This article is compiled from the Space AMA co-hosted by @OdailyChina and @okxchinese, “A Casual Chat on Stablecoins and Tokenized Stocks: Outlook and Compliance.” Guests: William | COO of FinTax, Kiwi | OKX Ventures Research, Zixi | CEO of Stablestock, Xiaoyu Yue | Web3 Product Manager.
In recent years, stablecoins have grown fast and drawn sustained attention. People are asking whether the field has entered an “arms race,” and which segments might stand out next. By market size, the global stablecoin market cap is about $260 billion, with non-USD stablecoins totaling only around $2 billion. Even though non-USD stablecoins remain small, competition among them is quietly emerging worldwide. Many jurisdictions have launched or are drafting rules—for example, the EU’s MiCA adopted in mid-2023, and Hong Kong’s recently effective “Stablecoin Ordinance.” Both are defensive in flavor, aimed at curbing financial risk as USD stablecoins like USDT and USDC keep expanding, reflecting regulators’ growing focus on this space. That said, from a broader regulatory perspective, the market is still early. For now, different stablecoin types are more likely to grow together than to engage in a pure zero-sum game.
On the nuts and bolts of regulation, freeze mechanisms and blacklist controls across jurisdictions are key to stablecoins’ prospects. Today, stablecoins are used largely for buying crypto assets and for large transactions in “grey” or “grey-white” areas. How far regulators go with freezes directly affects whether stablecoins can survive. Ideally, stablecoins should function as a medium of exchange and unit of account, playing to their strengths—cross-border, low-friction payments. If stablecoins can form real trading pairs with bitcoin or certain real-world goods, they will meet more practical demand and gain an edge. Conversely, overly strict rules could sever key use cases and sap competitiveness. Regulators therefore need to state clearly what funds can be frozen and set up a framework that lets lawful funds continue to circulate freely in their original settings. This is both a regulatory challenge and a decisive factor in which models can succeed under compliance.
Licensing also matters a lot. In the U.S., the GENIUS Act requires that only institutions qualified as “Payment Stablecoin Issuers (PPSI)” may issue stablecoins, with either a federal or state approval route. Reserves must fully back the tokens 1:1 with high-quality liquid assets (like USD or U.S. Treasuries), and reserves must be disclosed and audited regularly. Under the EU’s MiCA, stablecoins fall into fiat-backed and multi-asset-backed types; fiat-backed coins must be supported 1:1 by reserves, algorithmic stablecoins are banned, and issuers must be authorized by a member-state regulator before they can operate across the EU. Singapore, via the Payment Services Act (PSA) and its stablecoin framework, takes a more flexible, innovation-friendly approach: non-bank issuers over 5 million SGD in circulation must obtain a Major Payment Institution (MPI) license; smaller issuers can be temporarily exempt. Banks don’t need a separate license to issue stablecoins, but they must meet the same reserve and compliance standards. In Hong Kong, thresholds and KYC requirements are tighter than in the U.S. or Singapore; HKD stablecoins may find it hard to plug into DeFi and therefore may be limited in traditional trading or grey-trade scenarios. As a result, Hong Kong issuance will likely need deep integration with businesses that already own payment scenarios, and licenses may be prioritized for firms with native payment use cases (e.g., large e-commerce platforms).
USD stablecoins are the backbone of crypto finance thanks to the dollar’s long-standing dominance and their first-mover advantages. In many regions, getting physical dollars is costly or difficult—especially where financial infrastructure is weak or capital controls are strict. USD stablecoins dramatically lower that barrier: with an internet connection, users can access a digital equivalent pegged 1:1 to the dollar. This simplifies cross-border payments and trade and has brought real convenience to global commerce. It also advances financial inclusion, especially where traditional services fall short.
Think of the market like an iceberg. Above the waterline are compliant USD stablecoins such as USDC, which hold share with transparent reserves and tight compliance. Below the waterline, larger in number and more flexible, are offshore non-compliant stablecoins like USDT, popular for their broad use cases and low entry barriers. Meanwhile, many countries are rolling out localized stablecoins that target specific scenarios and regions—some are deeply integrated into e-commerce or payment ecosystems to improve penetration. Still, because the dollar is the world’s reserve currency and USD stablecoins enjoy strong acceptance for cross-border transactions and value storage, their global lead looks hard to shake in the near term. That lead stems not only from dollar credit but also from scale, ecosystem compatibility, and liquidity depth.
Beyond the USD vs. non-USD split, two categories show strong growth potential. First, even though many jurisdictions ban interest payments to stablecoin holders to avoid direct competition with bank deposits, there is still room—especially in DeFi/CeFi’s grey zones—for “yield-bearing stablecoins.” By integrating tightly with DeFi or CeFi platforms, they can deliver steady, risk-managed returns that appeal to institutions and larger capital. We’re already seeing neutral-strategy products seeking a balance between compliance and yield, injecting fresh energy into the market.
Second, scenario-driven stablecoins issued by Web2 giants can leverage mature payment or business ecosystems to reach users USD stablecoins don’t fully cover. By focusing on specific scenarios—e-commerce, payments, or social—they can boost liquidity, stickiness, and provide tailored solutions where finance is under-served. In cross-border e-commerce, for instance, stablecoins are starting to challenge traditional third-party processors.
In developed markets, competition tends to compress payment fees and keep the structure stable. But in emerging markets like parts of Latin America, where fees are higher and infrastructure is weaker, stablecoins have more room to grow. Take Mexico and Brazil: Mexico’s improving banking system has chipped away at stablecoin share; Brazil’s more volatile FX and less efficient banking mean demand for stablecoins is stronger, with payment fees around ~1%—often cheaper than legacy rails. Web2 companies are stricter on compliance, while USD stablecoin projects often move faster on flexible, ubiquitous payment use cases.
Tokenized stocks—an RWA hot spot—are reshaping how traditional and crypto finance meet. By turning real-world shares into blockchain tokens, the model reimagines asset management and trading. The core value is bringing off-chain liquidity on-chain, easing bottlenecks caused by trading-hour limits, geography, and complex clearing in traditional markets. More broadly, most recent blockchain innovation points to one thing: making on-chain liquidity deeper. Stablecoins inject dollar liquidity to anchor on-chain value; tokenized stocks tackle illiquidity in off-chain equities. Together, they form a richer on/off-chain liquidity framework that improves access and pushes TradFi and DeFi toward deeper integration.
Can tokenized stocks power the next bull-market narrative? That depends on both market enthusiasm and regulatory signals. We’ve seen early versions before—in 2018, some platforms let retail users buy “on-chain proxies” while brokers held the real shares. Superficially this linked blockchains with traditional exchanges, but, as the SEC noted, tokenizing a security doesn’t change its legal nature. On-chain markets also differ in trading hours and participant profiles, which led to thin liquidity and sharp price swings—sometimes tokens traded as much as 300% above the real stock. Add fragmented oversight across jurisdictions, and when platforms failed, investors struggled to defend their rights. That model faded.
Security Token Offerings (STOs) were billed as ICOs done “the compliant way.” The snag was cost: rigorous KYC/AML, ongoing disclosures, and legal expenses discouraged issuers. Even when offerings succeeded, most tokens couldn’t list on major exchanges; they were stuck on small venues or OTC, leaving secondary liquidity scarce. Investors also hesitated over unfamiliar token structures and uncertain returns. Cross-border regulatory and tax differences piled on, making scale-up hard. STOs kept the “compliance” halo but failed to build a real market—offering limited tailwinds for tokenized-stock competitiveness.
Challenges remain. First, buyers may doubt whether tokenized shares are truly backed by real stock. Second, without a steady pipeline of new assets, on-chain liquidity is hard to sustain; moving assets in and out still faces friction. To respond, some projects use Proof-of-Reserve: they set up reserve pools and disclose regularly to keep on-chain tokens tied 1:1 to the underlying. That helps, but doubts linger, and liquidity still depends heavily on the operator’s execution. Third—and more important—tokenized stocks often can’t fully convey stockholder rights like voting and dividends, limiting their appeal as true equity substitutes. Fourth, regulatory differences slow global rollout. Trading across borders triggers different rules and complex tax treatments. Tax regimes vary widely, and taxes directly affect investor returns and behavior. Today, tokenized-stock income may fall under several jurisdictions’ tax regimes, and applying the rules can be hard in practice. On top of that, composability adds accounting challenges that will need professional tooling. Two tokens can already form a DEX pair and earn fees; in the future, two tokenized stocks might also form a pair and earn fees. How should LP income be measured? What happens when holders lack dividend withholding credits they would have had with traditional shares? Regulators will need token-aware rules and calculation models. That’s a big lift—and one where the Web3 community can help supervisors craft practical, fair frameworks.
Stablecoins and tokenized stocks are reshaping the global financial landscape. Powered by tech innovation, they are pulling crypto finance and traditional systems closer together. Stablecoins bring dollar liquidity on-chain and streamline payments, boosting inclusion and efficiency. Tokenized stocks break traditional market bottlenecks, bringing off-chain assets onto chains, widening access, and—together with stablecoins—building a more diverse liquidity stack that helps DeFi and TradFi work in concert.
The flip side is real: freeze rules, licensing, and blacklists directly influence which stablecoin models survive, and recent legislation shows how wary many jurisdictions are of USD-stablecoin expansion. For tokenized stocks, authenticity concerns, incomplete shareholder rights, and tax complexity all bite, while high compliance costs and cross-border fragmentation curb scale. The upside is undeniable, but whether these two tracks truly lead the next big crypto storyline is something only time will tell.
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