwhile, crypto exchanges, powered by next-gen FMI, have already achieved true 7×24 trading. That’s the gulf between the old and the new.

But the implications go even further. Blockchain isn’t just an efficiency booster—it redefines how users access financial services, changes workflows, redraws market relationships, shifts value chains, and ultimately changes how finance is done at every level. The stablecoin economy isn’t just “fixing an old link with new tech”—it’s building an entirely new system and network. This structural shift will render some organizations totally obsolete, while spawning new platform players and applications. Already, we see four key changes:

First, Bitcoin is now a new asset class, used beyond household portfolios and corporate treasuries, even reaching national reserves.

Second, stablecoins are now legally recognized as revolutionary payment and settlement tools. In 2024, on-chain transaction volume topped $16 trillion and counting. Cross-border e-commerce in China is a major beneficiary, with overseas buyers using stablecoins more than ever, and Chinese merchants receiving them in record numbers.

Third, DeFi has become a high-efficiency investment tool. By the end of 2024, DeFi’s total value locked reached about $190 billion. DeFi lending is robust—on-chain USDT loan APRs have stabilized around 8%. The major innovation: DeFi lending runs on smart contracts, cutting out traditional intermediaries, slashing trust and operational costs, improving capital turnover tenfold or more, and pushing settlement efficiency to new heights.

Fourth, asset tokenization (RWA) is the new hot trend, bridging traditional financial and even physical assets onto the blockchain.

If any stablecoin design ignores these changes, it’s either obsolete from day one or can’t be built at all.

Programmability Makes Stablecoins Infinitely More Complex

Meng Yan: Anyone just joining the stablecoin debate probably hasn’t had time to grasp the full complexity of on-chain ecosystems, DeFi, composability, tokenomics, or the high-stakes security environment on public blockchains. So they may not realize what happens—good or bad—once stablecoins and RWAs go on-chain.

Xiao Feng: These challenges all come back to technology. The key is understanding the opportunities and risks created by the openness and programmability of stablecoins—and of all tokens, including future RWAs.

Many currently treat stablecoins and RWAs as “islands”—seeing stablecoins as a more efficient payment tool, or RWA as just an on-chain registry for offline assets. As long as the tech works and it’s regulatory-compliant, they think, “business as usual.” But they don’t realize these assets are programmable. Once they’re on-chain, they immediately become part of a highly automated, deeply interconnected, and vastly more complex ecosystem.

From a DeFi lens: once a stablecoin is on-chain, it instantly gets used for lending, market making, restaking, farming, leverage, and even derivatives. If it doesn’t have a solid risk model, clear boundaries with DeFi protocols, or strategies for defending against flash loan attacks and other extremes, it can easily be manipulated—potentially losing value or triggering system-wide crises. Likewise, RWAs used as on-chain collateral become part of the financial game. If their underlying data is opaque, valuations unclear, ownership disputed, or regulatory status uncertain, those assets can contaminate the ecosystem as major sources of risk rather than boosting liquidity.

From a tokenomics perspective: Stablecoins and RWAs aren’t neutral—they interact complexly with utility, governance, and incentive tokens. In the past few years, whole sets of incentive structures—liquidity mining, user growth, governance rewards—have rapidly taken shape. New entrants often know nothing about this or how these incentive designs can rapidly scale up (or crash) an entire system. If RWAs or stablecoins are poorly designed, any loss of trust can cause the whole value chain to snap almost instantly, inflicting huge losses.

From a security perspective: On-chain environments are brutally harsh. Yu Jian, founder of SlowMist, calls public blockchain a “dark forest.” Anyone who’s experienced an attack knows just how dangerous it is, but most in traditional finance have never felt it firsthand. Some have private blockchain experience but know nothing about the risks on public chains. Once a stablecoin or RWA asset or contract hits a public blockchain, it faces non-stop attacks—smart contract exploits, bridge bugs, oracle manipulation, wallet phishing, MEV siphoning, and more. This isn’t theoretical—it happens daily. On-chain security isn’t as simple as code audits—it involves protocol logic, system interactions, and a full range of unpredictable user behaviors. When things go wrong, there’s no customer support, no stop-loss, no rollback—the only protection is robust, proactive design. Every flaw could cost millions to fix the hard way.

From a compliance standpoint: The programmability of stablecoins and RWAs creates both huge opportunities and entirely new regulatory challenges. Traditional compliance is manual, after-the-fact, and centrally controlled, but fully on-chain assets and transactions can be executed, cross-chain, and globally circulated in seconds—beyond the reach of classic compliance processes. What’s worse, regulatory demands differ across jurisdictions, meaning global stablecoins and RWAs must navigate incompatible rules worldwide. But this is where true innovation lies: “programmable compliance” means embedding regulatory requirements directly into code—up-front rules, real-time verification, automatic execution. If rules are well defined and data is on-chain, “code as law” is possible, setting the stage for global, safe, and efficient compliant stablecoin and RWA flows. Tomorrow’s regulation will move from the “visible hand” to “rules you write into software.”

The bottom line: Once stablecoins truly plug into the on-chain ecosystem, things get unimaginably complex—far beyond any simple “use-case scenario.” Everything we’ve discussed is just the tip of the iceberg. New technical, security, incentive, and compliance challenges will keep emerging. This is a never-ending journey requiring constant learning, experimentation, and evolution from the whole industry.

Cognitive Advancements Require Real Innovation

Meng Yan: I think your technology-first approach to stablecoins and blockchain nails the most important point. But I also have a concern: stablecoins are spreading at scale so quickly that new, unforeseen problems are bound to keep arising—beyond what our current theories can handle. Theory alone probably won’t be enough.

Xiao Feng: I agree completely. Cognition never happens all at once, especially not in such a fast-changing, complex system as blockchain, where real-world issues only emerge in practice. You can’t anticipate every variable in advance—real understanding comes from an ongoing cycle of “perception—innovation—feedback—further innovation.” For Chinese entrepreneurs, this is a once-in-a-generation opportunity: with deep technical resources and a global perspective, if we move together, organizing and taking action in this stablecoin paradigm shift, we really can gain influence and leadership in the global stablecoin world. True understanding only grows through real-world practice and becomes the productive force driving the new financial system’s evolution.

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