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In a recent episode of Cantina TV, Hari Mulackal, our co-founder and CEO, sat down with David Lee, co-founder of Level Money, to discuss the evolving landscape of stablecoins and their growing importance in the global financial ecosystem.
What Are Stablecoins?
For those new to the concept, stablecoins are essentially tokenized dollars on a blockchain. As David explains, "You usually give somebody dollars from a bank account, you send it to a stablecoin issuer like Tether or Circle, and then you receive back a token on some sort of blockchain, whether that's Ethereum or Solana or Arbitrium or Base."
These digital assets maintain a stable value by being pegged to an underlying asset, typically the US dollar. What makes them revolutionary is their ability to be transferred instantly across borders without the friction of traditional banking systems.
The Level Money Approach
Level Money brings a unique twist to the stablecoin space. Rather than issuing tokens directly backed by fiat currency, Level builds on existing stablecoins:
"The way that we work is a little bit different because we actually build on top of these fiat-backed stablecoin issuers. You exchange USDC, which is a stablecoin itself, for Level USD, which is a tokenized version of a dollar again, and then at any point you could redeem that back for the underlying collateral."
What sets Level USD apart is that the backing USDC and USDT are deployed into DeFi native yield sources such as lending and restaking. Users can stake their Level USD to earn yield from these sources in their staking contract.
The Regulatory Landscape
David shared how the regulatory environment for stablecoins has evolved significantly since 2022. What began as a challenging period with negative sentiment toward crypto has transformed into a growing recognition of stablecoins' legitimate role in the financial system.
Perhaps most striking is the scale that stablecoin issuers have reached: "If Tether and Circle combined their treasury holdings into a country, it would be the 16th largest holder of US treasuries." At current growth rates, stablecoin issuers are projected to become the fifth largest holder of US treasuries within five to ten years.
Real-World Impact
At Cantina, we've experienced firsthand the transformative power of stablecoins. As Hari noted, "Stablecoins have been a huge win for us because we can pay anyone in the world in stablecoins. We don't have to deal with all the wire transfers. We don't have to deal with all the mess of international banking."
This practical utility underscores why stablecoins capture the original vision of blockchain technology: creating a borderless, permissionless financial system accessible to anyone in the world.
As regulatory clarity continues to improve and adoption increases, the stablecoin ecosystem is poised for significant growth. Companies like Level Money are at the forefront of innovation, building on the foundation of established stablecoins to create new financial opportunities in the decentralized economy.
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This article is based on a Cantina TV interview with David from Level Money. View the full conversation here.