Chapter 4: The Relationship Between RWA and Stablecoins

1. What are Stablecoins?

   • Simple Explanation: Stablecoins are a type of cryptocurrency whose value is linked to real-world assets like the US dollar. Common stablecoins include USDT and USDC, and their value is usually equal to 1 dollar. This makes their price stable, unlike Bitcoin, which can change a lot.
   • Purpose: The main purpose of stablecoins is to offer a stable currency for people trading cryptocurrencies or tokenized assets, without worrying about big price changes.

2. How Stablecoins Help RWA

   • A Safe Tool for Trading: When people buy assets through RWA (like real estate or bonds), using stablecoins for payment helps keep the trade stable. There’s no need to worry about the market prices suddenly changing, which makes trading safer.
   • Adds Liquidity: Stablecoins make it easier to buy and sell RWA tokens. Since stablecoins are easy to trade, investors can use them to quickly buy or sell RWA tokens, keeping the market active.
   • Easier Cross-Border Trading: Stablecoins allow investors to trade internationally without the complex processes and high fees of traditional bank transfers. The money also arrives faster.

3. How Stablecoins Benefit RWA Projects

   • Keep Trades Stable: When investors use stablecoins to buy RWA assets, they don’t have to worry about prices suddenly changing. This keeps the trade amount the same and makes investing simpler and more reliable.
   • Builds Investor Confidence: Stablecoins make investors feel safer because they know they won’t lose money due to market changes. This also attracts more cautious investors to RWA projects.

4. Hong Kong's Support for Stablecoins

   • Hong Kong’s Policies: The Hong Kong government supports virtual assets, especially stablecoins, which help RWA projects run smoothly. By using stablecoins, RWA projects in Hong Kong can stay compliant and gain protection from regulators.
   • Testing Environment: Hong Kong has a “Stablecoin Regulatory Sandbox” that lets companies test their stablecoin and RWA projects in a safe environment, ensuring the security of transactions.

5. Examples of How RWA Uses Stablecoins

   • Real Estate Tokenization Example: Imagine you want to invest in part of a large building. The project team tokenizes the building, and you can use stablecoins to buy a small portion of it. This way, you don’t need a lot of money to buy the whole building, and you avoid the price swings of cryptocurrencies.
   • Charging Station Project Example: In a tokenized charging station project, investors use stablecoins to buy tokens representing the profits of the stations. The project’s profits are then paid back to investors using stablecoins, ensuring their returns aren’t affected by market changes.

6. The Future of RWA and Stablecoins

   • Closer Collaboration: In the future, RWA and stablecoins will work more closely together. Companies and investors will increasingly use stablecoins to trade tokenized assets, making transactions safer and faster.
   • Global Development: As more countries support stablecoins, RWA will grow faster worldwide. Investors will have more opportunities to invest in different tokenized asset projects globally.

Summary

Stablecoins provide a more stable and secure way for RWA projects to run, helping investors avoid risks from market changes. By using stablecoins, cross-border trades become easier, and global investors can more easily participate in RWA projects. In the future, stablecoins will continue to play an important role in the RWA market.

BiFinance Team

September 14, 2024

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