Below is a refined view of the opportunities, challenges, and evolving innovations summary that I took during KBW2025 about Stablecoins now and the future!

Key Use Cases for Stablecoins

Here are several domains where stablecoins are especially compelling — both today and as the ecosystem matures:

1. B2B cross-border escrow / payments

   1. Traditional cross-border transfers are slow and expensive. Stablecoins can act as instant cross-border rails, often with lower fees and settlement risk. In particular, using stablecoins in escrow for trade:

      1. A buyer is purchasing goods oversea and pay into a stablecoin escrow to secure initiate the order.

      2. Goods will then be shipped.

      3. Upon receiving the goods, the funds would be released to supplier. The transaction will be saved on chain, instant and low cost.

         The shipment receiving confirmation can be done manually or better, through API automation on existing SaaS platform to avoid any human error in the process. This whole process further simplify cross-border trade finance.

2. Yield in local currency (no FX risk)

   1. One friction of dollar-denominated stablecoins is foreign exchange risk for non-USD markets.

   2. If stablecoins can integrate local-currency yield strategies (e.g. through tokenized bonds or local money markets), that unlocks more adoption.

3. B2C retail payments + DeFi onboarding

   1. For mass adoption, stablecoins need to work for small payments: public transport, retail, subscriptions, vending, etc. Over time this bridges the gap between DeFi and real-world consumer use. Consumer can also simultaneously access DeFi features (staking, lending, yield). This dual utility is powerful.

4. B2B supply chain / trade settlements

   1. Consider large firms (e.g. Toyota) paying overseas suppliers: stablecoins may serve as “digital cash settlement” with lower settlement costs, faster execution, and flexible programmability.

From Infrastructure to Application — Why the App Layer Matters

Even if a chain offers high APY (e.g. from treasury yields or staking rewards), that alone doesn’t guarantee long-term adoption. Without compelling apps, users won’t see the utility.

The real moat is having a healthy, vibrant ecosystem: stablecoin wallets, payment rails, merchant integrations, DeFi apps, bridging, etc., not just chains or yield mechanisms.

Yield Models & Strategies for Stablecoins

Yield is a central lever that determines issuer attractiveness, user retention, and revenue models. Some models to consider:

• Backing via US Treasury / T-Bills

  • Many centralized stablecoin issuers hold reserves in short-term Treasuries or similar safe assets.

• Hedge-fund / DeFi strategies

  • A stablecoin issuer (or associated fund) may deploy liquidity into lending markets, money markets, or more exotic strategies to earn extra yield.

• On-chain yield-bearing (future direction)

  • Fully decentralized yield-generation: e.g. lending, borrowing, yield aggregators, or automated market makers. These are more composable and transparent.

• Liquidity provision for DEXes

  • By supplying stablecoin liquidity to DEXes, it unlock trading fees, incentives, and additional yield opportunities.

The yield model is not just about returns to users — it also underpins revenue for the protocol and the ecosystem.

Monetization & Protocol Business Models

How can stablecoin projects (or protocols) generate revenue?

• Infra & strategy services

  • Operating yield strategies (like a hedge fund arm), risk management, treasury operations, oracles & analytics can be revenue centers.

• Fees and spreads

  • Fees on minting, redemption, or transactional spread capturing (e.g. taking a fraction of swap spread).

• Value capture in application layers

  • If stablecoin is embedded into payments, wallets, or merchant rails, the protocol might take a share of merchant fees or service fees.

• KYT & infrastructure services

  • As compliance, auditing, proof-of-reserve, insurance, audit data, oracles, and monitoring grow in importance (e.g. live oracle feeds, risk assessment APIs).

Real-World Assets (RWA) Looping & Oracles: The Vital Link

To scale sustainable yield and connect stablecoins with traditional finance, tokenizing real-world assets (RWA) is core. But it needs robust infrastructure, especially oracles.

Why RWA looping / yield loops matter?

Rather than idle reserves, stablecoins can reinvest into tokenized real-world assets (e.g. tokenized bonds, real estate debt, receivables).

• That enables yield loops — capital in yields, which compounds back into more stablecoin backing or reward mechanisms. It makes stablecoin issuers more competitive and sustainable, especially in markets with low risk appetite.

Oracle / infrastructure needs to support RWA To make this work, RWA-based stablecoin yield loops need:

1. Reliable, real-time data feeds (speed)

   • Oracles must ingest market prices, valuations, collateral events quickly and reliably. Perhaps moving beyond traditional unidirectional oracles to full state synchronization for RWA-backed protocols.

2. Programmability / Smart-contract hooks

   1. The systems must allow triggers, settlement logic, collateral checks, margin calls, liquidation rules, etc., to be embedded into contracts.

3. Verifiability & proof of ownership / proof-of-reserve

   1. Trust is crucial. On-chain proofs, cryptographic attestations, audits, and audits of asset custody are fundamental.

4. Interoperability / Multi-chain support

   1. RWA tokenization might span multiple chains or rollups. Oracles must work cross-chain so that stablecoin services aren’t isolated.

5. Standardized risk modeling

   1. For adoption, risk parameters and modeling should be standard across assets and chains.

*Example: RedStone Oracle & RWA

• RedStone recently launched RWA oracle feeds for Solana, enabling tokenized assets to feed into DeFi protocols.

• This helps bring institutional-grade tokenized assets and real-world yield into chain-native applications.

• As an RWA oracle provider, RedStone is an example of the infrastructure building blocks necessary for sustainable yield loops.

Risks & Constraints

Regulatory constraints on yield-bearing stablecoins In many jurisdictions, a stablecoin that pays yield could be classified as a security, triggering stricter regulations.

• Run risk / de-peg risk

  • In stress scenarios, users may rush to redeem, leading to instability. Some research points out that mechanisms to maintain peg can paradoxically intensify run risk.

• Oracle / state synchronization limitations

  • Many RWA protocols struggle because state isn’t fully synchronized between on-chain logic and off-chain real-world changes. This limits capital efficiency and integration with DeFi.

• Illiquidity in RWA / valuation uncertainty

  • Real-world assets may not trade continuously or transparently. Valuation lags, market stress, or asset illiquidity can break assumptions.

To conclude, the usage of stablecoin still falls onto the user/market demand in which falls into these baskets: Privacy, Utility & Behavior:

• Privacy & anonymity considerations

  • Users often prefer some degree of privacy, especially in payments. That can create tension with KYC / AML / regulatory expectations.

• Focus on usage, not just supply

  • The success of a stablecoin comes down to what users do with it — payments, DeFi interactions, remittances, merchant adoption.

• Behavioral stickiness

  • Yield-bearing mechanics, rewards, loyalty, and integration with daily-use apps help bind users to a stablecoin — reducing churn and promoting network effects.

Are you bullish or bearish on stablecoin?

Which countries’ stablecoin do you think will jump out first and why?