The Millennium Leap of Currency Forms: From Shell Money to Stablecoins

The evolution of currency is humanity's relentless pursuit of efficiency and trust. From shell money to bronze coins, from paper money to credit currency, every transformation in the form of currency embodies innovations in technology and systems.

When the Song Dynasty's jiaozi broke through the limitations of metallic currency in paper form, it was not only an innovation in materials but also a prototype of credit currency. After the collapse of the Bretton Woods system in the 20th century, the US dollar reconstructed the global financial order as a pure credit currency, shifting monetary power from physical anchors to national credit.

The emergence of Bitcoin has opened the era of digital currency, while the rise of stablecoins marks a paradigm revolution in trust mechanisms. USDT's claim of "1:1 dollar peg" essentially replaces sovereign credit with algorithmic code, compressing trust into mathematical certainty. This new form of "code as credit" is reshaping the distribution logic of monetary power.

From the era of bartering with coins to the centralization of metal currency, to the national credit of paper money, and finally to the era of digital currency and distributed consensus, each evolution of currency form has reshaped the power structure. As the SWIFT system has become a tool for financial sanctions, the rise of stablecoins has exceeded the scope of payment tools, unveiling the beginning of the transfer of monetary power from sovereign nations to algorithms and consensus.

In this digitally fragile era of trust, code is becoming a more solid anchor of credit than gold, with mathematical certainty. Stablecoins are pushing this millennial game to a new climax: when code begins to write the rules of currency, trust is no longer a scarce resource, but a programmable, divisible, and gamified digital power.

Origins and Emergence: The "Dollar Substitute" of the Crypto World

The Bitcoin white paper was released in 2008, pioneering the era of decentralized digital currencies. However, the early efficiency of Bitcoin transactions was very low, severely limiting its liquidity. It wasn't until 2014 that Tether(USDT) emerged with the promise of "1:1 pegged to the US dollar," becoming the first "fiat currency substitute" in the crypto world.

USDT has quickly captured a majority of trading pairs on exchanges due to its seamless connection between traditional finance and the crypto ecosystem. It has not only spawned a frenzy of cross-platform arbitrage but also become a liquidity bridge, and is even regarded by some citizens of certain countries as a "last line of defense" against the devaluation of their local currency.

At the same time, USDC, as another important stablecoin, has gradually risen. Launched jointly by Circle and Coinbase, USDC has gained favor among institutional investors due to its transparency and compliance, and in March 2021, it received support from Visa, officially entering the mainstream financial payment system.

However, beneath the facade of prosperity, cracks in trust are spreading. The "1:1 peg" of USDT has always been shrouded in controversy, with its reserve transparency and compliance continuously facing scrutiny. The root of this trust crisis lies in the deep-seated contradiction between "efficiency first" and "trust rigidity": the coded "1:1 commitment" attempts to replace sovereign credit with mathematical certainty but falls into the "trust paradox" due to centralized custody and opaque operations.

Barbaric Growth and Trust Crisis: Dark Web, Terrorism and Algorithm Collapse

Stablecoins have transformed from a "payment tool" in the crypto world to a carrier of "dark finance," with a simultaneous arrival of the efficiency revolution's rapid advance and the abyss of trust collapse. After 2018, the anonymity and cross-border liquidity of stablecoins have made them tools for certain illegal activities. These events have prompted regulators to strengthen the scrutiny of virtual assets, but the lag in regulation has, in turn, fostered more complex evasion methods.

The rise and fall of algorithmic stablecoins has pushed the trust crisis to its peak. In May 2022, Terra's UST depegged due to a liquidity crisis, causing a market cap loss of approximately $18.7 billion, along with the collapse of several institutions. This disaster exposed the fatal flaws of algorithmic stablecoins—their value stability relies entirely on a fragile balance between market confidence and code logic.

The trust crisis of centralized stablecoins stems from the "black box operations" of financial infrastructure. In 2021, when Tether disclosed its reserve assets, the insufficient cash reserves raised market doubts about its solvency; in the 2023 collapse of Silicon Valley Bank, USDC experienced a brief price drop due to partial reserve freezes, revealing the deep binding risk between the traditional financial system and the crypto ecosystem.

In the face of a systemic trust crisis, the stablecoin industry is undertaking self-rescue through over-collateralization defenses and a transparency revolution. DAI has established a multi-asset collateral system, and USDC implements a "glass box" strategy, publishing audited reserve reports every month. The essence of this self-rescue movement is the transformation of cryptocurrency from the utopia of "code is credit" to a compromise within traditional financial regulatory frameworks.

Regulation and Sovereignty Games: The Global Legislative Competition

In 2025, the United States passed the GENIUS Act, requiring stablecoins to be anchored to dollar assets and included in the Federal Reserve's regulatory framework; Hong Kong passed the "Stablecoin Ordinance," becoming the world's first jurisdiction to implement full-chain regulation on fiat stablecoins. The essence of this competition is the ultimate struggle for sovereign nations to seize control over currency pricing power and payment infrastructure in the digital financial era.

The US GENIUS Act requires stablecoin issuers to be registered entities in the US, with reserve assets needing to match 1:1 with US dollar cash or high liquidity assets such as short-term US Treasury bonds. The EU's MiCA Act regulates crypto assets through a classification-based regulatory model, categorizing them into different classes. Hong Kong's "Stablecoin Ordinance" requires issuers to apply for a license from the Financial Management Authority and meet requirements for high liquidity reserve assets and segregated management.

Apart from the US, Europe, and Hong Kong, the regulation of stablecoins in other regions of the world shows differentiated paths. Singapore and Japan have revised relevant laws to strengthen reserve requirements and compliance regulations; China has comprehensively banned virtual currency trading, while Hong Kong promotes compliant stablecoin pilot programs through sandbox testing; some countries in Africa and Latin America, in response to inflation or to promote inclusive finance, have adopted a relatively lenient attitude towards stablecoins.

The deepening of global stablecoin regulation is reshaping the financial system landscape, with its impact reflected in the reconstruction of financial infrastructure, the game of monetary sovereignty, and the transmission of financial system risks. In the future, stablecoins may become an alternative infrastructure for CBDCs, but their long-term effects on monetary sovereignty, financial stability, and geopolitics still require dynamic observation.

Now and Future: Deconstruction, Reconstruction, and Redefinition

Looking back from the node of 2025, the ten-year journey of stablecoins is an epic of technological breakthroughs, trust games, and power reconstruction. From the initial "technical patch" that solved the liquidity dilemma in the crypto market to the current "global financial order disruptor" that shakes the status of sovereign currencies, it has always been swaying on the balance of efficiency and trust, growing in the cracks between regulation and innovation.

The rise of stablecoins is essentially a re-examination of the "nature of currency." As currency evolves from the physical credit of metal coins to the sovereign credit of fiat money, and then to the code credit of stablecoins, humanity's definition of value carriers is shifting from "trustworthy physical objects" to "verifiable rules."

The controversy surrounding stablecoins reflects the deep contradictions of the digital age: the game between efficiency and security, the struggle between innovation and regulation, the ideal of globalization and the reality of sovereignty. It has become a mirror, reflecting the infinite possibilities of digital finance, while also exposing humanity's eternal yearning for trust and order.

Looking to the future, stablecoins may continue to evolve in the game between regulation and innovation, becoming the cornerstone of a "new monetary system" in the digital economy era, or they may face another reconstruction amid systemic risks. But no matter which direction they take, they have profoundly rewritten the logic of monetary history: currency is no longer just a symbol of national credit, but a symbiotic entity of technology, consensus, and power.

In this currency revolution, we are both witnesses and participants. Stablecoins will eventually become an important beginning for humanity's exploration of a more efficient, fairer, and more inclusive monetary order.