Dialogue Among Stablecoin Industry Giants: Building a New Landscape for the Digital Dollar

In the rapidly evolving era of cryptocurrencies and blockchain technology, Sam Kazemian, the founder of Frax Finance, and Stani Kulechov, the founder of Aave, are two leading figures in the stablecoin space. In their latest conversation, they shared insights on the rapid growth of the stablecoin industry, the journey of project innovation, and their views on the upcoming regulatory changes, especially how stablecoins have become the focal point of the industry following the volatility in the crypto market in 2022.

Their attention is focused on the GENIUS Act, a landmark piece of legislation that could elevate stablecoins to the status of legal tender, fundamentally altering the global landscape of the dollar. This article delves into Sam and Stani's insights on the stablecoin market, their expectations for the bill, and the prospects of how stablecoins will shape the future financial ecosystem.

The Surge of Stablecoins and Legislative Trends

When asked about the current momentum of the stablecoin industry, Sam Kazemian expressed his excitement. He pointed out that investment reports and ETF briefings have listed "AI" and "stablecoin" as the two hottest areas in the world today. As the founder of a stablecoin protocol, the feeling of seeing this industry finally understood and accepted by the whole world is exhilarating.

Stani Kulechov added that stablecoins not only provide stability in regions of global financial turmoil but also turn DeFi yields into tools that mainstream users in Western countries can understand and use. This is a natural evolution of financial technology from "fiat currency → digital currency → on-chain assets," opening a new paradigm for cross-border value transfer.

Controversy Over the Impact of Stablecoins on the US Dollar

Regarding how stablecoins affect the position of the US dollar in the global monetary system, Sam believes that this completely misunderstands the role of stablecoins. He points out that stablecoins are actually an "extension" of the US dollar, a global extension of the dollar's influence. Sam divides the development of stablecoins into two stages: first, the ideal of "decentralized algorithmic stablecoins," which rely purely on market mechanisms for stabilization, ultimately ending in collapse like Terra; second, the current realism stage, which involves gaining recognition from the US government, allowing stablecoins to possess "legal tender status" as dollars.

Stani believes that the US dollar is a simple and effective tool for transaction settlement, and the popularity of the Internet has actually expanded the global dollar loan distribution. He expects that similar situations will occur with stablecoins in the future, as the coverage of the Internet will be even broader. Stani predicts that in the next 2-3 years, stablecoins will become the largest asset class on-chain, and within 5-7 years, security tokens will surpass the total of stablecoins and native crypto assets.

The Future of Security Tokens

Stani further explained his views on security tokens. He believes that this concept encompasses a wide range of assets, from publicly traded company stocks, private equity, debt instruments to potentially structured financial products in the future. DeFi provides a globally accessible liquidity network that can liberate these assets from "closed" financial structures, enabling them to be priced and traded directly on-chain, thereby reshaping the entire capital market structure.

The Core Impact of the GENIUS Act

Sam detailed the importance of the GENIUS Act. He pointed out that the Act allows non-chartered banks to issue M1 currency under strict regulations for the first time. These regulations require that stablecoins must be backed by highly secure assets. Sam believes that this development has not yet been fully priced in by the market and may gradually be recognized in the coming months as more news about banks issuing legal stablecoins emerges.

Stani emphasized the importance of regulatory balance, stating that the GENIUS Act needs to establish clear yet inclusive rules, and should not drive innovators away due to excessive caution.

The Competition and Cooperation of Stablecoins

Regarding the potential competition among future stablecoins, Stani believes it is more like a choice of "payment channels" or "tracks" rather than direct competition. Sam also agrees with this viewpoint, believing that the digital dollar is a positive-sum game, with the global M1 market being enormous, while the current total market capitalization of on-chain stablecoins accounts for only a small portion, indicating that the overall penetration rate of the industry is still very low.

Future Plans for Frax and Aave

Sam revealed that Frax is transitioning from an "algorithmic stablecoin protocol" to a "digital dollar issuance + settlement network." They plan to implement the issuance of stablecoins, cross-chain settlement, and value transfer on the high-performance EVM chain, Fraxtal.

Stani introduced Aave V4's "unified liquidity architecture", incorporating the design of "liquidity hub + risk branches" to address the diversification of on-chain asset types and the elongation of risk curves in the future.

Finally, Sam proposed a collaborative idea, hoping to allow frxUSD holders to directly deposit assets into Aave to earn returns through the real lending market. Stani welcomed this, believing it showcased the modularity and composability of Aave V4, and looked forward to the realization of this "on-chain dollar yield" in practical scenarios.