Investment Rating - The report maintains an "Outperform" rating for the industry [1]. Core Insights - The report highlights the rapid growth and adoption of stablecoins, with their transaction volumes surpassing those of traditional financial systems like Visa and PayPal [7]. - It emphasizes the regulatory advancements in Hong Kong, particularly the introduction of the "Stablecoin Regulation Draft," which is expected to enhance compliance and foster innovation in the virtual asset market [23]. - The report anticipates an influx of institutional players into the virtual asset trading services, driven by regulatory clarity and the expansion of service offerings by Chinese brokerage firms [60]. Summary by Sections Section 1: Industry Chain, Application Scenarios, and Profit Models - Stablecoins have emerged as a more efficient medium for on-chain transactions compared to fiat currencies, significantly simplifying the process of trading cryptocurrencies [4]. - As of May 2025, the total market size of stablecoins is approximately $247.2 billion, with an average rolling transaction volume of $2.29 trillion, which is 1.7 times that of Visa [7]. - The most popular stablecoins are fiat-backed, such as USDT and USDC, which account for 64% and 25% of the market share, respectively [13]. - The report outlines the different types of stablecoins, including fiat-collateralized, crypto-collateralized, algorithmic, and commodity-backed stablecoins, each with its own advantages and disadvantages [10][12]. - The profitability of stablecoin issuers primarily comes from interest income generated from reserve assets, with Tether's interest income reaching $4 billion in 2023 [16]. Section 2: Institutions Expected to Accelerate Entry into Virtual Asset Trading Services - Chinese brokerage firms are rapidly expanding into virtual currency services, with Guotai Junan International being the first to obtain a Virtual Asset Service Provider (VASP) license [60]. - The report notes that as of July 2025, 43 brokerages and one bank have upgraded their licenses to provide virtual asset trading services, indicating a growing trend in the market [64]. - The report identifies 11 licensed Virtual Asset Trading Platforms (VATPs) in Hong Kong, which are crucial for retail investors to access virtual asset investments [66]. Section 3: Investment Recommendations - The report maintains a positive outlook on the development of the virtual asset trading market in Hong Kong, driven by government policies and the anticipated expansion of market participants [83]. - It suggests that the ongoing regulatory framework will facilitate the tokenization of real-world assets, providing new avenues for revenue generation for brokerages [83].

Investment Rating - The report maintains a recommendation for investment in the stablecoin sector, emphasizing its potential to revolutionize global payment efficiency and its implications for the financial system [2][10]. Core Insights - Stablecoins represent a technological innovation that enhances global payment efficiency while also reflecting the digital extension of dollar hegemony and the ongoing competition within sovereign financial systems [2][10]. - The future development of stablecoins will depend on the maturation of regulatory frameworks and the evolution of a multipolar stablecoin ecosystem, which could determine their role as a core component of inclusive global financial infrastructure [2][10]. Summary by Sections Stablecoin 1.0: Efficiency Revolution in Traditional Payment Models - Stablecoins leverage smart contracts for automated payments, reducing credit risk and enhancing efficiency [11][12]. - They significantly lower cross-border payment costs, with fees dropping to as low as $0.00025 per transaction compared to traditional systems [19][20]. - In high-inflation economies, stablecoins serve as a hedge against inflation and facilitate cross-border settlements [27][28]. Stablecoin 2.0: Digital Extension of the Dollar - As of July 4, 2025, the global stablecoin market is valued at $241.634 billion, predominantly backed by the US dollar [30][32]. - The issuance of stablecoins is expected to increase demand for US Treasury securities, reinforcing the dollar's dominance [33][36]. Stablecoin 3.0: New Variables for Global Financial Stability - The stability of stablecoins relies on trust mechanisms, with potential systemic risks emerging from liquidity and credit risks [37][42]. - The rise of stablecoins may challenge sovereign monetary policies and reduce the effectiveness of macroeconomic controls [38][42]. Stablecoin 4.0: Future Compliance and Ecosystem Integration - The report anticipates four concurrent trends in stablecoin development: regulatory frameworks enhancing compliance, deeper integration with traditional finance, the creation of stablecoin application ecosystems, and the emergence of a multipolar stablecoin system [45][52]. - Regulatory developments in regions like the EU, the US, and Hong Kong are expected to shape the future landscape of stablecoins [46][48].

Core Insights - JPMorgan's second-quarter earnings exceeded expectations, with revenues at $44.9 billion, despite a 10% decrease compared to the previous year, indicating resilience against tariff impacts [4] - CEO Jamie Dimon emphasized the importance of open banking and digital assets, including JPM Coin and stablecoins, as key growth areas for the bank [3][9] - The bank's consumer and commercial clients are in strong financial condition, with stable credit metrics and a slight increase in loans [2][5] Financial Performance - Revenues for the second quarter were reported at $44.9 billion, which was 10% lower year-over-year but still above expectations [4] - Consumer and community banking loans increased by 1% to $576.1 billion, while debit and card sales volumes rose by 7% to $487.2 billion [5] - Active mobile customers grew by 8% to 59.9 million, reflecting a positive trend in digital engagement [5] Regulatory Environment - Dimon called for regulators to simplify the financial system, suggesting that recent banking failures could have been avoided with better regulatory clarity [7] - He highlighted the decline in public companies and the need for regulators to define their goals for public versus private markets [7] Digital Assets and Open Banking - The bank is committed to exploring digital holdings and stablecoins, with Dimon acknowledging the competitive landscape posed by FinTechs [3][9] - Dimon discussed the potential for charging fees for data access in open banking, emphasizing the costs associated with setting up secure systems [10] - He advocated for consumer rights in data sharing, stressing the importance of liability clarity when third parties are involved [10]

Investment Rating - The industry view for large-cap banks in North America is rated as In-Line [8] Core Insights - Stablecoins currently do not serve as a substitute for bank deposits due to their lack of yield and limited acceptance as a payment tool, but this could change as the market evolves [2][11] - The growth of stablecoins could significantly impact the Treasury market, as they hold a considerable share of T-bills, with Tether holding approximately 66% of its reserves in T-bills, representing about 2% of the total T-bill market [4][15] - Institutional use cases, such as faster settlement and collateral mobility, are expected to drive further adoption of stablecoins [5] - The regulatory landscape for digital assets is evolving, with the Genius Act having passed the Senate, which will shape how stablecoins interact with the broader financial system [6][20] Summary by Sections Potential Implications for Bank Deposits - Stablecoins are not a current threat to bank deposits but banks should not be complacent and may consider issuing their own tokenized deposits [2][12] Stablecoins vs. Money Market Funds - Stablecoins are more regulated and cannot pay interest, treating holders as creditors, while money market funds can offer yields and equity ownership [3][13] Treasury Market Impact - The growth of stablecoins could increase demand for U.S. Treasury bills, providing the Treasury with a more stable buyer base for short-term debt [4][15][17] Growth Drivers - The current market cap of stablecoins is $263 billion, primarily driven by retail users, but institutional adoption is expected to fuel future growth [18] Legislative Outlook - The final regulatory frameworks will significantly influence the interaction of stablecoins with the financial system, with the Genius Act and Clarity Act being key legislative efforts [6][20]

Investment Rating - The report rates the industry as "Buy" [1] Core Insights - The application scenarios for stablecoins are continuously expanding, with a future scale expected to reach $3.5 trillion [3][25] - Circle, as a leading company in the stablecoin sector, demonstrates growth potential and challenges in its business layout, ecosystem construction, and financial performance [3][25] Summary by Sections 1. Stablecoins: Continuous Expansion of Application Scenarios - Since the launch of the first stablecoin USDT in 2014, stablecoins have evolved from focusing solely on cryptocurrency trading to applications in payments and traditional finance [7] - Major developments include JPM Coin for cross-border trade settlements and PayPal USD for consumer payments, indicating a broadening of use cases [7][8] 2. Future Scale of Stablecoins - The future scale of stablecoins is projected to reach $3.5 trillion, driven by four main scenarios: cryptocurrency trading, cross-border payments, daily consumer payments, and traditional capital market applications [25][26] - In cryptocurrency trading, stablecoins are expected to reach $363.3 billion by 2030, assuming a 10% growth in the cryptocurrency market [15][26] - For cross-border payments, stablecoins could capture 20% of the market, leading to a demand of $2.9 trillion [15][26] - Daily consumer payments could see stablecoin demand of $121.6 billion, assuming a 10% market share [15][21] - In traditional capital markets, stablecoin demand is estimated at $133.3 billion under neutral scenarios [15][26] 3. Circle: The First Publicly Listed Stablecoin Company - Circle, founded in 2013, is set to go public in 2025 and focuses on its self-issued stablecoin USDC, which is expected to account for 99.1% of its revenue by 2024 [25][26] - The company has built an ecosystem around USDC, including stablecoin issuance, tokenized funds, liquidity services, and developer tools [25][31] - Circle's revenue is highly tied to reserve asset yields, benefiting from the Federal Reserve's interest rate hikes, with projected revenue of $1.676 billion in 2024 [25][41] 4. Financial Performance and Challenges - Circle's revenue has shown significant growth, from $772 million in 2022 to $1.45 billion in 2023, with a further increase to $1.676 billion expected in 2024 [44] - The company's gross margin has declined from 60% in 2022 to 39% in 2024 due to rising distribution and transaction costs [48] - Circle's financial model is sensitive to external economic variables, particularly interest rates and market events, which can lead to volatile profit margins [46][50]

Core Viewpoint - The application scenarios of stablecoins are continuously expanding, with the future scale expected to reach $3.5 trillion [1][2]. Group 1: Application Scenarios - Stablecoins have evolved from their inception in 2014 with USDT, initially focusing on cryptocurrency trading, to various applications including cross-border trade settlements and decentralized finance (DeFi) [1]. - Four main scenarios for stablecoin application have emerged: 1) Cryptocurrency trading, supporting transactions of BTC, ETH, RWA assets, and NFTs [1]. 2) Cross-border payments, enabling point-to-point instant transfers without intermediaries [1]. 3) Consumer payments, integrating stablecoins into the internet finance system for lower-cost and faster transactions [1]. 4) Traditional capital markets, allowing tokenization of assets like foreign exchange and securities, enhancing asset usability and transferability [1]. Group 2: Future Scale Estimation - The future scale of stablecoins is projected to reach $3.5 trillion through four key scenarios: 1) In the cryptocurrency sector, with a neutral market growth of 10%, stablecoins are expected to reach $363.3 billion by 2030, maintaining an 8.22% market share [2]. 2) In cross-border payments, assuming a 20% market share, the demand is estimated at $2.9 trillion [2]. 3) For daily consumer payments, a 10% market share translates to $121.6 billion [2]. 4) In traditional capital markets, under a neutral scenario, stablecoin demand is projected to be $133.3 billion [2].

Core Insights - The implementation of the "Stablecoin Regulation Draft" in Hong Kong and the passage of the "Genius Act" in the U.S. Senate signify a growing global focus on stablecoin policies, potentially leading to more countries adopting similar innovations [1][15][16] - Stablecoins are emerging as a significant force in the digital currency landscape, with their unique attributes allowing for stability and efficiency in transactions compared to traditional fiat currencies [3][4][5] Regulatory Developments - Hong Kong's stablecoin regulation will take effect on August 1, while the U.S. "Genius Act" is awaiting a vote in the House of Representatives before being signed by President Trump [1] - The European Union and other regions are also working on stablecoin regulations, aiming to redefine the digital financial order [15][16] Market Growth - The stablecoin market has experienced explosive growth, with total market capitalization rising from $20 billion five years ago to $260 billion currently, and projections suggest it could reach $400 billion by the end of 2025 [6] - Over 95% of stablecoins are currently dollar-pegged, highlighting the dominance of U.S. dollar stablecoins in the market [5][17] Technological Advantages - Stablecoins leverage blockchain technology, providing decentralized features that enhance transaction speed and reduce costs, with cross-border payments being completed in minutes compared to traditional methods that can take days [4][10] - The unique mechanism of stablecoins allows for flexible supply adjustments based on market demand, distinguishing them from traditional cryptocurrencies like Bitcoin [4][5] Application Scenarios - Stablecoins are increasingly used in various applications, including cross-border trade settlements, daily payments, and decentralized finance (DeFi) innovations, with annual transaction volumes reaching $28 trillion [9][10] - They serve as a crucial bridge between traditional finance and digital assets, facilitating liquidity and risk management in the cryptocurrency market [11][12] Competitive Landscape - Major financial institutions and tech companies are entering the stablecoin space, with firms like JPMorgan, PayPal, and various banks in Brazil and the UAE exploring their own stablecoin offerings [13] - The competition is intensifying as traditional and new financial players seek to capitalize on the growing demand for stablecoins [13] Global Financial Dynamics - The U.S. aims to maintain its dominance in the global currency system through the promotion of dollar stablecoins, which are expected to play a critical role in international trade and payments [16][18] - China's initiatives, including the issuance of a digital yuan and stablecoin regulations, indicate a strategic move to enhance the internationalization of the renminbi [18][19]

Core Viewpoint - The approval of Guotai Junan International by the Hong Kong Securities and Futures Commission to upgrade its securities trading license to provide virtual asset trading services marks a significant development in the financial industry, allowing direct trading of cryptocurrencies and stablecoins on its platform [1][3]. Group 1 - Guotai Junan International becomes the first Chinese broker in Hong Kong to offer comprehensive virtual asset trading services, including trading, advisory, and issuance of related products [3]. - Following the announcement, the Hong Kong stock market opened higher, with the Hang Seng Index rising by 0.62% and the Hang Seng Tech Index increasing by 0.9%. Guotai Junan International's stock surged over 60% after initially spiking more than 100% [1][3]. - The news has led to a notable increase in the valuation of financial companies associated with stablecoins, as seen with Everbright Holdings and its related securities [2][3]. Group 2 - Analysts suggest that stablecoins could fundamentally transform the role of large investment banks from mere transaction facilitators to becoming engines for asset securitization and cross-border clearing hubs [4]. - The current legal framework limits the connection between domestic brokerage operations and stablecoins, but international operations may benefit from stablecoin expansion, especially after Guotai Junan International's license approval [5][6]. Group 3 - The expansion of brokerages' balance sheets is seen as a key driver for stock price increases, with the current period (2023-2024) potentially being an opportunity for such expansion [5][6]. - The stablecoin market is currently valued at $220 billion, with projections suggesting it could grow eightfold to $2 trillion in the next three years, significantly impacting the short-term treasury market [6].

Core Viewpoint - Guotai Junan International has received approval from the Hong Kong Securities and Futures Commission to upgrade its existing securities trading license to provide virtual asset trading services, allowing clients to trade cryptocurrencies and stablecoins directly on its platform [1][5]. Company Summary - Guotai Junan International is now the first Chinese broker in Hong Kong to offer comprehensive virtual asset trading services, including trading, advisory, and issuance of related products [5]. - Following the announcement, Guotai Junan International's stock surged over 60%, with an intraday increase exceeding 100% [1][5]. Industry Summary - The approval for virtual asset trading is expected to significantly enhance the valuation of financial companies involved in stablecoins, as seen with Everbright Holdings, which saw a stock price increase of over 50% due to rumors of its stake in Circle [4][5]. - Stablecoins are anticipated to transform the role of brokerages from mere transaction facilitators to asset securitization engines and cross-border clearing hubs, which could positively impact their valuations [4][6]. - The current stablecoin market is valued at approximately $220 billion, with projections suggesting it could grow eightfold to $2 trillion in the next three years, potentially influencing the short-term treasury market significantly [8].

Investment Rating - The report maintains an "Accumulate" rating for the diversified financial sector [5] Core Insights - Stablecoins are essentially privately issued digital shadow currencies backed by sufficient reserves, gradually penetrating into real economy payment scenarios, which warrants attention regarding their impact on currency circulation and the government bond market [1][12] - As of June 18, 2025, the total market size of USD stablecoins reached approximately $220 billion, accounting for about 1% of USD M2 [1][21] - The initial use case of stablecoins was as a medium for cryptocurrency trading, with around 80% of stablecoin transaction volume still attributed to crypto asset trading as of 2024 [2][30] - Stablecoins exhibit low-cost and high-efficiency characteristics, particularly in cross-border payments, contributing to over 70% of the $600 billion in cross-border flows in Q2 2024 [2][43] - The interaction between stablecoins and currency liquidity is generally neutral, with their issuance not significantly altering the factors determining fiat currency liquidity [62] Summary by Sections Nature of Stablecoins - Stablecoins are issued by private commercial entities and are considered credit money, as they represent a claim against the issuing institution [12] - They are backed by sufficient reserves, which limits their issuance scale to the reserve size, unlike traditional fiat money which can be created with leverage [12][21] - Stablecoins are based on blockchain technology, allowing for peer-to-peer transactions without central control [12] Initial Use Cases - The development of stablecoins like USDT was driven by the need for a stable medium of exchange in cryptocurrency trading, particularly to reduce the high friction costs associated with converting fiat to crypto [30][31] Payment Integration - Stablecoins are increasingly accepted in traditional payment scenarios, especially in cross-border transactions where they provide a more efficient alternative to fiat currencies [43][45] Central Bank Digital Currency (CBDC) Outlook - CBDCs and stablecoins share similar technological foundations but differ in their issuers, with CBDCs being state-backed and stablecoins being privately issued [56] - The potential for CBDCs to penetrate the market is significant, especially in areas where stablecoins are currently utilized [58] Interaction with Currency Liquidity and Government Bonds - The issuance of stablecoins does not significantly impact fiat liquidity, as their effects are largely neutral unless considering the choice of reserve assets [62]