Source: YouTube blogger Macro Insights
Content Organization: Peter_Techub News
The Future of Dollar Stablecoins: USDC and the Transformation of the Global Financial System
Stablecoins, especially USDC, are an important innovation in the cryptocurrency field, serving not only as a “cash cow” for the digital economy but also potentially as a prototype for future world currencies. Jeremy Allaire, CEO of Circle Internet, recently delved into the essence of stablecoins, regulatory challenges, risk management, future development trends, and their positioning in the global financial system during an interview. This article combines the interview content and related information to analyze how USDC challenges the traditional banking system through a full reserve model, explores the impact of the “Genius Act” on the compliance of stablecoins, and discusses how the programmability of stablecoins is reshaping financial services and internet applications.
The business model of stablecoins: a cash cow or a currency revolution?
The business model of stablecoins is referred to as a “cash cow” by host Qiao, with its core being the holding of tokens that do not pay interest, but can generate returns through highly liquid assets behind them (such as short-term government bonds). USDC is issued by Circle, with reserve assets mainly including short-term treasury bills and cash, stored in globally systemically important banks and the Circle Reserve Fund, with an average maturity of about 13-23 days, far exceeding the transparency of other stablecoins. This full reserve model contrasts sharply with the fractional reserve system of traditional banks. Traditional banks create credit through deposits, expanding the money supply, but also introducing systemic risks, while the fully reserved USDC ensures that each token is backed by an equivalent asset, theoretically reducing the risk of default.
Jeremy emphasized that the goal of USDC is not only to generate profit but to build an “internet-scale digital financial infrastructure.” By collaborating with distribution partners such as Coinbase and Binance, USDC has achieved seamless usage in over 600 million accounts worldwide, covering platforms like Robinhood, Kraken, and Brazil’s Nubank. This extensive network effect and liquidity make it an essential tool for global payments and value storage. However, Coinbase takes more than 50% of the revenue from Circle’s reserve assets, sparking discussions about distribution costs. Jeremy believes that this partnership has driven the adoption of USDC in its early stages, and in the future, as the market matures and regulations improve, the distribution structure will become more diversified and costs will be optimized.
The “Genius Act” and Global Compliance
The “Genius Act” passed in 2025 provides a federal regulatory framework for stablecoins, clarifying requirements for transparency, auditing, and security, and defining stablecoins as “cash equivalents” that can be used as payment and collateral in capital markets. This not only enhances the confidence of financial institutions in stablecoins but also promotes their widespread adoption in the globally regulated financial system. Circle has applied to become the “first national digital currency bank,” regulated by the Office of the Comptroller of the Currency (OCC), with over $64 billion in USDC further integrating into the U.S. financial system.
Globally, Circle adopts a “regulatory-first” strategy, obtaining licenses in regions such as the EU, Singapore, Hong Kong, and Japan, especially issuing USDC in Europe under the MiCA regulation, becoming the only legally recognized global dollar stablecoin. This compliance strategy gives it an advantage in competition with Tether, particularly in terms of transparency and governance. Jeremy believes that the stablecoin market is “winner takes most” rather than “winner takes all,” and there may be 3-5 major players in the future, but Circle is expected to maintain its lead thanks to regulatory compliance and network effects.
SVB Incident: Crisis of Trust and Risk Management
The collapse of Silicon Valley Bank (SVB) in early 2023 led to a brief depegging of USDC, with secondary market prices dropping to as low as $0.95, exposing the vulnerabilities of stablecoins under extreme market conditions. Jeremy acknowledged that this was related to the disruption of banking services, but emphasized that Circle mitigated risks through full reserves and high-quality assets (such as treasury bills and deposits with globally systemically important banks). The SVB incident prompted Circle to further optimize reserve management, creating the Circle Reserve Fund in collaboration with BlackRock, with 90% of reserve assets publicly disclosed daily to enhance transparency. Furthermore, Circle established independent reserves in Europe to reduce single market risk.
The SVB incident revealed the core challenge of building trust in stablecoins: how to balance between decentralized blockchain and centralized reserve management. Jeremy believes that a full reserve model is safer than a fractional reserve, as the latter relies on implicit guarantees of “too big to fail,” while stablecoins provide more predictable stability through mandatory risk management and regulatory compliance. However, the liquidity demands of reserve assets (such as intraday settlements) still depend on the banking system, highlighting the complex coexistence of stablecoins and traditional finance.
Programmability: Reshaping Finance and the Internet
The “programmability” of stablecoins is its disruptive core feature. Jeremy likened it to “the superpower inherited from the Internet,” which enables near-zero cost value storage and transfer through blockchain. USDC operates on 24 blockchains, supporting applications such as decentralized finance (DeFi), payments, and smart contracts. Its programmability empowers “machine-to-machine” payments, where AI agents can directly pay USDC via APIs to access data or services, eliminating the friction costs of traditional payments.
This feature is driving the internet from “free browsing” to “pay-per-use” transformation. Joe mentioned that in the future, websites may charge for data scraping using stablecoins, and a micropayment mechanism similar to the X42 protocol is being developed. Jeremy further pointed out that programmability will give rise to subscription models similar to Spotify, or distribute revenue to data providers based on usage through front-end services like Open AI and Google. This model not only disrupts content consumption but could also reshape the business ecosystem, pushing financial services towards greater efficiency and transparency.
The essential difference between DeFi and traditional finance
DeFi, as the core application of stablecoins, achieves autonomous financial services through smart contracts, such as lending, trading, and derivatives. Jeremy believes that the essential difference of DeFi lies in its transparency and auditability, with on-chain transactions being public and verifiable, reducing the opaque risks of traditional finance. However, DeFi also faces unique challenges, such as smart contract vulnerabilities, hacking attacks, and market manipulation. Compared to the centralized regulation of traditional finance, the decentralized nature of DeFi requires higher code security and community governance. Circle is committed to reducing these risks by supporting high-quality blockchain networks and developer tools.
The Future of Stablecoins: A Prototype for World Currency?
Jeremy views USDC as a “new type of M1 electronic currency,” whose full reserve model and internet-native characteristics make it a potential foundation for the global financial system. Stablecoins not only challenge traditional banks’ deposit and credit models but also accelerate the digital transformation of global payments through integration with payment networks like Visa and Mastercard. U.S. Treasury Secretary Scott Basset has stated that stablecoins increase demand for short-term government bonds, reinforcing the international status of the dollar. However, Jeremy emphasizes that the true potential of stablecoins lies in their global accessibility and programmability, which could give rise to a “new financial system” that enables more efficient and inclusive innovations in payments, credit, and investment.
Conclusion
USDC is reshaping the global financial landscape through full reserves, regulatory compliance, and programmability. The “Genius Act” provides it with legitimacy and infrastructure support, while the SVB incident has pushed for stricter risk management. The “winner takes most” pattern of stablecoins indicates that Circle is likely to maintain its lead through network effects and a global compliance strategy. In the future, stablecoins may not only serve as a digital extension of the dollar but also as a prototype for world currency in the post-dollar era. Their programmability will drive the rise of “machine-to-machine” payments and on-demand payment internet, fundamentally changing the financial services and business ecosystem. Investors and developers need to closely monitor regulatory dynamics and technological innovations in this area to seize the limitless possibilities of the digital economy.
