From the turmoil in Venezuela and Iran, see how stablecoins are becoming the "second monetary system"

Author: CoinW Research Institute

Summary

This article uses the Venezuela incident as a starting point to point out that stablecoins are repeatedly mentioned not because of speculative narratives, but because in environments where the domestic currency’s credit is damaged, the banking system fails, and cross-border capital flows are restricted, they become a financial tool that ordinary people can still “use.” Stablecoins do not offer higher yields; rather, they provide an alternative channel that does not rely on the domestic financial system for payments, settlements, and value storage.

Furthermore, although stablecoins carry risks of centralization and compliance, in the context of systemic failure, “manageable stablecoins” are often still preferable to “depreciating fiat currencies.” Their proliferation objectively extends the influence of the US dollar and, when sovereign monetary systems fail, gradually takes on some of the functions of informal global clearing. As real usage continues to accumulate, regulatory attitudes are shifting from simple prevention to rule-based management, and the payment and settlement infrastructure around stablecoins is moving from narrative to practical operation.

Stablecoins are transforming from an asset form into a financial infrastructure form. Their growth does not depend on market sentiment but is driven by real problems, repeatedly validated through ongoing use. The true value of stablecoins is not in whitepapers and stories but is proven time and again during moments of financial system failure in the real world.

1. When national credit fails, what people truly need is not “price appreciation”

Venezuela repeatedly becomes a focus of discussion, not only because of the sudden political conflict this time but also because it has long been in a state of “repeated damage to national credit.” This damage is not only reflected in inflation data or exchange rate fluctuations but also in whether the currency, banking, and payment systems can still operate normally.

When the system itself lacks stable expectations, financial issues sink from the “investment level” to the “survival level.” For ordinary people, the real concerns are not whether to allocate certain assets but a series of more fundamental questions: Can wages still be safely stored? Can remittances from overseas relatives arrive smoothly? Will bank transfers suddenly be frozen? Will assets rapidly lose value due to capital controls, policy changes, or currency devaluation? These issues directly affect individuals and families’ daily economic lives.

It is in such an environment that the meaning of “hedging” changes. Hedging no longer means pursuing higher returns or beating inflation but finding a form of money that can still be used normally: Can it preserve value? Can it be used for payments? Can it be transferred? Can it cross borders? These questions are often more important than price fluctuations themselves.

2. The logic of stablecoin usage under the breakdown of national credit

Why are stablecoins always repeatedly mentioned in environments of credit failure?

When the domestic currency’s credit continues to weaken, the efficiency of the banking system declines, and even functional failures occur at certain stages, stablecoins naturally become a practical choice. This is not because they are particularly advanced or radical but because they happen to sit at the intersection of traditional financial systems and real survival needs. At this point, stablecoins are not a better investment but an alternative path that does not rely on the domestic banking clearing system. They enable funds to perform basic functions: preserve value, facilitate payments and settlements, and cross-border transfers, without being entirely dependent on the local currency system and financial infrastructure. In cases like Venezuela, the frequent appearance of stablecoins is because they are genuinely used in people’s daily lives and to some extent fulfill roles that should be handled by the local currency and banking system.

“Failed states” are not exceptions but highly concentrated examples

Globally, Venezuela is not the only example of widespread stablecoin adoption; Iran also presents a highly typical real-world case. For a long time, Iran has faced persistent devaluation of the rial, high inflation, and financial sanctions that block access to foreign exchange and cross-border settlement channels. The banking system struggles to effectively serve as a store of value and facilitate fund flows. Recently, with increasing economic pressure and social unrest, Iran’s financial and capital controls have tightened further, foreign exchange channels are restricted, and the freedom of capital movement has decreased, continuously weakening public confidence in the stability and predictability of the domestic financial system.

Meanwhile, Iran has experienced intermittent disruptions in communication and internet services. While not directly targeting the financial system, these changes objectively amplify the fragility of the financial infrastructure itself. In a highly online-dependent environment, bank transfers, electronic payments, account settlements, and cross-border fund dispatching rely heavily on stable network connections. Once communication is hindered, these functions often cannot operate smoothly, significantly reducing the usability of the local currency in daily transactions, fund management, and value transfer. The uncertainty about whether fiat currency can be used smoothly at critical moments further erodes public trust in traditional financial systems.

In this context, USDT, USDC, and other dollar-pegged stablecoins are increasingly used for pricing goods and services, temporarily storing income, and cross-border transfers. In some scenarios, they even directly replace the local currency, becoming a reference unit for daily transactions. This usage logic is not complicated and is almost free of speculative motives; it is a “still usable” funding choice repeatedly validated by reality under conditions of damaged domestic credit, failed banking systems, and restricted capital flows. The cases of Venezuela and Iran demonstrate that “failed states” are not isolated incidents but highly concentrated examples of stablecoin demand. Their proliferation stems more from gaps left by the real financial system than from narratives within the crypto market.

It bypasses not regulation but the failing financial system

From a Web3 perspective, the reason stablecoins keep reappearing is not because they bypass regulation but because they bypass the already dysfunctional domestic currency and banking clearing systems. When a country’s currency continuously loses purchasing power, and bank transfer efficiency is low or even frozen at any moment, stablecoins provide a real-world channel that does not depend on the local financial infrastructure.

3. Are stablecoins really safe?

Before discussing the real value of stablecoins, one unavoidable question is: Are stablecoins truly safe? In the Web3 context, they are often questioned for insufficient decentralization and even considered as merely transferring centralized risks of traditional finance onto the chain. This skepticism is not unfounded. It must be acknowledged that mainstream stablecoins do have obvious centralization features, managed by specific issuers, with the ability to freeze addresses and cooperate with compliance checks, and are not entirely untouchable in extreme cases.

However, in environments like Venezuela, people are not concerned with whether “centralization is ideal” but face more immediate real risks: the domestic currency may depreciate sharply in a short period, bank accounts may be frozen due to policies, foreign exchange controls, or systemic issues, and funds may be inaccessible for transfer. Under such circumstances, safety itself needs to be redefined.

It is in this context that a seemingly contradictory but highly realistic choice emerges: a stablecoin that “may be frozen” often remains preferable to a fiat currency that “almost certainly continues to depreciate.” The former is at least usable most of the time, capable of payments, transfers, and cross-border movement; the latter’s risk is not just volatility but systemic erosion of purchasing power, potentially losing all functionality at critical moments.

This is the “decentralization paradox” of stablecoins. They are not perfect nor provide absolute safety, but when the system and financial infrastructure crack, people tend to choose the tool with relatively more controllable risks and more predictable outcomes. This choice is not a neglect of centralization risks but a sober trade-off.

4. From Venezuela, observing the “geopolitical function” of stablecoins

The Venezuela case clearly demonstrates that when a country’s monetary system experiences structural failure, stablecoins do not merely exist passively but gradually take over some functions originally belonging to sovereign currencies.

Essentially, the proliferation of stablecoins is an unofficial extension of US influence. It does not spread through central banks, international organizations, or formal currency agreements but leverages blockchain and crypto networks to enter regions with fragile domestic currency credit at lower thresholds and faster speeds. Stablecoins do not create new value anchors but transplant existing US dollar credit into areas where traditional financial coverage is insufficient, in the form of on-chain assets.

For some countries, this process is not neutral. When residents begin to spontaneously price, store, and settle in stablecoins, the use of the local currency is gradually squeezed out, even without formal “dollarization” policies, and monetary sovereignty is effectively weakened. This is not a political stance but a result of practical choices.

From the perspective of ordinary people, the significance of stablecoins is quite the opposite. They are not political tools but “escape channels” for currency. In environments with limited banking systems and strict capital controls, stablecoins preserve individuals’ ability to store labor results and conduct cross-border transfers.

It is in this tension that stablecoins gradually reveal a new role: an informal global clearing layer. When the sovereign monetary system functions well, they are on the periphery; when the financial system cracks or fails, they passively take over some settlement, storage, and cross-border transfer functions.

5. How do stablecoins enter the real financial system?

From “forced use” to “repeated use”

In incidents like Venezuela, stablecoins enter the real world not by voluntary choice but as a result of necessity. When extreme situations occur, people need a “still usable” tool to perform basic payments and value storage. But as such scenarios recur over time and across regions, stablecoins are gradually no longer just a temporary substitute in extreme environments but are seen as a reliable funding tool. This change is quietly influencing regulators, financial institutions, and the entire cross-border payment system’s perception of them.

The regulatory attitude shifts: from “whether” to “how to regulate”

This shift is especially evident at the regulatory level. Early discussions focused more on “whether stablecoins should exist,” but as their real usage in cross-border payments and daily settlements becomes clearer, the question turns to: since they are already being used and are difficult to replace in some scenarios, how to incorporate them into manageable and monitorable frameworks? This is not an ideological endorsement but an acknowledgment of reality. Stablecoins do not solve abstract efficiency issues but address long-standing structural pain points such as slow, costly, and opaque cross-border transfers that are magnified in fragile financial regions.

Underestimated survival and cross-border attributes

Because of this, the “survival attributes” and “cross-border properties” of stablecoins have been underestimated for a long time. They do not depend on market sentiment but are often adopted first when foreign exchange is restricted, banking channels are unstable, or even interrupted. This usage is not conspicuous but highly sticky; once a pathway is established, it is difficult to replace easily. Meanwhile, the payment and settlement infrastructure around stablecoins is moving from concept to operation—wallets, on-chain transfers, compliant custody, cross-border interfaces—being gradually assembled under real demand, taking on functions previously handled by traditional clearing networks in some scenarios.

Payment stablecoin infrastructure: an overlooked main thread

From this perspective, “payment stablecoin infrastructure” may be one of the most overlooked implicit main threads this year. It does not stand at the forefront of popular narratives but is the underlying foundation for all narratives to be credible. Whether in DeFi, RWA, on-chain finance, or cross-border remittances and real commercial settlements, whenever real fund flows are involved, stablecoins’ roles in clearing, settlement, exchange, and compliance channels are indispensable. The Venezuela case has made this point very clear. For real users, the only concern is: can this money reach me smoothly, safely, and promptly? Once funds start flowing, it inevitably involves stablecoin issuance, custody, cross-chain transfers, exchanges, and a whole unseen but essential infrastructure.

From asset to infrastructure: a role shift

This also determines that stablecoin payments are not driven by emotion but by problem-solving. Their demand arises when local currencies are out of control, banking efficiency declines, and cross-border restrictions tighten. Therefore, the growth of related stablecoin infrastructure is often slow and steady rather than explosive or noisy. Once a payment pathway is verified as “truly usable,” it will be repeatedly used and gradually embedded into local financial habits.

Over a longer horizon, a clear trend is emerging: stablecoins are shifting from an “asset form” to a “financial infrastructure form.” They are no longer just traded or allocated but are increasingly appearing in the most fundamental and urgent links—payments, settlements, cross-border flows, and value storage. When the market fully recognizes this change, it may no longer see it as a new direction but as a widely used, hard-to-replace financial infrastructure system.