From the turmoil between Venezuela and Iran, see how stablecoins have become a "second currency system."

CoinW Research Institute

Abstract

This article uses the situation in Venezuela as a starting point to point out that the repeated mention of stablecoins is not due to speculative narratives, but because they have become a financial tool that ordinary people can still "use" in an environment where local currency credibility is damaged, the banking system is failing, and cross-border capital is restricted. What stablecoins provide is not higher returns, but an alternative channel for payment, settlement, and value storage that does not rely on the domestic financial system.

Furthermore, while stablecoins do carry centralization and compliance risks, in the context of systemic failure, "manageable stablecoins" often outperform "inevitably depreciating fiat currencies." Their diffusion also objectively extends the influence of the U.S. dollar and gradually takes on some informal global clearing functions when sovereign currency systems fail. As real usage continues to accumulate, regulatory attitudes are shifting from simple prevention to regulatory management, and the payment and settlement infrastructure surrounding stablecoins is moving from narrative to real operation.

Stablecoins are transitioning from an asset form to a financial infrastructure form. Their growth is not driven by market sentiment but by real-world problems, repeatedly validated through ongoing use. The true value of stablecoins is not found in white papers and stories, but is proven time and again during moments of financial failure in the real world.

1. When National Credit Fails, What People Really Need is Not "Appreciation"

Venezuela has repeatedly become a focal point of discussion, not only due to the recent political conflict but also because it has long been in a state of "repeated damage to national credit." This damage is not only reflected in inflation data or exchange rate fluctuations but also in whether the currency, banking, and payment systems can still function normally.

When the system itself lacks stable expectations, financial issues sink from the "investment level" to the "survival level." For ordinary people, the real concern is not whether to allocate a certain asset, but a series of more fundamental questions: Can wages still be safely stored? Can money sent by relatives abroad arrive smoothly? Will bank transfers suddenly be frozen? Will assets quickly become ineffective due to capital controls, policy changes, or rapid currency depreciation? These questions directly affect the daily economic lives of individuals and families.

It is in such an environment that the meaning of "hedging" itself changes. Hedging no longer means pursuing higher returns or beating inflation, but rather finding a form of money that can still be used normally: whether it can preserve value, facilitate payments, allow transfers, and enable cross-border flow is often more important than price fluctuations themselves.

2. The Logic of Stablecoin Use Under National Credit Breakdown

Why are stablecoins repeatedly mentioned in environments of credit breakdown?

When the credibility of the local currency continues to weaken, the efficiency of the banking system declines, and even functional failures occur at certain stages, stablecoins often naturally enter the realm of real choices. This is not because they are particularly advanced or radical, but because they happen to be at the intersection of traditional financial systems and real survival needs. At this point, stablecoins are not a better investment but an alternative path that does not rely on the domestic banking clearing system. They allow funds to still perform the most basic functions: preserving value, facilitating payments, and enabling cross-border flow, without being completely constrained by the operation of the local currency system and domestic financial infrastructure. In cases like Venezuela, stablecoins frequently appear because they are indeed used in people's real lives and, to some extent, take on roles that should have been fulfilled by the local currency and banking system.

"Failed states" are not exceptions but highly concentrated samples

Globally, Venezuela is not the only case of large-scale adoption of stablecoins; Iran also constitutes a highly typical real-world sample. For a long time, Iran has faced continuous depreciation of the rial, high inflation, and financial blockades due to international sanctions, with limited access to foreign exchange and cross-border settlement channels, making it difficult for the banking system to effectively perform value preservation and capital flow functions. Recently, as economic pressures have intensified and social unrest has escalated, Iran's financial and capital controls have tightened further, limiting access to foreign exchange and decreasing the freedom of capital movement, while public confidence in the stability and predictability of the domestic financial system continues to weaken.

At the same time, there have been instances of temporary restrictions on communication and internet services in various parts of Iran. This change is not directly targeting the financial system but objectively amplifies the inherent fragility of the financial system itself. In a reality that heavily relies on online systems, bank transfers, electronic payments, account settlements, and cross-border capital movements are highly dependent on stable network connections. Once communication is disrupted, these functions often struggle to operate smoothly, significantly compressing the availability of the local currency in daily transactions, capital allocation, and value transfer. The uncertainty of whether fiat currency can be smoothly used at critical moments further undermines the public's trust in the traditional financial system.

In this context, dollar-pegged stablecoins like USDT and USDC are increasingly used for pricing goods and services, temporarily storing income, and facilitating cross-border transfers, even directly replacing local currency in some scenarios, becoming a reference unit for daily transactions. This usage logic is not complex and carries little speculative color; rather, it is a "still usable" financial choice that has been repeatedly validated in conditions of damaged local currency credibility, failing banking systems, and restricted capital flows. The cases of Venezuela and Iran indicate that "failed states" are not isolated incidents but structural samples where the real demand for stablecoins is highly concentrated, with their diffusion stemming more from the gaps left by the real financial system than from narratives within the crypto market.

What it bypasses is not regulation, but a failing financial system

From a Web3 perspective, the repeated emergence of stablecoins is not because they bypass regulation, but because they bypass the local currency system and banking clearing systems that can no longer function normally. When a country's currency continuously loses purchasing power, and bank transfer efficiency is low or may be frozen at any time, stablecoins provide a real channel that does not rely on the domestic financial infrastructure.

3. Are Stablecoins Really Safe?

Before discussing the real value of stablecoins, there is an unavoidable question: Are stablecoins really safe? In the context of Web3, they are often questioned for not being decentralized enough, and even considered as merely transferring the centralization risks of traditional finance onto the blockchain. This skepticism is not unfounded. It must be acknowledged that mainstream stablecoins do exhibit significant centralization characteristics, managed by specific issuers, with the ability to freeze addresses and cooperate with compliance checks, and are not entirely untouchable in extreme cases.

However, in environments like Venezuela, the issue people face is not whether "centralization is ideal enough," but rather more direct real-world risks: the local currency may depreciate significantly in a short time, bank accounts may be frozen due to policies, foreign exchange controls, or systemic issues, and funds may not be freely transferable. Under such premises, safety itself needs to be redefined.

It is precisely in this context that a seemingly contradictory yet extremely realistic choice emerges: a stablecoin that "may be frozen" is often still preferable to a fiat currency that is "almost certainly continuing to depreciate." The former is at least usable most of the time, allowing payments, transfers, and cross-border flows; while the latter's risk is not just volatility, but a systemic erosion of purchasing power, potentially losing functionality entirely at critical moments.

This is the "decentralization paradox" of stablecoins. They are not perfect and do not provide absolute safety, but when institutional and financial systems show cracks, people often choose the tool with relatively more controllable risks and more predictable outcomes. This choice is not an ignorance of centralization risks, but a conscious trade-off.

4. The Geopolitical Function of Stablecoins as Seen Through Venezuela

The case of Venezuela clearly demonstrates that when a country's currency system experiences structural failure, stablecoins do not merely exist passively but gradually take over some functions originally belonging to sovereign currencies.

Essentially, the diffusion of stablecoins is a non-official extension of the influence of the U.S. dollar. It does not spread through central banks, international organizations, or formal monetary agreements, but rather leverages blockchain and crypto networks to enter regions with weak local currency credibility at lower thresholds and faster speeds. Stablecoins do not create new value anchors but transplant existing dollar credit into corners of the traditional financial system that are underrepresented.

For some countries, this process is not neutral. When residents begin to spontaneously use stablecoins for pricing, storing value, and settling transactions, the space for local currency usage is gradually squeezed. Even without formal "dollarization" policies, monetary sovereignty will be weakened in practice. This is not a reflection of political stance but a result of real choices.

However, from the perspective of ordinary people, the significance of stablecoins is precisely the opposite. They are not a political tool but a "currency escape route." In environments where the banking system is restricted and capital flows are tightly controlled, stablecoins preserve the possibility for individuals to safeguard their labor results and complete cross-border transfers.

It is within this tension that stablecoins gradually reveal a new role: an informal global clearing layer. When sovereign currency systems operate well, they are on the margins; but when financial systems show cracks or even fail, they passively take over some functions of settlement, value storage, and cross-border flow.

5. How Stablecoins Enter the Real Financial System

From "Forced Use" to "Repeated Use"

In events like those in Venezuela, the entry of stablecoins into the real world is not a proactive choice but a forced outcome. When extreme situations arise, people need a tool that is "still usable" to complete the most basic payments and value preservation. However, when similar scenarios repeatedly occur across different times and regions, stablecoins gradually cease to be merely temporary alternatives in extreme environments and begin to be seen as a reliable financial tool. This change is quietly influencing the judgments of regulators, financial institutions, and the entire cross-border payment system regarding stablecoins.

Shift in Regulatory Attitudes: From "Should It Exist" to "How to Regulate"

This change is particularly evident at the regulatory level. Early discussions focused more on "whether stablecoins should exist," but as their real usage paths in cross-border payments and daily settlements gradually become clear, the question has shifted to: since they are already being used and are difficult to replace in certain scenarios, how can they be incorporated into a manageable and monitorable framework? This is not an ideological endorsement but an acknowledgment of reality. Stablecoins do not solve abstract efficiency problems but address long-standing structural pain points that have been amplified in regions with fragile financial systems, such as slow cross-border transfers, high costs, and opaque paths.

Underestimated Survival and Cross-Border Attributes

For this reason, the "survival attributes" and "cross-border attributes" of stablecoins have long been underestimated. They do not exist based on market sentiment but are often the first to be adopted when foreign exchange is restricted, and banking channels are unstable or even interrupted. This usage is not conspicuous but highly sticky; once a path is formed, it is difficult to replace. Meanwhile, the payment and settlement infrastructure surrounding stablecoins is transitioning from concept to operation. Wallets, on-chain transfers, compliant custody, and cross-border interfaces are gradually being pieced together under the push of real demand, taking on functions originally fulfilled by traditional clearing networks in certain scenarios.

The Overlooked Mainline of Payment Stablecoin Infrastructure

From this perspective, "payment stablecoin infrastructure" is likely one of the hidden mainlines that could be overlooked this year. It does not stand at the forefront of any popular narrative but is almost the foundational base upon which all narratives are built. Whether it is DeFi, RWA, on-chain finance, or cross-border remittances and real commercial settlements, as long as real capital flows are involved, most cannot avoid the role of stablecoins in clearing, settlement, exchange, and compliance channels. The case of Venezuela has made this point clear enough. For real users, they only care about one thing: can this money reach me smoothly, safely, and on time? Once funds truly begin to flow, it inevitably involves a whole set of invisible yet indispensable infrastructures such as stablecoin issuance, custody, cross-chain, exchange, and compliance for inflows and outflows.

Transition from Asset to Infrastructure Role

This also determines that stablecoin payments are not an emotionally driven track but a problem-driven track. Their demand is forced out by reality when local currencies are out of control, banking system efficiency declines, and cross-border flows are restricted. Therefore, the growth of stablecoin-related infrastructure is often slow but steady, rather than explosive or noisy. Once a payment path is validated as "really usable," it will be repeatedly used and gradually embedded into local capital flow habits.

From a longer time dimension, a trend is becoming clear: stablecoins are transitioning from an "asset form" to a "financial infrastructure form." They are no longer merely traded or allocated but are increasingly appearing in the most basic and essential links of payment, settlement, cross-border flow, and value storage. By the time the market truly realizes this change, it may have already become a widely used and irreplaceable financial infrastructure system.