The world of digital finance continues to evolve at a rapid pace, with terms like stablecoin and cryptocurrency becoming increasingly common in investment conversations. But what exactly sets them apart? In a recent dialogue at the 2025 Summer Davos Forum in Tianjin, financial expert Professor Zhu Ning from Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University sat down with media host Kuai Yingchun to unpack this very question.
Their conversation shed light on the fundamental distinctions between stablecoins and traditional cryptocurrencies such as Bitcoin—differences that matter not only for investors but also for regulators, businesses, and everyday users navigating the digital economy.
What Defines a Stablecoin?
At its core, a stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset—most commonly the U.S. dollar. Unlike volatile assets like Bitcoin or Ethereum, stablecoins aim to minimize price fluctuations, making them more suitable for transactions, savings, and cross-border payments.
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Professor Zhu highlighted this stability as both the greatest strength and potential limitation of stablecoins. "The biggest advantage of stablecoins lies in their stability," he noted. "But ironically, that same stability may also be their biggest drawback."
Because stablecoins are engineered to avoid large price swings, they typically offer little to no capital appreciation. This makes them less attractive to speculative investors seeking high returns—but highly valuable for those prioritizing reliability and utility in digital transactions.
Why Do People Invest in Cryptocurrencies?
When it comes to traditional cryptocurrencies, such as Bitcoin, the motivation behind adoption is often twofold: belief in the underlying blockchain technology and the potential for significant financial gain.
Zhu Ning pointed out that while some investors are drawn to crypto because of its decentralized, transparent, and innovative infrastructure, many others are primarily attracted by its historical price surges. "High risk, high return—that’s the essence," he said. "Just as success can come from volatility, so can loss."
This inherent volatility is what differentiates Bitcoin and similar cryptocurrencies from stablecoins. While one might serve as a store of value or speculative asset (like gold or tech stocks), the other functions more like digital cash.
The Role of Regulation in Digital Assets
One of the most critical distinctions Zhu emphasized was the role of regulation.
"There’s a fundamental difference between regulated and unregulated digital assets," he explained. "It’s not just about where your money is kept—it’s about transparency, disclosure, and accountability."
Stablecoins, especially those issued by established companies like Circle (issuer of USD Coin), often operate under stricter compliance frameworks. They're subject to audits, capital reserves requirements, and financial oversight—making them more aligned with traditional financial systems.
In contrast, many cryptocurrencies exist in a gray regulatory zone. While this fosters innovation and decentralization, it also raises concerns around investor protection, market manipulation, and systemic risk.
Zhu stressed that effective regulation isn’t about stifling innovation but ensuring trust and long-term sustainability in the financial ecosystem.
Circle’s Business Model: A Case Study
An interesting point raised during the discussion was the business model behind stablecoin issuers. While stablecoins themselves don’t appreciate in value, the companies behind them can still generate substantial revenue.
Take Circle, for example. Its income primarily comes from interest earned on the reserves backing USDC and transaction fees from payment processing. As Zhu observed, "As stablecoin use grows across real-world applications—remittances, e-commerce, DeFi—the company’s business expands, potentially driving stock performance."
This illustrates an important nuance: even if the asset doesn’t increase in value, the ecosystem around it can thrive.
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Will the U.S. Dollar Maintain Its Global Dominance?
The conversation also touched on broader macroeconomic themes—particularly the future of the U.S. dollar as the world’s primary reserve currency.
Zhu offered a balanced perspective: "Can the dollar maintain its dominance? Short answer: yes—for now." He acknowledged that all dominant systems eventually decline, but stressed that such transitions take decades.
He cited historical precedent: although the United States overtook Britain as the world’s largest economy in 1874, it wasn’t until after World War II—nearly 70 years later—that the dollar fully replaced the pound sterling as the leading global currency.
"Monetary shifts are slow," Zhu said. "They require not just economic strength but geopolitical trust, institutional credibility, and widespread adoption."
In this context, he views digital currencies—including central bank digital currencies (CBDCs) and private-sector stablecoins—as evolutionary tools within a gradually changing system rather than revolutionary forces capable of immediate upheaval.
Frequently Asked Questions (FAQ)
What is the main difference between stablecoins and cryptocurrencies?
Stablecoins are designed to maintain a stable value (often pegged to fiat currencies like the USD), while traditional cryptocurrencies like Bitcoin have volatile prices driven by market demand and speculation.
Are stablecoins safe to use?
Most reputable stablecoins are backed by reserves and undergo regular audits. However, risks remain—especially around transparency and regulatory changes—so due diligence is essential.
Can stablecoins generate returns?
Directly, no—stablecoins don’t appreciate in value. However, they can earn yield when used in decentralized finance (DeFi) platforms or interest-bearing accounts.
Is regulation good for crypto?
Regulation can enhance investor protection, reduce fraud, and promote mainstream adoption. However, overly strict rules may hinder innovation. Balance is key.
Why does stability matter in digital money?
Price stability enables reliable use in payments, savings, and contracts—core functions of any functional currency.
Could stablecoins replace traditional money?
While unlikely to fully replace fiat soon, stablecoins are increasingly used in cross-border transfers, remittances, and digital economies where fast, low-cost transactions are needed.
The dialogue between Kuai Yingchun and Professor Zhu Ning underscores a vital truth: understanding digital assets requires looking beyond price charts. The real story lies in purpose, design, regulation, and long-term utility.
Whether you're an investor evaluating portfolio options or a user exploring digital payments, recognizing the distinction between stablecoin, cryptocurrency, blockchain technology, regulatory compliance, and monetary evolution is crucial.
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As financial innovation accelerates, clarity—not hype—will guide smarter decisions. And in a world where money is going digital, knowledge remains the most valuable asset.