In Conversation with Cobo SVP Alex: The Trio of Technology, Compliance, and Distribution Driving Stablecoin Mass Adoption

By TechFlow

Cobo: Alex Zuo

Translator: Naetitia

From the U.S. GENIUS Act to Hong Kong's Stablecoin Regulation, the new wave of compliance is bringing an unprecedented opportunity for stablecoins.

With Circle's remarkable success, stablecoins have become a "land of milk and honey," akin to the biblical promised land of Canaan. They not only capture the attention of Web3 investors but also draw traditional Web2 giants like JD.com, Ant Group, and Walmart into the spotlight.

In this highly competitive sector, how can one quickly and effectively find their position?

As a full-featured digital asset custody and wallet platform, Cobo launched its stablecoin solution as early as last year. With years of deep industry experience, Cobo has developed a forward-looking approach that offers valuable insights into this question.

In our conversation with Alex Zuo, Senior Vice President and Head of Payments at Cobo, the challenges surrounding stablecoins were concisely explained:

Stablecoin-related businesses require extensive interdisciplinary collaboration, demanding solid expertise across FinTech, technology, and crypto. However, finding a team that excels in all three areas remains a significant challenge.

When discussing Cobo's role in this financial infrastructure transformation led by stablecoins, Alex shared:

Cobo has always been focused on building foundational infrastructure. For stablecoin clients, we provide comprehensive technical support, possess strong compliance advantages, and have extensive experience serving publicly listed companies. At the same time, Cobo’s robust distribution capabilities enable stablecoin issuers to quickly establish scenarios for stablecoin circulation and adoption.

On the opportunities for entrepreneurs in the stablecoin wave, Alex noted:

As stablecoins move toward mass adoption, new demands, tools, and functionalities will emerge across various scenarios, offering significant opportunities for exploration and innovation.

In this feature, we will follow Alex’s perspective to explore the pathways to stablecoin mass adoption in cross-border payment scenarios and its immense potential as the future "internet money layer."

Cross-Border Payment Clients Pave the Way for the Evolution of Cobo's Stablecoin Payment Solutions

TechFlow: Thank you for your time. To start, could you please introduce yourself?

Alex:

Hello, everyone. I’m Alex Zuo, Senior Vice President and Head of Payments at Cobo.

My early career was in the VC space. About a decade ago, I worked at PreAngel, where our partner, Wang Lijie, started exploring the crypto space very early on. Later, I joined the Asia fund of Formation 8, whose co-founder from the LG Family in Korea invested in Coinone, one of Korea's top three exchanges around 2016. It was during this period that I began delving deeper into crypto.

In 2018, I ventured into entrepreneurship with a few friends, including project teams previously invested in by PreAngel. Together, we founded TokenInsight, a rating company where I served as Co-founder and COO, overseeing the business and commercial side of the company. In 2019, I joined Cobo.

I’ve been with Cobo for nearly six years. Initially, I focused on investment-related work, including institutional lending and Cobo Venture. After the collapse of FTX, the company decided to scale back its investment lines and concentrate on core business operations. This shift led me to take charge of all BD Sales and domestic marketing efforts. Currently, I oversee the entire payments and stablecoin-related business.

TechFlow: Many people may not be familiar with Cobo's work in payments and stablecoins. Could you introduce the current stablecoin solutions provided by Cobo and the role they play in payment scenarios?

Alex:

We’ve always been focused on building foundational infrastructure for the industry, especially wallet-related infrastructure. Five or six years ago, when exchanges were booming, our main clients were trading platforms. As the industry gradually moved towards compliance, asset management platforms, mining companies, and miners became our primary service targets. Last year, we shifted our focus to BTCFi, which we believe is a crucial domain.

Starting last year, we began receiving inquiries from an increasing number of cross-border payment clients. These clients, along with their upstream and downstream partners, often hold USDT (U) either actively or passively and encounter payment issues, such as receiving or sending funds. In this process, they sought wallet functionalities from us, prompting us to dive deeper into the payments field and develop more capabilities.

Compared to crypto-native clients, payment clients differ significantly. They have weaker security measures and less understanding of blockchain technology but higher expectations for compliance, product scalability, and long-term business growth. Some even consider obtaining licenses in the future. We realized that the existing infrastructure and custody architecture were insufficient to meet these needs, leading us to make deeper optimizations, primarily in the following areas:

1. Chain Abstraction: We implemented several chain abstraction solutions to lower the barriers for clients using our products. For instance, while it’s natural for crypto users to pay gas fees in USDT transfers, it’s a significant hurdle for traditional Web2 enterprises in terms of both understanding and operation. By introducing chain abstraction, we enabled USDT-based transfers and payments, further reducing the entry threshold.

2. Anti-Money Laundering (AML) and Compliance: Payment clients are highly concerned about avoiding illicit funds on-chain and ensuring the compliance of on-chain assets. To address this, we simplified and enhanced our product offerings. Cobo’s unique advantage lies in being the only global company that provides both centralized custody and MPC (Multi-Party Computation) self-custody solutions. Many of our clients now primarily use MPC, and Cobo combines the strengths of centralized custody with MPC self-custody to deliver compliance capabilities, including on-chain AML services, helping clients mitigate risks further.

Cross-border payments involve three layers: receiving stablecoins via wallets, conversion (settlement), and bank accounts. Payment companies may excel in conversion and banking but often struggle with integrating digital currencies. To bridge this gap, we collaborate with our partners to connect these traditional payment institutions. In Hong Kong, for instance, we hold a license and operate licensed trust accounts to assist clients in resolving these challenges.

Cobo's strength lies in wallets and infrastructure. We aim to build a comprehensive service network around wallet capabilities to lower the barriers for using stablecoins. Ultimately, we hope to promote the adoption of stablecoins on a compliant track, enabling more clients to seamlessly cross the "last mile."

Cobo's Unique Value: Technology, Compliance, Distribution, and Expertise

TechFlow: It seems Cobo’s approach differs from other stablecoin projects. Cobo appears to leverage its own strengths and gradually develop products based on client needs. Does this mean that once you’re done, clients can use your solutions directly?

Alex:

That’s correct, and it’s because we focus more on the foundational layer. Currently, our primary client base is divided into two major categories.

The first category consists of cross-border payment clients. These clients may not issue their own stablecoins, but their upstream and downstream partners already have business needs involving stablecoins or digital currency transactions. As a result, they approach Cobo or seek out settlement providers, and initially, they might even turn to exchanges to handle these transaction-related matters. However, as their business scales up, traditional solutions can no longer meet their needs. At this point, they require a wallet provider like Cobo to help them generate and manage multiple addresses, connect with various settlement providers, and act as a router to find the most cost-effective way to conduct fiat-to-crypto transactions. This encapsulates what we do in the cross-border payment or PSP (Payment Service Provider) scenarios.

The second major category involves stablecoin issuance and circulation. Many of our clients, including large internet companies, didn’t feel an urgent need for stablecoin licenses or related initiatives just a few months ago. They were more inclined to observe how others were progressing. However, recent developments, such as Circle’s stock performance and JD.com’s proactive stance, have made them realize the significant business potential, prompting them to accelerate their efforts.

In this process, clients require support from law firms, consulting firms, and technical service providers. Cobo can offer technical support, such as stablecoin minting, burning, freezing, and blacklisting functionalities. Clients also value partnerships with Cobo due to our robust distribution capabilities. We are connected to numerous PSPs, and our existing client base already handles transfer volumes of $300–400 billion. Stablecoin issuers want their coins to achieve rapid distribution, and our client network helps them swiftly expand their business scope and establish stablecoin circulation scenarios. This is one of our core values.

TechFlow: Many traditional banks claim they can assist clients with cryptocurrency settlements. Are they also working with PSP (Payment Service Provider), as you mentioned? And does Cobo collaborate with many banks?

Alex:

We define PSPs as entities that already bring significant traffic and possess upstream and downstream clients. This is the type of client we value most.

In the past, when crypto-friendly banks wanted to help clients with cryptocurrency settlements but lacked the necessary licenses or capabilities, they typically turned to OTC services. OTC services primarily handle the final conversion.

Cobo aims to help clients gradually build their crypto ecosystems or complete payment systems. We believe this type of client service offers higher added value.

TechFlow: You mentioned earlier that Cobo is the only company globally that provides both centralized custody and MPC self-custody solutions. What specific advantages does this offer? For some clients, wouldn’t it be feasible to work with two separate providers — one for self-custody and another for MPC?

Alex:

Nowadays, more clients are opting for the MPC technical framework. This self-custody model can later support license applications and offers greater scalability for future business operations. The number of clients choosing centralized custody is indeed decreasing. However, MPC clients often encounter challenges such as private key management and compliance issues. This is where Cobo’s dual expertise in centralized custody and MPC self-custody becomes advantageous.

First, in legal jurisdictions where centralized custody is required, Cobo can directly empower clients with our licensing capabilities. Second, in regions where clients wish to apply for their own licenses, they can choose Cobo’s MPC solution. Additionally, for startups without established compliance teams, Cobo’s MPC solution allows them to leverage our centralized custody’s risk control and AML capabilities, further lowering compliance barriers.

Moreover, Cobo has been in the industry for a long time and has accumulated extensive technical expertise. Over the years, we’ve developed various wallet types and foundational wallet solutions. While some wallet solutions, such as smart contract wallets, may not currently be in high demand, we foresee significant needs for these solutions as the market scales.

TechFlow: What do you think are the main obstacles for stablecoins?

Alex:

I believe stablecoin-related businesses require extensive interdisciplinary collaboration. They demand solid expertise across three areas: finance (Fin), technology (Tech), and crypto. Each of these domains has distinct requirements.

In the financial domain, the focus is on compliance and a deep understanding of the financial system and practices. In technology, the emphasis lies in product design and blockchain integration. In the crypto domain, the challenge is how to generate value beyond simple conversion services, as profit margins have dwindled from 0.4% or 0.2% to around 0.05%. The real value lies in helping users manage assets, generate returns, and facilitate swaps, which requires deep crypto-native knowledge.

From my experience, especially in the stablecoin sector, it’s challenging to find a team that excels in all three areas — Fin, Tech, and Crypto. Many companies have evident shortcomings. Therefore, when evaluating a project’s potential for success, I believe the team’s overall capabilities and expertise are key.

TechFlow: Recently, Circle’s stock has surged, and companies like JD.com and Ant Group have announced high-profile entries into the stablecoin space. How does Cobo position itself in this competitive landscape?

Alex:

From what I understand, stablecoin licenses in Hong Kong are quite limited, with only a handful available. Currently, over 40 companies have submitted applications, and law firms report that dozens more are interested. The competition is fierce, with major Chinese financial institutions and internet companies dominating the field. Many smaller firms don’t even qualify to apply.

From an issuance perspective, Cobo is providing technical support to some large clients. These are important partners for us, and we hope they succeed in obtaining licenses in Hong Kong. However, even if they don’t, most of these clients have expressed intentions to pursue licenses in other regions, such as Singapore, the Middle East, or Switzerland. For companies committed to this field, their business expansion won’t be confined to Hong Kong.

In assisting clients, we not only provide issuance tools but also help build foundational wallet systems that connect issuers and merchants. Similar to how Circle has a merchant system that facilitates interactions between settlement providers and merchants, we aim to create a network that supports minting, burning, and other functionalities. Broadly speaking, our goal is to become a distribution channel for stablecoins.

Currently, stablecoin distribution follows three models:

1. Centralized and resource-intensive: Examples include Stripe, which builds a global network through its own banks and licenses, creating a closed ecosystem where clients rely entirely on its infrastructure.

2. Decentralized network model: Circle Payment Network uses a certified supplier network, enabling transfers among whitelisted participants. Circle itself does not directly provide bank accounts for conversion but relies on partners for compliance and information transmission.

3. Hybrid model (Cobo): We build a large PSP transfer network at the core, connecting exchanges, OTC merchants, and Cobo. This network integrates on-chain transfers with rapid off-chain bank settlements. For example, after completing a $1 million USDT transfer on-chain, funds can be settled within a minute through crypto-friendly banks off-chain. Beyond this core layer, smaller PSPs and exchanges interact with top market makers for settlement, while merchants and retail users operate at the outermost layer.

In this system, outer-layer clients need self-custody wallets due to regulatory constraints. Mid-layer clients require more payment tools, such as chain abstraction and AML features. Core-layer clients rely on MPC-based transfer systems. By using Cobo’s ecosystem, clients benefit from faster, safer, and more compliant transfers. This model resembles the CeDeFi concept introduced by AAVE, where institutions participate in DeFi through regulated custodians or wallet providers, ensuring fund security and traceability.

Our goal is to help clients rapidly increase transaction volumes. Cobo currently handles transfer volumes of $300–400 billion, while many stablecoin issuers in Hong Kong have issuance volumes of only a few billion dollars. By providing a robust circulation network, we can significantly enhance their distribution capabilities and connect stablecoin issuers with clients through the Cobo wallet system. This enables issuers to attract users via incentives and subsidies while clients provide more application scenarios, creating mutual benefits for both parties.

TechFlow: Regarding distribution networks, what changes do you foresee in the future? Or, beyond the current distribution systems, do you envision new methods emerging?

Alex:

The Cobo distribution network we’re developing relies on banks and top market makers, using a layered approach to distribute stablecoins. While this model is effective for now, the future evolution of this network remains uncertain.

Historically, stablecoin distribution relied heavily on exchanges, similar to how Circle derived half its revenue from Coinbase. However, it’s unclear which scenarios will support large-scale stablecoin circulation in the future. Some believe that regions with weak banking systems, such as Latin America and Africa, may adopt stablecoins widely, including in cross-border payments where stablecoins act as equivalents, potentially bypassing final settlement. But as stablecoins become more regulated, the actual potential of these scenarios remains uncertain.

Additionally, we’ve discussed internally how the banking system itself might undergo fundamental changes. In the past, cross-border bank transfers depended on the Federal Reserve’s account system. In the future, banks might issue their own tokens, creating a new system that could surpass existing limitations and even challenge the Federal Reserve in certain aspects. This presents a highly promising direction.

There’s also speculation about AI-driven payment agents (AI Agents) becoming the next big trend. However, their specific architecture and implementation are still unknown.

TechFlow: Many companies are applying for licenses in Hong Kong. From your perspective, what barriers do traditional companies face when entering the stablecoin space, whether through licensing or building crypto reserves? Also, what specific compliance advantages does Cobo offer?

Alex:

Currently, listed companies are best suited for two types of businesses: accumulating cryptocurrencies (similar to MicroStrategy) and obtaining stablecoin licenses.

From a crypto accumulation perspective, this business has relatively low barriers and is straightforward to operate, especially under current lenient regulations. However, the key challenges lie in timing the sale and maintaining a competitive edge as more companies join the trend. To stand out, companies must achieve a leading position or explore deeper connections between crypto and equity. Therefore, I believe the real challenge in this direction lies in how to manage operations effectively in the later stages.

Regarding stablecoin licenses, many small companies announce plans to enter this field, often to boost short-term stock prices. We’ve encountered companies that showed no prior interest in this area but issued announcements without thorough communication. Such companies typically lack the execution capability or eligibility to obtain licenses.

In Hong Kong and related business ecosystems, Cobo’s advantages are twofold:

1. Experience with listed companies: We’ve provided services to Nasdaq and Hong Kong-listed mining companies, gaining experience in collaborating with auditing firms on crypto asset audits, statistics, and end-to-end services with consulting firms.

2. Comprehensive solutions: Beyond technical capabilities, Cobo offers complete solutions, from issuance to distribution. Our services go beyond minting and burning to include full merchant wallet management, enabling clients to quickly adopt and utilize stablecoins. This comprehensive approach sets us apart from other providers.

Wallets as the Missing Link for Stablecoins, Optimistic Outlook on Stablecoin Conversion

TechFlow: When it comes to mass adoption, specifically for stablecoins, what key infrastructure do you think still needs to be developed? Or, which infrastructure could create a strong synergy in driving the mass adoption of stablecoins?

Alex:

First of all, I believe wallets can create significant synergy. From Stripe's recent acquisition moves, it’s evident that they aim to enable merchants and even individual users to directly use self-custody wallets via Privy. These wallets can generate addresses using email, making them easy to use right out of the box. Stripe has linked this system to its Bridge-based payment acceptance service, enabling rapid transfers and management between wallets. From our observation, Stripe is leveraging blockchain technology to quickly reconstruct the core functionalities of early Alipay. Their acquisitions this year are clearly aimed at filling gaps in the wallet space.

Similarly, many clients who approached us this year have also realized that wallets are the truly missing link in their business or a segment they find challenging to address quickly in the short term. For this reason, I am very optimistic about our sector.

As for other infrastructure, compliance remains a core issue in the payment space. This includes on-chain KYB (Know Your Business) and KYC (Know Your Customer) processes and how to integrate deeply with real-world Web2 data. For instance, when completing a transaction, you need to protect user privacy while ensuring user reliability. These issues currently lack mature solutions.

Additionally, exploring how to expand into the asset management sector in a compliant and legal manner post-payment is another direction worth investigating. Whether centralized or decentralized, asset management companies still need to optimize how they serve traditional clients.

Lastly, I’m personally very bullish on the stablecoin conversion sector. Given current trends, we may see a surge in stablecoin issuances not just from major tech companies in the U.S., China, and Europe but also from regions like South Korea. The conversion between these stablecoins can no longer rely on the old Curve model. Building an efficient conversion system presents a huge opportunity and is one of the key areas our company is focusing on internally.

Now is the Critical Moment for Stablecoins to Achieve Mass Adoption

TechFlow: How large do you think the market space for stablecoins is? What market share do you foresee Cobo holding in the future?

Alex:

Based on data from our centralized custodial wallets and internal statistics of MPC transaction volumes, we currently hold roughly a 5% market share.

Looking ahead, I believe our core business foundation will remain intact. With the entry of more Chinese companies, major payment corporations, and Web2 payment giants, combined with the rapid transfer system we are building at Cobo, our market share could expand to around 10%–15%.

This is an estimate based on transaction volumes. However, it’s challenging to determine the overall size of the stablecoin market. On one hand, it depends on whether regulatory developments continue to be favorable. On the other hand, it hinges on whether scenarios involving AI agents, for instance, can truly materialize. If billions of AI agents worldwide start transacting, the scale could surpass even that of the current internet.

In the short term, cross-border payment scenarios are the most apparent opportunity. Over time, a significant portion of online, on-chain, and even interactions between intelligent agents could evolve to settle in stablecoins, making the scale difficult to predict.

TechFlow: Among Hong Kong, Singapore, and Dubai, which region do you think is most likely to become a fertile ground for stablecoin growth?

Alex:

From our perspective, each region has its nuances. For instance, from a custodial standpoint:

• The EU offers the MiCA license.

• Singapore has the MAS’s DTSP license and the Digital Payment Token (DPT) license under the Major Payment Institution (MPI) framework.

• Hong Kong lacks clear regulations as of now.

• The U.S. has the New York BitLicense for pure custody.

• Dubai in the Middle East provides the VARA license.

From an issuance perspective:

• The U.S. has relatively low requirements for issuers but mandates compliant custody or the use of regulated commercial banks.

• Switzerland’s Crypto Valley is issuer-friendly, but Europe’s stipulation that reserves must be held in local commercial banks poses risks due to the historical instability of European banks.

• The Middle East, particularly Dubai, is welcoming, but its banking system lacks global recognition.

• Hong Kong’s primary issue is the limited number of licenses and stringent approval processes.

• Singapore was the earliest to introduce stablecoin legislation, but many details remain unclear, leading to uncertainties.

Overall, we recommend exploring licenses in regions like Switzerland, Singapore, and Dubai. However, the choice of license depends on the applicant's capabilities. Regulators primarily focus on three concerns:

1. Whether the business scenarios are compliant and legitimate.

2. Whether the license will be sold off after a couple of years.

3. Whether the circulation volume is too small to justify the license’s value.

TechFlow: Beyond payments, stablecoins are often regarded as the next-generation "internet money layer" in the broader financial market. What’s your take on this perspective? What significant impacts or efficiencies do you foresee stablecoins delivering, and how is Cobo preparing for this future?

Alex:

In the short term, stablecoins will likely erode the fiscal sovereignty of smaller nations, such as Nigeria, where local currencies are highly unstable. In the medium to long term, USD-backed stablecoins could have a profound impact on local currencies, especially in standardized online services and transactions. As USD-denominated stablecoins become mainstream, they could severely disrupt the monetary systems of smaller countries.

From a banking perspective, the competitiveness of small and medium-sized banks is expected to decline over time. For younger generations, as stablecoins become widely used, and accounts are designed to be stablecoin-centric, the need for traditional bank accounts — and by extension, bank cards — may diminish.

For centralized exchanges and banks, their core role in the future may focus on compliance. When converting cryptocurrencies to fiat, these institutions could provide compliance guarantees and mitigate counterparty risks. Their significance won’t disappear entirely, but their value will be diminished.

Cobo has made multi-layered preparations for this trend. For example, we offer fully compliant centralized custody, client-side compliant self-custody, and robust wallet systems, along with continuous product enhancements. Additionally, we are actively pursuing licenses in various regions to meet the needs of companies relying on our services. We’ve even considered whether we should eventually acquire a bank, but for now, it seems premature.

Broadly speaking, many activities will migrate on-chain. For instance, Coinbase has developed its Base blockchain, capturing value within its ecosystem. At Cobo, we’re more focused on becoming the bridge to the on-chain world through our wallet-centric approach.

TechFlow: Many believe stablecoins are primarily an institutional game. What’s your view on this? How can ordinary users better seize the opportunities presented by stablecoins?

Alex:

At this stage, I would advise caution regarding A-share companies. From my interactions, some genuinely want to engage but lack the capacity, while others are merely looking for short-term speculative gains.

As for whether stablecoins are an institutional game, I believe that from an issuance perspective, this sector will undoubtedly be led by highly centralized, large institutions. However, for entrepreneurs, if you believe in mass adoption and foresee 20%–30% of future transactions being settled in stablecoins, there will be numerous new demands, tools, and functionalities across different scenarios worth exploring and innovating.

I think we’re at a critical juncture for stablecoins to achieve mass adoption, which presents a plethora of new entrepreneurial opportunities. In the past, the industry focused on recreating traditional financial functions on-chain. Now, the trend is to adapt on-chain innovations to models acceptable to traditional finance while balancing compliance and the flexibility of blockchain.

For instance, many dismiss USDT cards as a poor business model. The core issues with USDT cards, aside from compliance, lie in poor user experience. Most existing USDT cards are debit cards, where you can only spend what you deposit. Solving the challenges of on-chain credit or integrating traditional credit into blockchain systems could revolutionize the user experience for USDT cards. Similarly, there’s significant room for exploration in adapting trust structures and insurance systems to blockchain.

I’m more optimistic about the current market than many others. Previously, projects would issue tokens and stop at building prototypes. That old model of token issuance and exchange listing no longer works. Today, real customers are entering the market, demanding more mature and practical products. For example, if Coinbase’s account system integrates with Shopify, Amazon, and Walmart next year, and everyone has their on-chain wallet and assets, products must be simplified and made more accessible to the masses. This marks a new starting point.

Finally, I believe CeDeFi (Centralized Decentralized Finance) is a promising area to explore. In the past, Ce referred to centralized exchanges, but now it leans more toward tech platforms. The key lies in balancing liquidity and compliance — meeting regulatory requirements while serving a broader user base. This presents immense entrepreneurial opportunities.