A Thorough Comparison of Open USD, USDG, and SoFiUSD: Who Will Ultimately Control Financial Infrastructure?
This series began with a single question.
SoFi issues its own stablecoin, SoFiUSD. Despite this, it announced its participation in Open Standard, which has a different stablecoin initiative.
Why would a company with its own currency join a collective that could become a competitor?
In the first installment, we looked at Open USD, which has brought together over 140 leading companies..In the third installment, we covered USDG, which has over 130 participating companies and is beginning to expand its services.
Looking at this, SoFiUSD appears to be a small entity challenging two massive collectives, Open USD and USDG, on its own.
So, did it join as insurance in case SoFiUSD fails to gain traction?
Or is it merely for information gathering? Or is there a larger strategy at play?
<How Open USD Operates>
In Open USD, companies representing various sectors have gathered under the Open Standard. They are attempting to build a massive economic sphere from the ground up that no single company could create alone.
Stripe, at the center, holds the gateway to online payments. By bringing Bridge under its umbrella, it has also acquired a stablecoin issuance foundation. Currently, it is attempting to acquire PayPal, aiming to bring a massive distribution infrastructure under its control as well.
On the other hand, there are difficulties unique to a collective. Many of the participating companies are competitors. Even if they agree with the collective's philosophy, they may hesitate to actively implement it if it conflicts with their own interests.
What Open USD needs going forward is for participating companies to integrate Open USD into their own services and generate actual usage. Will the 'participation' of 140 companies turn into 'implementation' by 140 companies?
The real test for Open USD is just beginning.
<How USDG Operates>
USDG placed Paxos at the center of issuance and gathered the companies necessary for distribution. It then created a mechanism to distribute operating revenue generated from reserves to companies that expand the use of USDG.
The number of participating companies has exceeded 130, and the issuance balance has surpassed $3 billion. It is now a key player forming the second tier, following USDT and USDC.
At this moment, USDG is closer to the 'environment where companies can do business on top of a collective' that we considered in the second installment. For participating companies, USDG is beginning to become a currency that generates revenue.
However, this mechanism also has weaknesses.
The revenue earned from reserve assets is heavily influenced by the interest rate environment. While interest rates are high, there is a strong incentive to expand USDG because a large amount of revenue can be distributed to participating companies. However, if interest rates fall, that source of funds will decrease.
This challenge is also common to Open USD, which adopts the same model.
Will companies continue to use the stablecoin even if revenue distribution shrinks? To become a true financial infrastructure, it must evolve from a mere 'revenue-generating currency' into a 'currency necessary to operate financial services.'
USDG also still has a long way to go to reach its goal.
<How SoFiUSD Competes>
SoFi has approximately 15 million members. However, its strategy extends beyond services for its members. More importantly, it focuses on Big Business Banking.
The companies participating in Big Business Banking include those involved in the trading, custody, liquidity, and settlement of digital assets. SoFi also aims to build a massive financial network that connects many companies.
At its core is a corporate infrastructure that allows companies to handle fiat currency and digital assets within a single bank, enabling 24/7 fund transfers and settlements..
Companies keep deposits at SoFi and use standard bank transfers. When necessary, they issue SoFiUSD and send it to counterparty companies on the blockchain. The receiving company can then redeem that SoFiUSD back into dollars.
The ability to seamlessly complete the entire flow of 'bank deposit → SoFiUSD → blockchain → bank deposit' within a single financial institution is the greatest feature of SoFiUSD.
Furthermore, SoFi can manage the cash that serves as the reserves for SoFiUSD in an FRB account. This is a unique strength that issuers who deposit reserves in private banks do not have.
Reserves held at the FRB do not have such credit risks from private banks and have high liquidity, which enhances the safety of the reserves.
We have looked at the three parties so far. Reorganizing them, their methods for aiming for adoption, their current positions, and the challenges they face are vastly different.
At this point, there is no single party that is absolutely superior. What will ultimately decide the winner is whether they can create a market that companies and users actually use.
However, it is not necessarily the case that all three are fighting over the same chair in the same market.
<There May Not Be Only One Winner>
The real financial market does not operate on a single company, currency, or network alone.
・Companies have multiple bank accounts
・Merchants accept multiple payment methods
・Exchanges handle multiple stablecoins
・The optimal financial infrastructure changes depending on the purpose of use
That is precisely why a future where all three succeed in their respective markets is entirely plausible.
Therefore, it is not appropriate to view the reason SoFi joined the Open Standard as 'insurance in case SoFiUSD fails.' That would be underestimating the potential of SoFiUSD itself. I view SoFi's participation more positively.
<Why Did SoFi Join the Open Standard?>
There is not just one conceivable future.
The first future is that SoFiUSD gains credibility as a bank-issued stablecoin and spreads. In this case, SoFi can earn significant profits from SoFiUSD and its financial services.
The second future is that Open USD becomes widespread. However, even in this case, SoFi has the potential to become a provider that supports that financial infrastructure through its own bank, corporate services, Galileo, and Technisys.
The third future is that both SoFiUSD and Open USD become widespread. SoFiUSD usage expands through SoFi's member services and financial network, while Open USD is used by a wider range of merchants and payment networks. If SoFi handles the exchange and fund transfers between them, the two can coexist sufficiently.
The fourth future is that another stablecoin, including USDG, becomes widespread. However, if SoFi can play the role of connecting stablecoins to the real financial system, new business opportunities will arise here as well.
SoFi is positioning itself to secure a role in financial infrastructure regardless of what the future holds. Its true goal is to build a world where, no matter which stablecoin becomes mainstream, the funds flow through SoFi's financial infrastructure—
Viewed in this light, participating in the Open Standard is not an "insurance policy," but a "strategy to expand future options."
<Who will ultimately control financial infrastructure?>
SoFi joined the Open Standard because it did not limit its future solely to SoFiUSD.
No one knows at this moment what the next financial infrastructure will look like. That is why SoFi is not betting on a single future, but is simultaneously extending paths toward multiple conceivable futures.
SoFiUSD is at the center of that strategy. However, SoFi's strategy does not end there.
The winner may not necessarily be the company that issued the most stablecoins. The one who ultimately controls financial infrastructure will be the company that can support the flow of funds, regardless of which currency is chosen.
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