Digital Dollar Frenzy Card-Linked Yield Depeg Risks

● Digital Dollar Frenzy, Yield Gold Rush

Stablecoins: Focusing Only on the Truly Profitable Aspects—Treasury Yield, Card Payments, 2.0 (Yield), Depeg Risks, and KRW Outlook

The article presents five key takeaways.First, why stablecoins are expanding in collaboration with card networks in the global payment infrastructure.Second, how U.S. Treasury collateral and over-collateralization align with dollar demand and interest rate environments.Third, how to realistically earn interest with the Stablecoin 2.0 (yield-bearing) model.Fourth, the exact mechanism behind depegging and the security checklist individuals can use to prevent it.Fifth, the practical uses of KRW stablecoins in Korea and key regulatory considerations.

News Briefing: Key Points on Stablecoin Expansion

Global payments are rapidly onboarding by leveraging the Visa and MasterCard infrastructures rather than substituting them.USDT (Tether) and USDC (Circle) hold most of the market share and see prominent real-world use in Latin America and Africa.With the implementation of MiCA in the EU, the proportion of licensed and compliant stablecoins in Europe is increasing, accompanied by a trend of restricting the handling of Tether on some exchanges.Reserves are being restructured around cash and U.S. Treasuries, while over-collateralization is spreading to enhance trust.Depegging occurs more frequently due to imbalances in buy and sell activity on exchanges rather than a lack of reserves by the issuer.Stablecoin 2.0 evolves into a structure that distributes yields from Treasuries and short-term bonds to users, enabling them to “earn interest while spending” when linked to cards.Although KRW stablecoins in Korea could serve as a gateway to global digital assets and on-chain finance, mainstream payments are expected to naturally switch over on existing app and card UIs.

What Are Stablecoins and Why Are They Gaining Momentum

In one sentence, they are defined as a “digital dollar (digital cash)”.They are tokens on the blockchain, but their value is pegged 1:1 to fiat currencies (primarily the dollar).They serve as a bridge between the real world and the cryptocurrency world, being used for remittances, trade, and on-chain finance.They help transfer the global economy’s dollar liquidity onto the blockchain, forming the foundational infrastructure of the digital asset market.

Reserves, U.S. Treasuries, Over-Collateralization: The Structure of Trust

Major issuers build trust for 1:1 redemption by holding cash and cash-equivalent assets such as U.S. Treasuries (T-bills) as reserves.Over-collateralization acts as a psychological safety net and serves to hedge against Treasury price and interest rate volatility, as well as regulatory risks.From the perspective of the dollar system, stablecoins function as a channel that expands the demand for Treasuries, forming a defensive line for the dollar ecosystem.In periods of declining interest rates, the yield capacity of stablecoin yield models may decrease, and as more complex strategies are employed to generate returns, risk management becomes increasingly important.

Why Does Depegging Occur: Exchange Liquidity vs. Issuer Reserves

Even if issuers hold reserves on a 1:1 basis, the point of immediate exchange for users is usually an exchange.If selling pressure overwhelms an exchange due to a specific issue, an “exchange depeg” may occur, causing prices to fluctuate below one dollar.The temporary discount of USDC during the SVB incident is a representative case, where the bottleneck in off-ramp liquidity rather than the reserves themselves was the cause.Algorithmic collapses (like Terra/Luna) differ in nature from collateral-backed ones.Wallet security, smart contract vulnerabilities, phishing, and other security practices at the user and protocol level serve as the first line of defense against actual losses.

Payments Ride on “Card Networks”: A Symbiotic Relationship Rather Than Competition

Stablecoin issuers utilize the Visa and MasterCard networks rather than establishing new connections with merchants and POS systems worldwide.Users can load USDT and USDC onto prepaid or debit cards, and payments are processed with a familiar card-user experience.Merchant Discount Rates (MDR) may gradually face downward pressure based on the fee structures between issuers and card networks.International payments and remittances cut down on currency exchange and intermediary steps, saving time and costs, while corporate transactions benefit from real-time settlements that enhance working capital efficiency.

Stablecoin 1.0 vs 2.0: Yield-Bearing Models That ‘Return’ Interest

The 1.0 model focused on payments and custody, with returns going to the issuer.The 2.0 model is yield-bearing, distributing interest earned from on-chain strategies akin to Treasuries and MMFs to users.Some bundle various underlying assets and strategies like an ETF, diversifying risks and ensuring transparency in dividend policies.When linked to a card, this structure enables automatic interest accumulation during holding, with everyday payments effectively beginning with the earned interest.Dividend returns are highly sensitive to interest rate cycles, inflation, and the dollar liquidity environment.

How to Actually Make Money: A Practical Guide

Choose issuers with regulatory and audit transparency
Check audit reports, reserve details (proportion of cash and U.S. Treasuries), and regulatory compliance.
Integration status with globally listed exchanges and credit card partners is also a trust indicator.
Earn “holding interest” with yield-bearing stablecoins
Hold stablecoins with specified yield distribution, and check dividend frequency, fees, and conversion costs.
Linking to a card with priority settings for using earned interest, and verifying overseas payment fee conditions can enhance perceived benefits.
Simple diversification among on-chain MMF/treasury tokenized products
Mix direct exposure to Treasuries with issuer yield-bearing models to diversify interest rate and issuer risks.
Since stablecoins are pegged to one dollar, the focus is not on capital gains but on interest and fee savings.
For professional investors: Buying depegged tokens at a discount and reaping redemption arbitrage (high risk)
This strategy only makes sense if the issuer offers a direct redemption route during exchange discounts, and the KYC, fees, and timing are appropriate.
It is not recommended for beginners and should only be approached selectively when liquidity and policy risks can be managed.

Korea: The Practical Uses of KRW Stablecoins

B2C payment UIs will continue to use traditional banking and simple payment methods, but the “backend currency” will naturally transition to KRW stablecoins.Consumers will first experience benefits from increased options for deposits, savings, and investments, as well as reduced fees and processing times for international payments and remittances.Companies can improve their working capital turnover through real-time settlement of trade payments, simplified currency hedging, and continuous rather than month-end settlements.Key regulatory concerns include anti-money laundering (AML), redemption obligations, reserve management, and accounting/tax consistency, and a framework for cross-border regulatory compliance is essential when connecting to global on-chain finance.

Security and Risk Checklist (Essential)

Issuer Risk
Verify the frequency of audit reports, reserve composition, legal redemption obligations, and bankruptcy segregation (separation of issuer assets and customer reserves).
Custody Risk
For personal wallets, store seed phrases offline and use hardware wallets.
When stored on exchanges, two-factor authentication (2FA) and withdrawal whitelists are essential.
Smart Contract Risk
Check the number of audits, the presence of a bug bounty, and upgrade permissions (such as multisig).
Regulatory and Sanctions Risk
Understand issues like OFAC blacklist address freezes and potential redemption restrictions by country.
Yield Product Risk
Check the sources of yield outlined in the terms, the potential for reduced dividends during declining interest rates, and any increases in leverage or credit exposure.

Connection with Global Macro: Interest Rates, Inflation, and the Dollar

The interest rate levels in the global economy are directly linked to the dividend capacity of stablecoins.In phases of slowing inflation and falling interest rates, yield on 2.0 models naturally declines, and differentiation among issuers shifts towards cost and transparency.A strong dollar and changes in U.S. Treasury yields directly affect the value of reserves and profitability.The spread of tokenization (of Treasuries, MMFs, and deposits) grows complementarily with stablecoins, converging towards a unified wallet UI that bundles payments, savings, and investments.

Key Insights That Are Rarely Mentioned Elsewhere

Why coexisting with card infrastructures is the solution
The cost of establishing new merchant and POS networks is astronomical, so for the time being, stablecoin payments are clearly faster by leveraging existing card rails.
Thanks to this structure, merchants first experience pressure for lower fees, and users enjoy reduced costs for international payments.
Changes That Occur When Interest Rates Fall
Dividend reductions in yield-bearing models become inevitable, and some issuers have an incentive to increase credit and maturity risks to compensate for lower returns.
Therefore, at the onset of a falling interest rate cycle, be cautious of marketing promises of “higher returns” and reassess the layering of credit within the reserve details.
Off-Ramps Are the Real Bottleneck
Depegging does not result from technology issues but from bottlenecks in liquidation channels.
From the user’s perspective, it is important to have a wallet and exchange configuration in place where the redemption path, fees, and T+ settlement times are known in advance.
The “Cash Conversion Cycle” of Businesses Changes
With continuous settlement and programmable payments, the collection cycle of payments is shortened, becoming a game-changer in inventory and cash flow management.
In Regulation, “Interoperability” Is Key, Not Speed
Once there is standardization of cross-border AML and tax interfaces, the speed at which the backend currency switches to stablecoins will accelerate, even though retail UX remains unchanged.

A One-Line Warning When Investing

Stablecoins are not instruments for capital gains.Reliable issuers, adequate reserves, and regulatory compliance are key, and unapproved tokens with low liquidity can become worthless upon delisting.

< Summary >

Stablecoins are transforming the backend of payments, remittances, trade, and on-chain finance as a digital dollar.The path of expansion is through symbiosis with card networks, and trust is built through reserves of cash, U.S. Treasuries, and over-collateralization.Since depegging mostly occurs due to bottlenecks in exchange liquidity, it is essential to secure redemption paths and ensure robust security in advance.Stablecoin 2.0, which distributes Treasury yields to users, makes it possible to earn “holding interest” and “interest while spending.”Korea’s KRW stablecoins serve as a card to expand access to global digital assets and on-chain finance, with regulatory and interoperability factors determining success.

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