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Bitwise CIO Matt Hougan said that the U.S. adopting comprehensive stablecoin legislature could signal the long-awaited “mainstreaming of crypto.”
In a note addressed to clients, Hougan theorized that stablecoin regulations may have an even bigger impact than the largely successful spot Bitcoin (BTC) ETFs.
“The launch of bitcoin ETFs in the U.S. epitomizes this transition, but it’s not the only road marker. Others include BlackRock launching a tokenized Treasury fund on the Ethereum blockchain, Europe passing comprehensive crypto legislation, Ray Dalio calling on investors to own “non-debt money” like bitcoin, and more.”
Matt Hougan, Bitwise CIO
Stars align for stablecoins in the U.S.
Hougan pointed to several indicators that suggest the U.S. Congress is closer to unveiling a framework for overseeing fiat-pegged cryptocurrencies.
The Lummis-Gillibrand Payment Stablecoin Act was recently introduced in the Senate, gathering support from lawmakers from various points on the political spectrum. However, some within the crypto industry remain skeptical about the bill’s effect on free speech due to its ban on algorithmic stablecoins.
Last week, Maxine Waters, the Ranking Democrat on the House Financial Services Committee, disclosed a deal with Committee Chairman Patrick McHenry regarding stablecoin rules.
Waters told Bloomberg that several members of the Committee were informed and leaning toward the policy, including Senate Majority Leader Chuck Schumer and Senate Banking Chairman Sherrod Brown, who notoriously holds anti-crypto sentiment.
Federal Reserve Governor Chris Waller, Federal Research Chair Jerome Powell, and U.S. Treasury Secretary Janet Yellen have publicly expressed support for stablecoins, a sign that Washington’s approach to this particular crypto sector may have flipped.
Bipartisan interest spurred by three catalysts
According to the Bitwise CIO, three primary reasons exist for the narrative shift. First, U.S. dollar-pegged coins could solidify global USD dominance by allowing more investors access to the popular greenback currency.
Also, passing legislation would bootstrap more demand for U.S. Treasuries. Stablecoin issuers already rank 16 among the largest independent Treasuries holders worldwide.
At $120 billion in total mkt cap today, stablecoins are currently the 16th largest "sovereign holder" of US treasuries — which is wild considering the state of the crypto market.
— Will (@WClementeIII) October 17, 2023
As demand for stablecoins grows, they will soon become too large for the US govt to let fail. pic.twitter.com/DOGSyu2egj
Inclusion in the traditional financial system would allow existing players like banks to contest Tether’s dominance. The USDT provider has 125 employees but earned $6.2 billion in profits last year, compared to Goldman Sachs’s $8.5 billion profits achieved with over 45,000 staffers. Per crypto.news, researchers from the S&P agree with this sentiment.
“This would be the first piece of comprehensive crypto legislation ever passed by Congress. It would allow big banks like JPMorgan Chase to enter the space, moving them from foes to friends of certain aspects of the crypto/DeFi ecosystem. And millions of people and corporations would be introduced to the speed, low costs, and ease of use that crypto wallets, stablecoins, and blockchain-based payment rails offer.”
Matt Hougan, Bitwise CIO