U.S. stablecoin bill may trump Bitcoin ETF impact

Bitwise CIO Matt Hougan said the US’s adoption of a comprehensive stablecoin legislature could signal the long-awaited “mainstreaming of cryptocurrency.”

In a note to clients, Hougan theorized that stablecoin regulations could have a larger impact than the largely successful spot Bitcoin (BTC) ETFs.

“The launch of bitcoin ETFs in the US epitomizes this transition, but it is not the only signpost. Others include BlackRock launching a tokenized Treasury fund on the Ethereum blockchain, Europe passing comprehensive crypto legislation, Ray Dalio calling for investors to own “debt-free money” like bitcoin, and more.

Matt Hougan, Bitwise CIO Stars are aligning for stablecoins in the US

Hougan noted several indicators that suggest the U.S. Congress is closer to unveiling a framework for regulating fiat-pegged cryptocurrencies.

The Lummis-Gillibrand Payment Stablecoin Act was recently introduced in the Senate and has received support from lawmakers from across the political spectrum. However, some in the crypto industry remain skeptical about the bill’s impact on freedom of expression due to its ban on algorithmic stablecoins.

Last week, Maxine Waters, the Ranking Democrat on the House Financial Services Committee, announced that she had struck a deal with Committee Chairman Patrick McHenry on stablecoin rules.

Waters told Bloomberg that several members of the Committee have been briefed and are receptive to the policy, including Senate Majority Leader Chuck Schumer and Senate Banking Chairman Sherrod Brown, who is known to have anti-cryptocurrency sentiment.

Federal Reserve Governor Chris Waller, Federal Reserve Chairman Jerome Powell, and U.S. Treasury Secretary Janet Yellen have publicly expressed their support for stablecoins; This is a sign that Washington’s approach to this particular crypto sector may be reversing.

Bipartisan interest spurred by three catalysts

According to Bitwise CIO, there are three main reasons for the narrative change. First, coins pegged to the US dollar could solidify global USD dominance by allowing more investors to access the popular dollar currency.

Additionally, passage of the law will increase the demand for US Treasury bonds. Stablecoin issuers currently rank 16th among the largest sovereign Treasury bondholders worldwide.

Stablecoins, with a total mkt value of $120 billion today, are currently the 16th largest “sovereign holder” of US treasury bonds. This is a pretty crazy figure considering the state of the crypto market.

As demand for stablecoins grows, they will soon become too large for the US government to allow failure. pic.twitter.com/DOGSyu2egj

— Will (@WClementeIII) 17 October 2023

Inclusion in the traditional financial system will allow existing players such as banks to fight against Tether’s dominance. The USDT provider has 125 employees but made $6.2 billion in profits last year, compared to Goldman Sachs’ $8.5 billion in profits with more than 45,000 employees. According to crypto.news, S&P researchers agree with this sentiment.

“This will be the first comprehensive crypto legislation passed by Congress. This will allow major banks like JPMorgan Chase to enter the space, turning them from enemies to friends of certain aspects of the crypto/DeFi ecosystem. “Millions of individuals and companies will be introduced to the speed, low costs and ease of use offered by crypto wallets, stablecoins and blockchain-based payment channels.”

Matt Hougan, Bitwise CIO