Institutions Are Stepping into a Brand New Era of Digital Assets

Which aspects should be on-chain, and which can remain off-chain? In this issue of "Clearing Spotlight," we invite Amy Zhang, Head of APAC at Fireblocks, to discuss how tokenization, smart contracts, and blockchain can significantly enhance the efficiency and security of asset transfers while institutions maintain strict internal approval processes. This conversation delves into how to balance Web2 approval workflows with on-chain asset transfers, and why an increasing number of institutions are choosing to pursue both paths, leveraging the strengths of each.

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Host:
Hello everyone, welcome back to "Clearing Spotlight." Here, we focus on how the market moves forward in a complex environment and how financial institutions cope with liquidity risks and infrastructure changes. Thank you for tuning in to "Clearing Spotlight" again. Today, our guest is Amy Zhang, Head of APAC at Fireblocks. Amy, how have you been lately?

Amy Zhang:
I’m doing well, how about you?

Host:
I’m also doing well. It’s great to talk with you, and you are our first female guest on the podcast.

Amy Zhang:
Really? That’s such an honor.

Host:
Why don’t you start by briefly introducing yourself and Fireblocks?

Amy Zhang:
Sure. Hello everyone, I’m Amy, currently responsible for Fireblocks' APAC business. I joined Fireblocks five and a half years ago. When I first joined, the company was still quite small. In the first year, we mainly focused on validating one question: whether the success Fireblocks achieved in Europe and the U.S. could also apply to the APAC region. If we were to continue investing in APAC, what should our strategy be? And how can we ensure that customers receive adequate support locally?

We quickly realized that APAC customers do need products and features similar to those of their European and American counterparts, but the real key lies in localization—building local teams and providing customer-centric support.

Today, Fireblocks serves over 2,400 customers globally; nearly 500 in APAC, covering a wide range of clients from small crypto trading teams to the largest banks and asset management firms, almost encompassing all types.

Adoption of Stablecoins in Asia

Host:
How would you describe the current state of stablecoin adoption in Asia? What is driving this momentum?

Amy Zhang:
I think one of the most significant changes is the shift in the "trust structure." You could say that since the establishment of the modern financial system, this is the first time—every day, tens of billions of dollars are transferred, recorded, and settled without the direct involvement of traditional banks or financial institutions.

If we break down the sources of this trust, there are three main aspects.

First, there is the increased regulatory clarity. Most countries in Asia have either established a regulatory framework for stablecoins or are in the process of formulating one. This has changed significantly over the past year.

Second, there is technological maturity. Over the past year, there have been several security incidents in the industry, but these events have also driven the maturity of technology and infrastructure, allowing institutions to better understand how to interact safely with blockchain and digital assets.

Third, there is the convertibility of liquidity, meaning whether institutions can directly complete on-ramps and off-ramps, including primary minting and burning, and whether they can access sufficient secondary market liquidity. This makes stablecoins truly usable and practical assets, allowing merchants to efficiently conduct cross-border fund transfers.

The Essence of Stablecoins: Integration of Information and Settlement

Host:
If you were to explain stablecoins to an audience encountering them for the first time, how would you define them in the simplest terms? Why are they so important for institutions?

Amy Zhang:
We can start with "how money flows." When a transfer occurs between you and me, there are actually two layers:
The first is the information layer, which is me telling you how much I want to transfer;
The second is the settlement layer, where the bank actually moves the money from my account to yours.

In the traditional system, this process involves a lot of intermediaries, including payment service providers, clearinghouses, etc. The reason banks have always been in the middle is that historically, funds were held in banks, and banks took on the responsibility of risk management.

The balance you see in your bank account does not equate to the actual cash the bank holds. Banks operate on a fractional reserve system, needing to manage the risks between "the $1 on the books" and "the $1 received by the other party."

The fundamental difference with stablecoins is that: information and settlement are completed in the same transaction. The core value this brings is efficiency. Time delays in cross-border payments have always been a pain point, while stablecoins can achieve instant settlement, saving time, reducing costs, and creating new revenue opportunities.

That’s why the earliest adopters of stablecoins are industries with high working capital needs, such as commodity traders and shipping companies. If they can turn over $100 million ten times a day, the efficiency and returns are completely different.

Moreover, in most regulated jurisdictions, stablecoins are backed 1:1 by high-liquidity assets like the U.S. dollar, rather than the fractional reserve system of banks.

Are Stablecoins "Surpassing" Traditional Cross-Border Systems?

Host:
It is often said that the trading volume of stablecoins is surpassing traditional cross-border payment systems. What are your thoughts on this?

Amy Zhang:
I don’t think we have fully surpassed them yet. In 2024, the scale of traditional cross-border capital flows is expected to be around $200 trillion, while the transfer scale of stablecoins is about $20 trillion, still only one-tenth. More importantly, this $20 trillion mainly does not come from traditional industries.

What is really happening is that some industries that have long been overlooked by traditional cross-border systems have naturally turned to stablecoins. The earliest was the crypto trading industry, which requires 24/7, instant, large-scale settlements and was almost "excluded by banks" in the early days. Following that are new economic forms: e-commerce platforms, creator economies, and digital businesses. These companies need to make payments to a large number of individuals globally, and the traditional banking system is not only costly but also complex to operate. After that, there are industries with high working capital needs, such as commodities, shipping, and precious metals trading.

Why Regulation is a Catalyst for Adoption

Host:
IMF data shows that APAC will lead global stablecoin activity in 2024. You previously mentioned that regulation is a key catalyst for adoption; could you elaborate on that?

Amy Zhang:
The most important value of regulation is certainty.

First, at the issuance level: which stablecoins can be used legally? Are they recognized?
Second, at the balance sheet level: if banks or PSPs hold stablecoins, how should they account for them and measure the risks?

Currently, both Singapore and Hong Kong are conducting relevant consultations to clarify the positioning of stablecoins on bank balance sheets. Without clear rules, institutions cannot operate at scale.

The Integration of TradFi and Crypto Finance

Host:
More and more traditional financial institutions are beginning to explore stablecoins. What does this indicate about changes in mainstream finance?

Amy Zhang:
We are witnessing a two-way integration of TradFi and crypto finance.

Banks and PSPs are considering how to incorporate stablecoins as a new payment rail into the existing system. If a bank is not a partner bank for mainstream stablecoins, it is effectively losing deposits.

For PSPs, stablecoins are just another rail, but with lower costs and greater profit margins, they can also bring new business lines. Meanwhile, native crypto institutions are issuing tokenized securities and receiving very positive market feedback.

Web2 Approval × Web3 On-Chain: Real Practices of Institutions

Host:
How do institutions typically balance innovation and risk management, especially in on-chain treasury and payment systems?

Amy Zhang:
The reality is that not all aspects need to be on-chain.

Approval, permissions, and risk management—many institutions already have very mature Web2 internal systems. They usually complete these processes off-chain and then leverage secure infrastructures like Fireblocks to actually move assets on-chain. This creates a division of labor:

• Web2: Approval, permissions, risk control

• Web3: Asset issuance, transfer, settlement

Internal interbank settlements often occur on private chains or permissioned ledgers; assets only go on public chains when interaction with the public ecosystem is needed.

Digital Asset Treasury Management

Host:
Many people think of Bitcoin when discussing digital assets, but treasury management is much more than that. What are your thoughts?

Amy Zhang:
A simple example: a trading company has $1 million in working capital, usually just sitting in a bank account as a buffer. Now, it can convert that money into stablecoins and access on-chain money market funds for returns; when it needs cash, it can convert back to USDC for global payments. This is essentially how crypto trading companies manage their treasury today, and traditional enterprises are just beginning to understand this. Of course, some publicly traded companies are also incorporating BTC and ETH as part of their asset allocation, which is reasonable from a long-term return perspective.

Host:
When companies are diversifying their treasury, are they only focusing on BTC and ETH?

Amy Zhang:
It depends on the purpose. Some companies are doing it for capital market narratives; others are very pragmatic—using stablecoins to optimize working capital efficiency. The ultimate question is: what actual benefits can using stablecoins bring to the company?

Host:
Hong Kong has been very proactive in its policies regarding stablecoins and digital finance. What do you think about its positioning?

Amy Zhang:
You can’t talk about Hong Kong without mentioning China. Hong Kong and China are one of the largest corridors for capital globally. If compliant stablecoins can play a role in this, it would be very meaningful. Additionally, Hong Kong has a massive scale in capital markets and has a natural advantage in the tokenization of securities and bonds; it is also one of the few jurisdictions that allow both crypto assets and security tokens to be offered on the same platform.

Host:
Finally, what advice would you give to financial executives or entrepreneurs who are still hesitant about adopting stablecoins?

Amy Zhang:
First, view stablecoins as an additional rail, not a negation of the existing system. Second, don’t be afraid of regulation. Regulation itself is an opportunity. What was once only possible for banks can now also involve PSPs and brokerages, which presents a huge business opportunity. Banks will not ignore this trend; they are also upgrading their capabilities to support customer needs in the stablecoin era.

Host:
Thank you very much, Amy, for sharing your profound insights on stablecoins and digital asset treasury management. Thank you to all our listeners for tuning in. We are "Clearing Spotlight," continuously bringing you clear perspectives on the market. See you next time.