The Evolution of Currency: From Shells to Code

The history of currency is humanity's eternal quest for efficiency and trust. From the shell money of the Neolithic era to the bronze coins of the Shang and Zhou dynasties, from the half taels of the Qin and Han dynasties to the jiaozi of the Tang and Song dynasties, each transformation in form reflects innovations in technology and systems.

The Northern Song Dynasty's jiaozi replaced metal currency with paper money, pioneering the era of credit currency. The monetization of silver in the Ming and Qing Dynasties shifted trust from contracts to precious metals. After the collapse of the Bretton Woods system in the 20th century, the US dollar became a pure credit currency, its value relying on US Treasury bonds and military power. The emergence of Bitcoin marked the birth of decentralized digital currency, while the rise of stablecoins represents another revolution in trust mechanisms - replacing sovereign credit with algorithmic code, compressing trust into mathematical certainty.

The transformation of currency forms reshapes the power structure each time: from the barter of the shell money era, to the centralization of metal currencies, to the state credit of the paper money era, and finally to the distributed consensus of the digital currency era. When USDT is questioned due to reserve controversies, and when the SWIFT system becomes a tool for financial sanctions, the significance of stablecoins has transcended the category of payment tools. It reveals the trend of monetary power shifting from sovereign states to algorithms and consensus. In the fragile trust of the digital age, code is becoming a more solid credit anchor than gold.

The Origin and Development of Stablecoins

In 2014, Tether( USDT) emerged with the promise of "1:1 pegged to the US dollar," becoming the first "fiat currency substitute" in the crypto world. It cut through the barriers between fiat and cryptocurrency like a sharp blade. By 2017, USDT quickly occupied 90% of trading pairs on exchanges, with its market capitalization skyrocketing from millions to 2 billion dollars. It significantly improved cross-platform arbitrage efficiency, becoming a liquidity bridge and even regarded as "digital gold" in the fight against hyperinflation.

However, the "1:1 peg" of USDT has always been surrounded by controversy. In 2018, Tether first disclosed its reserve assets, with cash accounting for 74%, which plummeted to 2.9% in 2021, raising doubts in the market about its solvency. Anonymity has also made it a tool for illegal transactions, with the USDT transaction amount seized from Silk Road 2.0 in 2016 reaching $42 million.

The root of this trust crisis lies in the 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. This indicates that stablecoins must seek a balance between decentralized ideals and real financial rules in the future.

Barbaric Growth and Trust Crisis

After 2018, the anonymity and cross-border liquidity of stablecoins made them a "golden channel" for criminal activities. In 2019, the U.S. Department of Justice accused North Korean hacker groups of laundering over $100 million through USDT. In 2020, Europol uncovered a case where ISIS used stablecoins for fundraising. These events prompted increased regulation but also gave rise 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 the bankruptcy of several institutions. This disaster exposed the fatal flaw 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 questions due to insufficient cash reserves. The collapse of Silicon Valley Bank in 2023 caused USDC to briefly drop to $0.87, revealing the deep binding risks between traditional finance and the crypto ecosystem.

In the face of a systemic trust crisis, the stablecoin industry is engaging in self-rescue through over-collateralization and transparency. DAI builds a multi-asset collateral system, anchoring the collateralization rate at 150%. USDC implements a "glass box" strategy, publishing audit reports monthly and achieving real-time tracking of reserve fund flows. This self-rescue movement is essentially a compromise of cryptocurrency from the utopia of "code is credit" to the traditional financial regulatory framework.

Regulatory Acquisition and Sovereignty Games

In June 2025, the United States passed the GENIUS Act, requiring stablecoins to be pegged to dollar assets and subject to Federal Reserve oversight. Hong Kong took the lead by implementing the "Stablecoin Ordinance" which provides comprehensive regulatory measures. This global legislative race is essentially a contest among countries for control over currency pricing power and payment infrastructure in the digital age.

The EU's MiCA legislation covers 27 member states and manages different types of crypto assets through a classified regulatory model. Countries like Singapore and Japan have also successively introduced regulatory policies, with significant differences in their stances: China has completely banned virtual currency trading, Russia allows USDT to be used for cross-border trade to evade sanctions, and African and Latin American countries encourage the use of stablecoins due to a shortage of dollars.

The deepening regulation of global stablecoins is reshaping the financial system: first, it challenges traditional settlement systems represented by SWIFT; second, it triggers a monetary sovereignty game, forming a dual structure of "dollar dominance + regional compliance innovation"; third, it exacerbates the risk transmission in the financial system, such as the full reserve requirement for stablecoins potentially increasing the pressure for banks to shrink their balance sheets, and the risk of algorithmic stablecoins losing their peg becoming more linked to fluctuations in the crypto market.

Future Outlook

Looking back from the node of 2025, the ten-year journey of stablecoins is an epic of technological breakthroughs, trust games, and power restructuring. It has evolved from a "technical patch" that solves the liquidity dilemma in the crypto market to a "financial order disruptor" that shakes the status of sovereign currencies.

The rise of stablecoins is essentially a re-examination of the "nature of currency"; humanity's definition of value carriers is shifting from "reliable physical assets" to "verifiable rules". Its controversies reflect the deep contradictions of the digital age: the game between efficiency and security, the struggle between innovation and regulation, and the conflict between global ideals and sovereign realities.

Looking to the future, stablecoins may continue to evolve in the game between regulation and innovation, becoming the cornerstone of the "new monetary system" in the digital economy era, or they may face another reconstruction amid systemic risks. 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. Stablecoins will ultimately mark an important beginning for humanity's exploration of a more efficient, fairer, and more inclusive monetary order.