The PE investment competition brought by the US dollar stablecoin

Author: Joy Liu

One of the biggest news in the financial market recently is probably the passing of the stablecoin bill.

As a participant in the private equity market, I am also thinking about what impact this matter has on our industry.

The private equity sector is an "old money" market.

The private equity market is the most fundamental, traditional, and slowest trading market within this economy, but it involves the most interaction with people. It adheres to what is considered the "old money" trading system.

Integrity/Trust + Negotiation + Legal Contract

The stablecoin system provides global investors with a more convenient opportunity to 'vote with their feet.'

The core private equity market will face more intense competition.

As the efficiency of the trading system improves, the degree of openness of the U.S. market will further increase. This means that more investors from outside the U.S. (limited partners) will have the opportunity to access and participate in high-quality private equity assets, thereby expanding the liquidity and scale of the entire market.

Moreover, with the support of stablecoin systems, global investors find it easier to access high-quality American assets that were previously difficult to obtain due to closed channels. However, this also means that competition for quality projects will become more intense.

Even in the era without stablecoins, the private equity market is a highly specialized and high-threshold system. Truly excellent projects attract a lot of attention from investors right from their inception, and of course, this is also a process of building trust. For example, we often have several years of contact with the project operators before entering a project.

This private relationship and understanding of each other's character is one of the essential elements in obtaining investment positions that are more difficult to acquire.

This is also why many great projects, once they officially enter the financing stage, often have their investment shares snatched up in an instant. Under the technological convenience and cross-border accessibility brought by stablecoins, competition will only intensify rather than slow down.

Assets remain the core, and people and teams remain the foundation.

No matter how much the settlement efficiency is improved or the information transparency is enhanced, the investment value of the private equity market ultimately depends on:

• Is the asset of high quality
• Can I get a share of this asset?
• Is the operations team trustworthy?

Many high-quality private equity projects are off market, meaning they are not made public and are traded offline. For high-quality assets, being able to access this kind of information and having the qualification to participate is itself a layer of screening threshold.

The legislation related to stablecoins has been passed in the United States, providing investors worldwide the opportunity to invest in high-quality American assets. However, the competition of core strengths still exists, and it has become more apparent: Who has sharper judgment? Who acts more quickly? Who has more comprehensive resources? Who possesses stronger investment capabilities?

Although I am not an expert in the field of blockchain and stablecoins, observing the changes that stablecoins bring to the private equity market from the perspective of private equity investment firms shows that while it expands the investment market, it further amplifies the gap in information asymmetry and judgment capability among investors, thus enlarging the unequal advantages of those investors who already have resources, funds, and judgment in the investment market.