6. Stablecoin Industry Chain Introduction — Upstream: Issuers and Service Providers

a. Issuers:

Earn interest by purchasing Treasury bonds with collateralized dollars (primary profit method), mainly commercial banks, investment banks, and payment giants (VISA, Master, and PayPal). Issuers will likely face restrictions in the future, with only licensed entities permitted to issue. Issuers are the core, with high barriers and high profits (via Treasury bond investments);

Issuers dominate the value chain, but exchanges may also attempt to issue stablecoins. For example, Binance partnered with Circle in Europe to issue stablecoins (as banks face low user adoption and high compliance barriers when issuing alone, hence collaborating with exchanges). However, due to tensions with the U.S., they have not issued in the U.S. (due to custody issues).

Issuer business barriers: a. Capital, which is an entry threshold but not a barrier; b. Licensing, which will be critical for compliance; c. Ecosystem.

The core competitive advantage lies in the downstream ecosystem developed by issuers, which exhibits strong network effects.

Expanding the circulation scenarios and velocity of their stablecoins. For instance, JD.com has a supply chain ecosystem, and PayPal has a payment ecosystem. The stronger the application scenarios, the greater the circulation of their stablecoins, leading to more funds and interest income.

b. Custodian Banks: For example, BNY Mellon custodies Circle’s stablecoins, earning custody fees; fees are relatively stable but low.

c. Custodians and Auditors: Similar to traditional finance, responsible for asset custody and auditing. Auditors can also earn millions annually.

$Circle(CRCL.US) $Coinbase(COIN.US) $Robinhood(HOOD.US) $Digital currency concept(CP00079.US)