The "GPT Moment" of Stablecoins: Large-scale Application of Blockchain in Finance and the Public Sector

1. The time for large-scale adoption of Blockchain has come

The year 2025 is expected to be the "ChatGPT moment" for the application of Blockchain in the financial and public sectors. The main reasons include:

1. The support stance of U.S. regulatory agencies for Blockchain is expected to become a turning point for the industry landscape, potentially driving broader adoption of Blockchain-based coins and stimulating the emergence of other use cases.

2. Continuously monitoring the transparency and accountability of public spending is also a potential catalyst.

3. These changes are built upon the developments over the past year, including the EU MiCA regulations, the issuance of cryptocurrency ETFs, and the institutionalization of cryptocurrency trading and custody.

4. Banks, asset management companies, public sectors, and government agencies have increased their participation in Blockchain, but still lag behind some more optimistic expectations.

5. The government's adoption of Blockchain can be mainly divided into two categories: empowering new financial instruments and system modernization.

6. Stablecoins are currently the main holders of U.S. Treasury bonds and are beginning to influence global financial flows. Their increasing popularity reflects the ongoing demand for dollar-denominated assets.

2. The Rise of Stablecoins

The main catalyst for the wider acceptance of stablecoins may be the clarity of U.S. regulations. This could allow stablecoins and Blockchain to better integrate into the existing financial system.

According to DefiLlama data, by the end of March 2025, the total value of stablecoins will exceed $230 billion, which is 30 times that of five years ago. It is expected that by 2030, the total supply of stablecoins could reach $1.6 trillion in the baseline scenario and $3.7 trillion in the optimistic scenario.

The establishment of a regulatory framework for stablecoins in the United States will support the demand for risk-free dollar assets. In the baseline scenario, it is expected that the amount of U.S. Treasury purchases will exceed $1 trillion. By 2030, the amount of U.S. Treasuries held by stablecoin issuers could surpass the total held by any current jurisdiction.

3. Future Challenges

The development of stablecoins also faces some challenges:

1. Non-U.S. policymakers may view stablecoins as tools of dollar hegemony.

2. China and Europe may promote central bank digital currencies ( CBDC ) or stablecoins issued in their local currencies.

3. Policymakers in emerging and frontier markets remain vigilant to the local risks brought about by dollarization.

4. Stablecoins carry the risk of a bank run, which may trigger a contagion effect.

5. Large-scale decoupling events of stablecoins may suppress liquidity in the crypto market, trigger automatic liquidation, and weaken the redemption capabilities of trading platforms.

4. Blockchain Applications in the Public Sector

The main application areas of Blockchain in the public sector include:

1. Public Expenditure and Financial Management
2. The distribution of public sector funding and grants
3. Public Records Management
4. Humanitarian Aid
5. Asset Tokenization
6. Digital Identity

These applications can improve transparency, efficiency, and accountability while reducing reliance on manual and paper processes.

V. Challenges Faced by Public Sector Blockchain Applications

1. Lack of trust: Many Blockchain solutions are still in the experimental stage and untested.

2. Interoperability and scalability: Global standards need to be established.

3. Transformation Challenge: Transforming existing infrastructure requires a significant amount of time and resources.

4. Regulatory issues: It is necessary to establish a regulatory framework that recognizes the legal nature and application of Blockchain.

5. Addressing Abuse Risks: The issue of illegal use of cryptocurrencies needs to be resolved.

6. Resistance to Change and Public Awareness: Public officials may resist change, and public awareness of Blockchain also needs to be improved.

Despite these challenges, the application prospects of Blockchain technology in the public sector are still broad. With the improvement of regulatory frameworks and the maturation of technology, Blockchain is expected to play an important role in enhancing government service efficiency and transparency.