Bitwise CIO: U.S. stablecoin bill may trump Bitcoin ETF impact

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As a researcher with a background in finance and experience following the cryptocurrency industry closely, I believe that the U.S. adopting comprehensive stablecoin legislation could indeed mark a turning point for crypto and signify its mainstream acceptance. The potential impact of such regulations may even surpass that of the successful Bitcoin ETFs.

Expert: Matt Hougan, Bitwise CIO, expressed that the United States passing extensive regulations on stablecoins might mark the long-anticipated “arrival of cryptocurrencies into the mainstream.”

In a memo to clients, Hougan posited that the regulation of stablecoins could prove to have greater consequences than the achievement of approved spot Bitcoin (BTC) Exchange-Traded Funds (ETFs).

As an analyst, I’ve noticed that the introduction of Bitcoin Exchange-Traded Funds (ETFs) in the United States signifies a significant shift in the cryptocurrency landscape. However, this is not the sole indicator of change. Other milestones include BlackRock’s launch of a tokenized Treasury fund on the Ethereum blockchain, Europe passing extensive crypto regulations, and Ray Dalio urging investors to consider holding non-debt assets like Bitcoin.

Matt Hougan, Bitwise CIO

Stars align for stablecoins in the U.S. 

As an analyst, I’ve noticed several signs pointing towards the U.S. Congress being on the verge of revealing a regulatory framework for fiat-pegged cryptocurrencies. Hougan’s analysis aligns with my observation.

The Lummis-Gillibrand Act proposing regulation for payment stablecoins has been presented in the Senate, garnering approval from legislators representing diverse political backgrounds. Yet, there’s apprehension within the cryptocurrency sector regarding its potential impact on free expression due to the prohibition of algorithmic stablecoins.

Last week, Maxine Waters, the top Democratic representative on the House Financial Services Committee, revealed details about an agreement she reached with Republican Committee Chair Patrick McHenry concerning regulations for stablecoins.

Several members of the Committee, including Senate Majority Leader Chuck Schumer and Senate Banking Chair Sherrod Brown – known for his critical stance on cryptocurrencies – have reportedly expressed their support or inclination towards the proposed policy regarding waters and Bloomberg’s conversation.

As a researcher studying the regulatory landscape of cryptocurrencies, I’ve noticed an intriguing development: Federal Reserve Governor Chris Waller, Federal Reserve Chair Jerome Powell, and U.S. Treasury Secretary Janet Yellen have recently expressed their support for stablecoins in public statements. This shift in stance from these key figures suggests that the US approach towards this specific crypto sector may be evolving.

Bipartisan interest spurred by three catalysts 

Based on the CIO of Bitwise, there are three key explanations for the change in perspective. Initially, US dollar-linked tokens may strengthen the global influence of the US dollar by providing additional investment opportunities for USD.

Additionally, the enactment of relevant laws could increase the appeal of U.S. Treasuries, leading to greater demand. Notably, stablecoin issuers currently hold the sixteenth largest amounts of these securities among all international independent holders.

As a crypto investor, I find it astonishing that stablecoins, with a total market capitalization of $120 billion, rank as the sixteenth largest “sovereign holders” of U.S. treasuries today. This is quite an accomplishment given the volatile nature of the cryptocurrency market. With increasing demand for stablecoins, their size will soon become too substantial for the U.S. government to allow them to fail.

— Will (@WClementeIII) October 17, 2023

Existing financial institutions, such as banks, could challenge Tether’s market dominance if they were included in the traditional financial system. According to crypto.news, researchers at S&P believe the same thing. While Tether employs 125 people and made a profit of $6.2 billion last year, Goldman Sachs, with over 45,000 employees, earned profits totaling $8.5 billion.

As a seasoned crypto investor, I can’t help but express my excitement about this potential legislation. For the first time in history, Congress is considering comprehensive crypto regulations. If passed, it would open the doors for industry giants like JPMorgan Chase to join the crypto realm. Instead of viewing us as adversaries, they could become valuable partners in certain aspects of the crypto/DeFI ecosystem. Moreover, this legislation could introduce millions of individuals and corporations to the world of crypto wallets, stablecoins, and blockchain-based payment rails. These innovations offer unparalleled speed, affordability, and ease of use that traditional financial systems can’t match.

Matt Hougan, Bitwise CIO

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2024-04-30 23:18