Factors Driving Stablecoin Market Growth

🏦  A major bank plans to issue a HKD-backed stablecoin ⬇️ Standard Chartered just announced a joint-venture to issue one of the first HKD-backed stablecoins (https://lnkd.in/eTW8z-Ut) They join a growing list of banks getting more involved in the stablecoin space, empowered by evolving regulatory clarity: ➞ BBVA is collaborating with Visa to launch a fiat-backed stablecoin in 2025 via the Visa Tokenized Asset Platform (VTAP) ➞ Société Générale (SG-Forge) launched EUR CoinVertible (EURCV) a euro-backed stablecoin, now accessible to retail investors and is in talks with ~10 banks to white-label its stablecoin technology. ➞ FV Bank partnered with issuers to integrate PYUSD, USDC and USDT for direct deposits and outbound payments ➞ JPMorgan Chase uses JPM Coin, a deposit token, for $1B of daily internal transfers (not publicly available but already integrated internally) Three reasons why this is relevant: 1️⃣  Non-USD stablecoins enable improved cross border payments experience ➞ USD stablecoins are 99% of stablecoin market cap today but the cheaper/faster/programmable benefits of stablecoins apply to other fiat currencies too ➞ There are an increasing number of non-USD currencies launching globally. With sufficient liquidity, this enables truly 24/7 FX (including on chain) as well as more on/off ramp and last mile delivery options. Imagine multi-currency wallets for where you have full control of what you were holding and when to exchange/off ramp. ➞ Given that around 80-90% of global trade happens in USD and that there is demand from the global south for USD for stability reasons I still see USD being the dominant stablecoin currency (e.g. +90%) but if the total stablecoin market cap is $2T by 2030 that’s still space for $200B of non-USD stables. 2️⃣  Banks adds legitimacy to the space ➞ Bank deposits above insured amounts aren’t risk free, but the perception is that they’re safer than existing stables (see USDC and USDT depegs and the incorrect but commonly cited example of Terra/Luna). Most business users are unlikely to argue about the safety of a "BofA" coin on its face given the association. The implementation details will matter. Tokenization of bank deposits themselves (see USBC) vs fully backed reserves is an evolving topic to watch out for. 3️⃣ Banks recognize the potential in stablecoins and are turning threats into opportunities ➞ Banks take deposits (pay little yield) and invest in loans (mortgage, cards, cars, biz loans). Stablecoins take deposits (pay little yield) and invest in treasuries. Issuance is fundamentally a very narrow version of banking without fractionalisation and it’s hard to ignore Tether making $13B of profit in 2024. ➞ Cross border payments could threaten banks high margin FX business but they themselves can take advantage of these new rails because they already have (1) customers and (2) access to FX liquidity

A new era for stablecoins. The passage of the GENIUS Act marks a watershed moment for the stablecoin industry. This regulatory breakthrough is expected to unlock unprecedented growth, with funding to stablecoin companies projected to rise to $12.3B in 2025 – more than 10x 2024's $1B in funding. The GENIUS Act represents more than just regulatory oversight; it legitimizes and industrializes stablecoins as critical financial infrastructure. This foundational shift from regulatory ambiguity to structured oversight is triggering a new wave of adoption across traditional finance, e-commerce, and cross-border payments. Success in the post-GENIUS Act era will be determined by three key factors: 1) Regulatory Compliance Capabilities - Companies that can quickly meet the Act's stringent requirements will gain first-mover advantages 2) Traditional Finance Partnerships - Integration with established financial institutions becomes essential for scale and legitimacy 3) Infrastructure Scale - Robust custody, settlement, and operational capabilities will separate winners from losers The door is now open for banks, fintechs, and retailers to launch their own stablecoins or integrate them into existing systems and the transformation is already underway. Major payment companies including Mastercard, Visa, and Stripe have begun integrating stablecoin capabilities. Industry giants like Amazon and Walmart are reportedly moving toward stablecoin-style offerings as payment networks prepare for disruption. Nearly all of the major banks and financial services firms have publicly disclosed their digital assets initiatives with stablecoins at the core. The GENIUS Act doesn't just regulate stablecoins; it positions them as the backbone of the next phase of financial digitization. Companies positioned at the intersection of traditional finance and compliant stablecoin infrastructure stand to capture the largest share of this rapidly transforming market. The stablecoin industry is now set to become to essential financial infrastructure. Which companies are positioned to win in the stablecoin era? Explore the full CB Insights' stablecoin market map: https://lnkd.in/guk7HuPz

Simply Genuis The GENIUS Act establishes the U.S. as epicenter for Stablecoins, cementing its role in the global financial system as we enter the digital age. This legislation sets the regulatory framework that legitimizes digital assets with a legal and formative foundation for digital assets, while reversing the repressive framework that limited financial institutions participation and put digital asset investors at greater risk. This act signed into law by super-majority with over 100 Democrats joining their Republican colleagues to pass the bill that paves the way for innovation, fosters trust, and positions the U.S. as the epicenter of the next financial revolution. Paul Atkins, the new SEC Chair helped reverse measures put in place by Gary Gensler and other members of the prior administration whose goal was to kill digital assets. Stablecoins have a market capitalization exceeding $150 billion and now it is set to grow rapidly. Treasury Secretary Scott Bessent says Stablecoins will create trillions in demand for short-term UST since every dollar in stablecoin must maintain 100% reserve backing with short-term, high-quality liquid assets, such as UST bills. Secretary Bessent further stated that this legislation will “expand US dollar usage via these stablecoins all around the world." The Act requires monthly audits, and best practices for AML/KYC rules. By establishing clear, balanced regulations, entrepreneurs feel free to innovate utilizing blockchain technology. Stablecoins will ultimately reduce costs for businesses and consumers, as citizens around the world can transact instantaneously with minimal friction. Blockchain technologies will power the next generation of payments, as the U.S. dollar comes on-chain. Will we see a “Walmart Coin," a “JPMorgan Coin?" Will the payment rails begin to move away from Visa and MasterCard? The American Bankers Association (ABA) warned that banks avoiding stablecoins risk losing customer deposits to fintech companies or other banks issuing stablecoins, i.e., cross-border payments or remittances. Other major currencies such as the Euro and the Yen will move towards a stablecoin architecture as there are strong use cases to drive efficiency gains and cost savings. Beneficiaries: USDC, Coinbase and other exchanges (Kraken), Banks who now have a green light to trade and custody digital assets, or issue their own stablecoin, while PayPal and select fintech companies should also benefit. Bankruptcy laws are also favorable for stablecoin holders since the law states that stablecoin holders must be paid if front of other creditors. As a credit investor focused on principle protection, an important feature of stablecoins is they are 1:1 backed by treasuries and other liquid assets. What other assets will move on to the blockchain for efficiency, transparency, and cost savings? We are already seeing mortgages and notably, a major credit manager has raised >$100m for Private Credit on the blockchain.