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The Future of Dollar Stablecoins: USDC and the Transformation of the Global Financial System

Dollar stablecoins, especially USDC, represent a significant innovation in the cryptocurrency space, 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 within the global financial system in an interview. This article analyzes 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: Cash Cow or Currency Revolution?

The business model of stablecoins has been referred to by host Joe as a "cash cow," centered on holding tokens that do not pay interest but can generate returns through high-liquidity assets (such as short-term government bonds) backing them. USDC, issued by Circle, has reserve assets primarily consisting of short-term treasury bills and cash, held in globally systemically important banks and the Circle Reserve Fund, with an average maturity of about 13-23 days, offering far greater transparency than other stablecoins. This full reserve model sharply contrasts with the fractional reserve system of traditional banks. Traditional banks create credit through deposits, amplifying the money supply but also introducing systemic risks, while the fully reserved USDC ensures that each token is backed by equivalent assets, theoretically reducing default risk.

Jeremy emphasized that the goal of USDC is not just profit but to build a "digital financial infrastructure" on an internet scale. By collaborating with distribution partners like Coinbase and Binance, USDC has achieved seamless usage across over 600 million accounts globally, covering platforms such as Robinhood, Kraken, and Brazil's Nubank. This extensive network effect and liquidity make it an important tool for global payments and value storage. However, Coinbase taking over more than 50% of Circle's reserve asset revenue has sparked discussions about distribution costs. Jeremy believes that this collaboration has driven the early adoption of USDC, and as the market matures and regulations improve, the distribution structure will diversify, and costs will optimize.

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, defining stablecoins as "cash instruments," and allowing them to be used as collateral in payment and capital markets. This not only enhances financial institutions' confidence in stablecoins but also promotes their widespread adoption within 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 the issuance of over $64 billion in USDC further integrating into the U.S. financial system.

Globally, Circle has adopted a "regulatory-first" strategy, obtaining licenses in the EU, Singapore, Hong Kong, Japan, and other regions, particularly issuing USDC in Europe under the MiCA regulations, becoming the only legally recognized global dollar stablecoin. This compliance strategy gives it an advantage in competition with Tether, especially in terms of transparency and governance. Jeremy believes that the stablecoin market is "winner-takes-most" rather than "winner-takes-all," with the future likely featuring 3-5 major players, but Circle is expected to maintain its lead due to regulatory compliance and network effects.

The SVB Incident: Trust Crisis and Risk Management

The collapse of Silicon Valley Bank (SVB) in early 2023 led to a brief decoupling of USDC, with secondary market prices dropping to $0.95, exposing the vulnerabilities of stablecoins under extreme market conditions. Jeremy admitted 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 in 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. Additionally, 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 decentralized blockchain with centralized reserve management. Jeremy believes that the full reserve model is safer than fractional reserves, which rely 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 likens it to "superpowers inherited from the internet," enabling 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's transformation from "free browsing" to "pay-per-use." Joe mentioned that future websites might charge for data scraping via stablecoins, with micro-payment mechanisms similar to the X42 protocol already in development. Jeremy further pointed out that programmability will give rise to subscription models akin to Spotify or allocate revenue to data providers based on usage through front-end platforms like Open AI and Google. This model not only disrupts content consumption but may also reshape the business ecosystem, pushing financial services toward more efficient and transparent directions.

The Essential Differences Between DeFi and Traditional Finance

DeFi, as the core application of stablecoins, achieves autonomous financial services such as lending, trading, and derivatives through smart contracts. Jeremy believes that the essential difference of DeFi lies in its transparency and auditability, with on-chain transactions being public and verifiable, reducing the opacity risks of traditional finance. However, DeFi also faces unique challenges, such as smart contract vulnerabilities, hacking, and market manipulation. Compared to the centralized regulation of traditional finance, DeFi's decentralized nature demands higher code security and community governance, and 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," with its full reserve model and internet-native characteristics making 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 Bessenet has stated that stablecoins increase demand for short-term government bonds, reinforcing the dollar's international status. 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 achieves 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 prompted stricter risk management. The "winner-takes-most" pattern of stablecoins indicates that Circle, with its network effects and global compliance strategy, is likely to maintain its lead. In the future, stablecoins may not only be a digital extension of the dollar but also a prototype for world currency in the post-dollar era, with their programmability driving the rise of "machine-to-machine" payments and a pay-per-use internet, fundamentally changing financial services and the business ecosystem. Investors and developers need to closely monitor regulatory dynamics and technological innovations in this field to seize the limitless possibilities of the digital economy.

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