Maelstrom CIO Arthur Hayes Alerts Big Banks Will Eventually Cannibalize Tether's Business Model

Arthur Hayes, CIO of Maelstrom and former CEO of Bitmex, discussed the eventual demise of Tether and other stablecoin companies. Hayes explained that Tether’s business model, which consists of taking dollars and investing in treasuries, will eventually be cannibalized by big banks like JPMorgan when they get allowed to issue fiat-backed stablecoins.

Arthur Hayes Warns About Banks Replacing Tether and Other Stablecoin Companies

Arthur Hayes, the former CEO of Bitmex and CIO of Malestrom, a crypto-focused early-stage investment fund, has stated that he expects big banks to take over the stablecoin business, now dominated by Tether, the company behind USDT.

At Laura Shin’s Unchained podcast, Hayes explained that while Tether has configured itself to be a great product in the crypto market, it has only achieved its status due to the refusal of the U.S. banking system to offer a similar product.

On Tether’s business model, Hayes declared:

The people who own Tether make something like $4 or $5 billion in free cash flow every year. It’s basically an interest rate: they basically take dollars, stuff it in a bank account, and then they go buy treasury bills and they earn the spread.

Nonetheless, Hayes remarked that centralized stablecoins cannot function as they are now without using banks to clear and custody their money. He stressed that bank managers were “f***ing morons” because they provide these services to Tether and other stablecoin companies, yet they fail to achieve the same performance offering stablecoins themselves.

Hayes said this situation will end when the U.S. Treasury permits traditional banks to issue stablecoins, whose legitimacy and backing will not be questioned.

Hayes predicts that banks like JPMorgan will replace Tether and other stablecoins companies, making the same interest play these do today. “At the end of the day, they don’t have any defensible business because they rely on the banks to custody their funds and allow them to trade dead instruments,” he concluded.

Tether closes 2023 with a market cap of $91.5 billion and $4 billion in excess reserves, having invested in several expansion initiatives, according to its CEO Paolo Ardoino.

What do you think about Arthur Hayes’ opinion on the future of Tether and centralized stablecoins? Tell us in the comments section below.