Stablecoins and the Future of Money Simulation Course

In a course called “Stablecoins and the Future of Money,” Professors Sanchez and Carter guide five students through the basics of stablecoins, referencing the article “Stablecoins go mainstream and why China's tech giants are rushing in.” Each student’s question is answered with a detailed, realistic classroom response that explains the main drivers and concerns.

Simulation Class: Stablecoins and the Future of Money

Professors: Dr. Maria Sanchez (Digital Finance) and Dr. Alan Carter (Global Financial Systems)
Course: Emerging Technologies in Global Finance
Date: July 2025

[Professor Sanchez stands at the board]

Prof. Sanchez:
Good morning, class. This morning, we will explore a notable advancement in the field of digital finance: stablecoins. We will examine their definition, the reasons for their current significance, and the factors that are influencing their rapid development.

Unlike Bitcoin or Ethereum, stablecoins are cryptocurrencies pegged to stable assets, typically the U.S. dollar. Their goal is to maintain price stability while enabling borderless, low-cost, programmable payments on blockchain networks. But the real story begins in 2025, when stablecoins started transitioning from speculative tools to essential infrastructure for global payments.

Let’s hear your questions to guide our discussion.

Elena

Professor, what makes 2025 such a turning point for stablecoins?

Prof. Carter:
OK. This year marks two breakthroughs:

1. Circle’s IPO, the company behind stablecoin USDC, saw a 160% surge on debut—a sign of mainstream investor confidence. 

   

2. Hong Kong’s Stablecoin Ordinance, which goes into effect this August, offers one of the most comprehensive regulatory frameworks for stablecoin issuers.

These events signal a shift from regulatory uncertainty to structured oversight, attracting institutional players like JD.com and Ant Group. They’re not just experimenting—they’re building real systems for cross-border payments with goals like 90% cost reductions and 10-second settlements.

Raj

What actually drives companies and governments to adopt stablecoins now?

Prof. Sanchez:
Three key drivers:

1. Efficiency: Stablecoins enable instant settlement without intermediaries. That slashes fees and time, especially in cross-border transactions.

2. Programmability: Through smart contracts, stablecoins can trigger payments automatically—ideal for finance, supply chains, and even aid distribution. Remember Raj, in our previous class, we presented what a smart contract is: “a self-executing program that automates the actions required in a blockchain transaction. Once completed, the transactions are trackable and irreversible. The best way to envision a smart contract is to think of a vending machine—when you insert the correct amount of money and push an item's button, the program (the smart contract) activates the machine to dispense your chosen item.” 

   

3. Currency Instability: In countries like Argentina, stablecoins are a safe haven from inflation and devaluation. In some places, they now account for 72% of crypto activity.

Add to that the geopolitical push for monetary independence and blockchain-native finance, and you have a system ready for disruption.

Samira

How do regulators see this? Aren’t they worried about losing control?

Prof. Carter:
They absolutely are. Christine Lagarde of the European Central Bank (ECB) warns that stablecoins could undermine monetary policy and banking stability. Here’s why:

• If too much money moves from banks into stablecoins, central banks lose their levers, like interest rate influence.

• Stablecoins that fail to maintain their peg risk destabilize savings and commerce.

That’s why you’re seeing a wave of laws: Hong Kong’s Ordinance, the EU’s MiCA, the U.S. GENIUS Act, and international rules like FATF’s Travel Rule. These aim to keep stablecoins transparent, backed, and regulated, especially across borders.

Leo

But what about risks? Didn’t a stablecoin already crash?

Prof. Sanchez:
Yes—TerraUSD lost its peg in 2022, resulting in a $45 billion wipeout. It was an algorithmic stablecoin, meaning it used smart contracts to manage its price rather than fiat reserves. That failure taught us that backing and redemption mechanisms matter.

Some stablecoins, such as USDC, offer fully audited reserves. Others, such as Tether, have faced issues with opacity. If you can’t redeem your stablecoin at par value reliably, it’s not stable—it’s just risky crypto in disguise.

Noah:

Why are Chinese tech giants like JD.com and Ant Group getting involved?

Prof. Carter:
Two reasons: financial innovation and global strategy.

China views stablecoins as a bridge for the internationalization of the renminbi (China's currency) and a low-cost, fast-settlement layer for cross-border trade. JD.com, for example, aims to reduce global remittance costs by 90% and settle transactions in under 10 seconds.

Also, Hong Kong provides a regulatory sandbox—a testing ground. That’s why tech giants are rushing in. This could shape the next-gen financial infrastructure, potentially rivaling the dominance of Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Visa in global payments. You may recall that SWIFT is a network banks use to communicate with each other securely, primarily for exchanging instructions to transfer funds between accounts.

Class Wrap-Up

Prof. Sanchez:
Stablecoins are evolving from crypto's “boring cousin” to a significant building block of the new financial order. They're programmable, stable, and borderless—but not without risks to monetary sovereignty and financial integrity.

Prof. Carter:
The future depends on who regulates, how they’re backed, and what infrastructure they connect to. We're witnessing a monetary transformation where code, capital, and compliance intersect.

Key Takeaways for Students

Driver	Explanation
Efficiency	Instant, low-cost, borderless payments bypassing traditional banking rails
Stability	Pegged to fiat assets, aiming to avoid crypto volatility
Regulation	Increasing clarity boosts adoption (e.g., HK, MiCA, GENIUS Act)
Risks	Redemption uncertainty, contagion during stress, and illicit use
Strategic Use	Safe haven in unstable economies; a tool for monetary influence on others

 Stablecoins Quiz – Professor Sanchez & Carter

Instructions: Select the best answer for each multiple-choice question. Short answer and discussion questions will follow.

Part I: Multiple Choice (2 points each)

What is the primary purpose of a stablecoin?

A. To serve as a speculative investment

B. To mine new cryptocurrencies

C. To maintain a stable value for transactions

D. To track inflation rates

Which of the following events in 2025 significantly advanced the stablecoin market?

A. Ethereum merge

B. Collapse of TerraUSD

C. Circle’s IPO and Hong Kong's Stablecoin Ordinance

D. Bitcoin ETF approval

What is one major appeal of stablecoins in emerging markets like Argentina?

A. They offer higher returns than local banks

B. They are not taxed

C. They provide a hedge against local currency devaluation

D. They support anonymous gambling

Why are regulators concerned about stablecoins?

A. They consume too much energy

B. They are completely untraceable

C. They can undermine monetary policy and financial stability

D. They are illegal in most countries

Which of the following companies is NOT mentioned as a participant in Hong Kong’s stablecoin sandbox?

A. JD.com

B. Animoca Brands

C. Ant Group

D. Binance

Part II: Short Answer (5 points each)

Explain the concept of “payment as settlement” and its importance in global finance.

What risks are associated with weak redemption mechanisms in stablecoins? Give one historical example.

Part III: Discussion (10 points)

Debate Question:

Should central banks support the integration of stablecoins into national payment systems, or should they issue only central bank digital currencies (CBDCs)? Support your position with examples and evidence.

References:

PekingEnsight, & Wen, W. (2025, July 2). Stablecoins go mainstream and why China's tech giants are rushing in: Regulatory breakthroughs, corporate rush, and the next frontier for digital payments. Peking Ensight. 

Stablecoins: Definition, How They Work, and Types. By Adam Hayes Updated June 13, 2024

Reviewed by Doretha Clemon; fact-checked by Skylar Clarine. 

By:

Irving A. Jiménez Narváez

Note: Some parts of the class simulation were edited using Grammarly and researched with ChatGPT 4.5.