Stablecoins & RWA: Forging Parallel Money Systems

This report explores how tokenization, specifically through stablecoins and Real World Assets (RWA), is driving a historical transformation in global monetary and financial systems. It posits that these innovations are creating parallel, decentralized systems that will fundamentally reshape the existing centralized structures, presenting both opportunities and challenges for industries, investors, and regulators. The core premise is that understanding these changes requires a return to the fundamental nature of money as an "accounting system."

Money as a Socially Consensual Accounting System

• Money is fundamentally a "social consensus" based "accounting tool," exemplified by low-cost paper currency acting as proof of labor.
• Its widespread circulation relies on establishing "social consensus" and trust, which does not require universal acceptance but sufficient recognition within a group.
• Long-term "scarcity" is crucial for maintaining fairness and trust in this accounting system, preventing inflation and preserving value.
• Current fiat currencies and banking systems are centralized accounting systems based on trust in governments to maintain relative scarcity.

Stablecoins: Building a Parallel, Decentralized Monetary System

• Stablecoins emerged from declining trust in centralized fiat systems (especially post-2008 quantitative easing) and the demand for decentralized accounting via blockchain.
• Unlike volatile cryptocurrencies, stablecoins aim for relative stability, with fiat-backed stablecoins (primarily USD) dominating 99% of the market.
• They function as digital cash, allowing decentralized circulation even if centrally issued, akin to physical cash withdrawals from a bank.
• Have the potential to reshape the global monetary system by breaking national borders and influencing fiscal/taxation policies, potentially strengthening the seigniorage power of high-credit currencies.

Real World Assets (RWA) Tokenization: A Parallel Financial Ecosystem

• RWA utilizes blockchain technology to convert real-world assets (e.g., equity, bonds, income rights, physical assets) into digital tokens.
• Similar to traditional Asset-Backed Securities (ABS), but RWA tokenizes these "small shares" for sale and decentralized circulation on the blockchain.
• Enables investors to manage wealth directly on the blockchain, potentially bypassing traditional centralized financial markets.
• RWA can acquire "monetary" attributes, allowing direct use of asset tokens for purchases, embodying the concept that "anything can be money."

Implications of Parallel Systems and Future Transformation

• The development of stablecoins and RWA is likely to create parallel, decentralized monetary and financial systems that will coexist, intertwine, and merge with traditional centralized systems.
• This transformation is anticipated to be as significant as AI's impact on the global economy, presenting new opportunities for industries and investors, alongside challenges for regulators.
• The emerging parallel ecosystem will require its own infrastructure, including issuing institutions, exchanges, credit creation, asset management, investment banking, custody, accounting, and legal frameworks.
• Key risks include global geopolitical factors, US policy uncertainties, and changes in regulatory policies.