After a Summer of Stablecoins, What’s Next?
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It's been the summer of stablecoins. The Genius Act that recently became law in The US has created the first federal regulatory framework for stablecoins, digital currencies whose value is typically pegged to fiat currencies, most often the US dollar. The act requires stablecoins to be fully backed by high quality assets such as US treasury bills. So does the stablecoin summer have staying power, and what could that mean for existing payment systems and financial stability more broadly? I'm Alison Nathan, and this is Goldman Sachs exchanges. Each month, I speak with investors, policymakers, an
The three most interesting uses of stablecoins in real life are a, dollar savings products outside of The US. Many people believe that is the single largest ultimate use case of stablecoins. So, on that front, you've got savers or even institutional investors in countries where dollar bank accounts are not widely accessible. And this is a dollar equivalent product that expands demand for the dollar and creates price stability in otherwise volatile or inflation ridden economies. Classic example would be people in Argentina wanting to hold USDC as opposed to holding Argentine pesos. And there ar
Let's talk about the Genius Act. How you think this changes the landscape? What does this really mean for the future of Stablecoin?
Well, at a high level, for the very first time, you actually have a specific supervisory system for stablecoins that mimics and mirrors the supervisory system for national banks. And the reason that more people have not adopted stablecoins over the past five or ten years is largely that they feel safer at the bank. They can go into a bank branch. They see the FDIC insurance sign. They know that their cash is not at risk. They know if the bank is robbed, their money will still be accessible to them. There's a feeling of safety. And there's been a feeling for the whole existence of crypto that c
How confident can we be that federal and especially state agencies have the expertise to be able to supervise this, especially when you think about the actual language of the act, which says disclosure once a month and an external audit once a year? How confident can we be that there is more safety off the back of these provisions?
Yeah. If the only thing happening in the Genius Act was a requirement of a monthly audit, I would say that doesn't make me feel a lot better. That's mostly sort of optics and window dressing. What makes me feel better is that these things have to be issued inside of a bank subsidiary, or if it's a non bank subsidiary, it has to be supervised by a state banking agency. There's a flock to national bank charters right now occasioned by the genius act. I mean, lots and lots of companies that are in the crypto space are now applying for national bank charters. So national banks are subject to somet
Right. Although I think there is just sort of a scale issue here because, I mean, the goal is hundreds or thousands of issuers of stablecoins active in the ecosystem.
I would disagree with you slightly on the idea that it's gonna be such a huge scale. I think of what we currently think of as stablecoins, that market, the crypto native stablecoins, USDC and Tether, those are overwhelmingly likely to be the dominant ones. And these banks that are looking to issue stablecoins, I think they have a very different business in mind. I don't think they're looking to launch a $100,000,000,000 market cap stablecoin for people to participate in like global remittances or DeFi protocols. I I'd say this because I advise a few of these banks
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