Key Points
- Potential stablecoin legislation could significantly impact crypto adoption, possibly surpassing the influence of U.S. spot bitcoin ETFs.
- Three factors are driving interest in stablecoins: their benefit to the U.S. dollar, their contribution to U.S. Treasuries, and the financial opportunity they present.
Matt Hougan, CIO at Bitwise, has highlighted the potential impact of comprehensive stablecoin legislation. If passed by Congress this year, it could significantly influence cryptocurrency adoption, potentially surpassing the impact of the U.S. spot Bitcoin exchange-traded funds.
Maxine Waters, the Ranking Democrat of the House Financial Services Committee, recently indicated that she and Chair Patrick McHenry are progressing towards introducing a stablecoin bill soon. Hougan believes this development has been overlooked and that comprehensive stablecoin legislation could be passed this year.
Unresolved Regulatory Issues
Despite the progress, Cody Carbone, Vice President of Policy for the Chamber of Digital Commerce, highlighted an unresolved issue regarding the primary regulator for stablecoin issuers.
Hougan attributes the bipartisan interest in stablecoins to three main factors. Firstly, Federal Reserve Governor Waller pointed out that stablecoins can be beneficial for the U.S. dollar, helping it retain its status as the world’s reserve currency. Secondly, stablecoin projects are significant purchasers of U.S. Treasuries. Lastly, the sheer financial opportunity that stablecoins present is attracting interest.
Stablecoin’s Financial Impact
Hougan cites Tether, the largest stablecoin issuer, as an example of this financial opportunity. Tether generated $6.3 billion in profit last year with only 125 employees, compared to Goldman Sachs’ $8.5 billion with 45,000 staff. This has led to Wall Street lobbying for entry into the stablecoin sector.
The potential legislation could pave the way for banks like JPMorgan to enter the crypto space. This could turn them from “foes to friends” in certain areas of the crypto ecosystem. It could also introduce millions of people and corporations to the benefits of crypto wallets, stablecoins, and blockchain-based payment systems.
The use of stablecoins for regular payments could become commonplace in a few years. This is supported by Stripe’s recently announced “pay with stablecoins” feature and Visa’s on-chain analytics platform showing rising stablecoin adoption.
The total stablecoin market is currently valued at $166.4 billion, up 23% year-to-date, though still down from a peak of around $181 billion in April 2022.
Hougan argued that the mainstream adoption of stablecoins could be a significant milestone in the crypto market. While investors can’t benefit from any appreciation in the value of the stablecoins themselves, they can invest in the associated infrastructure. This includes Layer 1 blockchains like Ethereum and Solana, which host large stablecoin supply and various DeFi apps that interact with the digital assets.
Hougan concluded by stating that cryptocurrency is poised to take another huge leap into the mainstream. He also made five predictions ahead of Bitcoin’s next halving, including a $250,000 price target.
