"High-end Dialogue" WSPN Founder Raymond Yuan: Regulation is not the opponent of innovation; regulation is a responsible partner of innovation

Article Author: Echo, MetaEra

Source: MetaEra

"Currency stability, regulatory environments in various countries, market capitalization growth"—these terms have become the hottest topics in the world of stablecoins this year. However, in the current stablecoin market, users are increasingly confused: with changing market demands, can stablecoins break through the limitations of cryptocurrency? Will the changing regulatory environment affect the availability and liquidity of stablecoins?

To seek answers, MetaEra engaged in an in-depth dialogue with WSPN founder Raymond Yuan, discussing several topics such as "Stablecoin 1.0 vs 2.0," "Stablecoin licensing applications," and "The role of stablecoins in the PayFi ecosystem."

Below is the full interview:

MetaEra: You have proposed a new concept of Stablecoin 1.0 and 2.0. In your view, what is the biggest innovation and improvement of Stablecoin 2.0 compared to Stablecoin 1.0?

Raymond: I believe that the most significant progress of Stablecoin 2.0 over 1.0 is reflected in product and user experience. Looking back at the 1.0 era, USDT and USDC, especially USDT, have existed for nearly 10 years. However, if you ask non-cryptocurrency users about their impression of USDT today, most have only heard of it but have not actually used it. The common phenomenon of Stablecoin 1.0 is that the level of productization is not high; most of them do not have their own wallets or apps. This means that the application scenarios of Stablecoin 1.0 are mainly limited to the cryptocurrency field. We believe that stablecoins should play a more important role in future payment systems. The goal of Stablecoin 2.0 is global asset allocation, covering a wider range of scenarios such as US stocks and everyday consumption like booking flights and hotels, transitioning from "electronic payments" to "digital payments."

MetaEra: WSPN recently completed a $30 million seed round of financing. Congratulations to you and the WSPN team! Can you share what you think is the most attractive aspect of WSPN to investors?

Raymond: Thank you! We feel very fortunate to have received significant support early in the project. We have received investment support from six well-known VCs, two strategic investors, and several exchanges. Throughout our interactions with investors, we received feedback on:

First, we have built a strong enough team. Besides myself from CTH, we have professionals from diverse backgrounds, including Paxos, BUSD, Visa, Alipay, and UnionPay. This diverse team composition can complement each other's shortcomings and leverage each other's strengths. I am confident in our team.

Second, it is about our understanding of the medium to long-term development of stablecoins, specifically a clear depiction of the future vision for stablecoins. Our goal is not to compete with other existing stablecoins in the current $200 billion market but to work together with industry peers to expand market boundaries, aiming to grow the scale of stablecoins from the current $200 billion to $2 trillion or even $20 trillion. This goal is the direction we will strive for in the next 5 to 10 years. Our philosophy is more based on incremental logic, seeking market expansion and growth rather than engaging in stock competition within the existing market.

Third, it is our relentless pursuit of product and user experience, as well as our emphasis on diverse usage scenarios. Many of our investors come from the traditional payment sector, and they firmly believe that payment technology evolves continuously with advancements in underlying technology. They believe that approximately every ten years, the payment sector will undergo a new technological system upgrade. Our dedication to product and user experience, along with our focus on broader usage scenarios, aligns with their investment philosophy. This is also one of the reasons we can impress them.

MetaEra: WSPN has launched its first stablecoin, WUSD, and plans to introduce a Euro stablecoin, WEUR. Can you introduce the design and issuance mechanism of WUSD and how it ensures stability?

Raymond: WUSD is a fiat-collateralized stablecoin, pegged 1:1 to fiat currency in the real world. This means that to issue $1 of WUSD, we must deposit an equivalent $1 reserve into a designated custodial bank. Only after completing this step are we authorized to mint and distribute the corresponding amount of stablecoin. This mechanism is a notable feature of WUSD, similar to the operation of other fiat-collateralized stablecoins like USDC.

The operational mechanism of WUSD covers multiple aspects. On one hand, it will continue to be closely related to digital currency trading and is expected to circulate in all major cryptocurrency exchanges in the future. Additionally, we hope to apply WUSD in a broader range of fields, especially in cross-border payments and actual payment scenarios, such as bulk trade transactions that have practical application needs, increasing the penetration of stablecoins in the payment sector. Furthermore, we are closely monitoring the market dynamics of Euro stablecoins, observing their gradual market share growth. Europe has a relatively sound and friendly regulatory environment, and we look forward to other currency stablecoins having growth opportunities once the regulatory framework and ecosystem are fully prepared. However, for now, our focus remains on the US dollar stablecoin WUSD.

MetaEra: WSPN has always adhered to a compliance-first principle in the stablecoin field, insisting on the philosophy of "no license, no operation," which is well-known in the industry. The company is actively applying for or has already obtained corresponding licenses globally, including in the US, the Netherlands, and several countries and regions in Asia. In this process, is there a difference in the application process for stablecoin businesses compared to exchanges? Are there any regional differences or interesting findings in the application process across various countries and regions that you can share?

Raymond: I believe that stablecoins are currently facing a tremendous development opportunity. Major markets and financial centers such as the US, Europe, Hong Kong, and Singapore have already introduced or are in the process of launching their own stablecoin regulatory frameworks. As one of the first applicants, we are actively applying for these corresponding stablecoin or payment licenses to ensure that our business operates within a sound compliance framework.

My understanding is that the core of stablecoin licensing lies in ensuring the legality and compliance of the source of funds, as well as how to securely safeguard these reserve assets, ensuring they are under safe custody and supervision. Additionally, it is crucial to ensure that there is bankruptcy isolation between the reserve assets and the issuing management company, meaning that even if the issuing entity encounters financial difficulties, it does not affect the safety of customer funds. This is a framework we have been working to improve over the past few years.

Lastly, regarding information transparency, how we introduce credible auditing firms and third-party organizations to provide asset verification and corresponding information disclosure mechanisms is vital for all users. Users need a clear understanding of the custody and usage of reserve assets, which is also an important component of the stablecoin management process.

As for exchanges, since it is not within our business scope, we may not be in a position to comment. However, it is certain that the nature of these two businesses is quite different, and they correspond to different regulatory departments and license categories.

MetaEra: Are there any regional differences or interesting findings in WSPN's application process across various countries and regions that you can share?

Raymond: This is a very interesting question. We recognized early on that to achieve the grand vision of stablecoins being widely adopted globally, we must achieve compliance and implementation in multiple regions around the world. This inevitably leads to differences in details due to varying regulatory frameworks. Therefore, how to complete this process with higher efficiency and lower costs has been a question we have been exploring.

We will soon begin operating an AI-driven internal regulatory framework—compliance system—aimed at automating the adaptation to different regulatory requirements worldwide. The system consists of three key parts:

First, we prioritize compliance requirements from regulatory regions globally, ensuring our business meets these basic compliance standards.

Second, we will leverage AI's automatic learning capabilities to track real-time changes and trends in regulations in each region, as well as their focal points.

Then, we will use AI for extensive in-depth on-chain data analysis, allowing our internal compliance management to exceed regulatory requirements, setting a higher standard for ourselves, and enabling proactive prevention of many risks and more comprehensive risk management.

Through this AI-driven compliance system, we can respond to global regulatory challenges more efficiently and at a lower cost, ensuring compliance and robust operation of our business worldwide.

MetaEra: The PayFi concept has recently gained popularity, and WSPN has also joined the Conflux PayFi ecosystem. Can you share what role WSPN stablecoins will play in this ecosystem and its potential impact?

Raymond: As a stablecoin issuer, it is crucial to maintain a relatively neutral role, and we aim to be multi-chain compatible. We have also been closely following the development of Conflux, which we believe possesses high security and high throughput technical characteristics, making it very suitable for financial activities that require large volumes and high speed, such as stablecoins.

Therefore, we chose Conflux as our ecological partner, and we have deployed our stablecoin's smart contract on Conflux, actively promoting the use of our stablecoin throughout the Conflux ecosystem. From the development experience of the entire industry over the past ten years, the success of a public chain is inseparable from the circulation of payment tools like stablecoins. Once these payment tools grow and thrive in the public chain ecosystem, it will inevitably lead to a significant increase in transaction volume and on-chain transfer volume. Additionally, it greatly facilitates other developers on-chain to expand their applications, as there is no longer a need for everyone on-chain to issue their own stablecoins. If a public chain ecosystem has a widely accepted high-quality stablecoin, it can automatically execute in other applications because it will seamlessly integrate with the stablecoin on the same ledger, thereby developing their own ecosystem. This is our expectation for the future of Conflux, and we hope to work with the Conflux Foundation and all developers in the Conflux ecosystem to grow the Conflux public chain ecosystem.

MetaEra: WSPN has invited former Visa president to join as a board member, and we have seen many executives with rich experience in the international payment field joining recently. How does this align with WSPN's strategic layout?

Raymond: WSPN stands for Worldwide Stablecoin Payment Network. Our understanding is that stablecoins play a tool role within it, but our ultimate goal is to realize the functionality of a payment network, using stablecoins as a circulating tool to transition existing electronic payments to digital payments, establishing a more efficient, lower-cost, and safer payment network system globally.

Therefore, we urgently need talents with global operational experience to join our team. As a leading card organization and clearing settlement institution, we look forward to drawing on the rich experience from Visa's executive team, learning how to surpass Visa and the existing systems in multiple aspects, which is the original intention of inviting them to join.

At the same time, we are also very grateful for the trust of many senior financial professionals who joined us early on. They are willing to bring their resources, networks, and years of accumulated experience and insights into our platform to support its growth.

MetaEra: You mentioned that the success of stablecoins relies on the prosperity of the entire ecosystem. What specific plans and actions does your CTH Group have in building this ecosystem?

Raymond: In addition to payments, CTH also has an investment institution, Fundamental Labs, which has invested in over 200 companies since 2016, including some exchanges that are currently performing well, leading infrastructure, and a large number of middleware and applications. In the future, Fundamental Labs will focus on the fields of Crypto payments and AI.

For stablecoins themselves, Fundamental Labs will focus on investing in upstream and downstream companies in the stablecoin industry chain. For example, many startups mentioned earlier provide withdrawal services for stablecoins, while some startups offer digital banking and digital wallet services for stablecoins. These will be key areas for future investments. We hope to create more collaborative opportunities with other entrepreneurial companies and innovative enterprises in the ecosystem through various forms of investment cooperation. I often say that the realization of a grand vision does not solely depend on the efforts of one company; it relies on a collective effort and the collaboration of outstanding, innovative entrepreneurs and businesses working towards the same goal to ultimately achieve the vision together.

In this process, as a company that has been cultivating in this industry for many years, CTH hopes to support other entrepreneurial enterprises within the ecosystem and engage in various forms of cooperation to jointly promote the early realization of the vision.

MetaEra: What challenges do you think Stablecoin 2.0 will face in driving the transformation of the global financial system, and how is WSPN preparing to address these challenges?

Raymond: I think challenges and opportunities coexist. The first challenge is that traditional financial institutions need time to learn and understand the emerging field of stablecoins, which is no small challenge. However, we can see that major financial institutions, including Standard Chartered and JPMorgan, have already begun to take action. They are either using stablecoins for interbank transfers or collaborating with other stablecoin institutions in the market. We have also started partnerships with several well-known banks. Therefore, although challenges exist, the difficulty of these challenges is gradually decreasing over time and with deeper cooperation.

Another challenge lies in regulation. A positive trend is that the US, Europe, Hong Kong, and Singapore have successively drafted and introduced their own regulatory bills for stablecoins, clarifying the boundaries and specific content of regulation. This will lead to the implementation of regulatory frameworks in the entire market, which, in the long run, is beneficial for the development and growth of this industry.

Moreover, how regulators can maintain continuous communication with the market in the short term, listen to the market's voice, and ensure that regulation does not stifle innovation is a common topic. We are willing to work together with all regulators to maintain open and transparent communication, enhance mutual understanding, and accelerate the entire learning process, making regulation more aligned with the market while allowing the industry to better understand the original intention of regulation.

In addition to discussing challenges, I would also like to talk about opportunities. In fact, stablecoins present a significant growth opportunity for the global economy.

According to incomplete statistics, over 1.7 billion adults currently do not have bank accounts or any form of financial services. Even for those who have obtained bank accounts, the types of financial services available to them are very limited.

In the future, if we hope to further deepen global integration or achieve rapid growth in globalization in the digital age, it is essential to solve the problem of bringing more people into the financial system. This means achieving financial inclusion, allowing everyone the opportunity and channels to access financial services, and enabling more people to enjoy higher-quality financial services, which is a tremendous opportunity that stablecoins can bring.

Additionally, another source of growth comes from machine-to-machine transactions in the future AI era. Our judgment is that a significant portion of future transfers and transactions will be initiated by machines, from the payer to the payee, all being machines. In the current transaction types, the existing financial system cannot support such transfers, but this type of transfer is expected to exceed 50% of the entire economy in the future, representing a massive incremental market. We hope our stablecoins can effectively serve the emerging automated machine transactions and machine transfers.

MetaEra: In your prediction, how will the future stablecoin market influence global investment trends? Can you share your insights?

Raymond: The current scale of stablecoins is approximately $200 billion. My personal judgment is that it will grow to $1 trillion within the next three years and exceed $10 trillion within the next five years.

Regarding the impact of stablecoin growth on financial transactions and capital markets, I have the following views:

The growth of stablecoins is conducive to building a unified global financial market. Currently, stock markets and many other financial transactions are relatively fragmented regional markets. For example, US stocks, A-shares, Hong Kong stocks, London stocks, and Tokyo exchanges have a significant amount of stock and asset trading limited to specific regions, making it challenging for long-term institutional investors, high-net-worth individuals, and those willing to allocate assets globally to manage their assets efficiently. Their investments are forced to be divided across different regions, requiring the use of multiple platforms, leading to increased costs and friction. We hope that the growth of stablecoins can quickly promote the formation of a unified trading market, where stocks, crude oil, bulk futures, precious metals, and even foreign exchange can be traded in the same market.

We envision that with the introduction of stablecoins, trading will become a 24/7 global peer-to-peer transaction, transforming a fragmented regional market into a unified global market. The trading duration will extend from the current average of 6 to 8 hours per day to 24 hours a day in the future.

MetaEra: Hong Kong has also launched a Hong Kong dollar stablecoin, with several institutions participating in its development. How do you view the competition between Hong Kong and Singapore in the Web3 era? Who do you think will become the Asian center for Web 3.0 in this decentralized race?

Raymond: I believe that one of the most important spirits of Web3 is its distributed nature, so I do not think there will be an absolute center for Web3, whether in Asia or globally. An ideal structure is that we see Web3 actively thriving in multiple cities, such as Hong Kong and Singapore, which have already become very active nodes in Web3. In addition, regions like New York, London, Berlin, Lisbon, Dubai, and San Francisco are also joining this trend. I think this is a more ideal structure. In such a structure, there should be multiple nodes remaining active simultaneously rather than a single center.

Regarding the competition between Hong Kong and Singapore, I think it is very healthy. Both are trying to maintain a balance between effective regulation and not stifling innovation while providing ample development space for emerging industries. I believe this is what both regions hope to achieve. They are competing with each other while also learning from one another. I think this healthy competition can promote mutual improvement, ultimately providing smarter and more effective regulatory solutions for the industry, which will be very beneficial for the long-term development of the entire industry.

MetaEra: Recently, the market focus has been on the US. Previously, WSPN's US CEO expressed a desire for the US to accelerate its regulatory pace. In light of the gradually clarifying global regulatory landscape, can you summarize WSPN's attitude or call to action in one sentence?

Raymond: In the era of regulation, one thing we all need to understand is that regulation always progresses in tandem with industry development; regulation is not the opponent of innovation but a responsible partner. This is my personal understanding.