A whirlwind corporate and legislative activity in the United States is changing the landscape of the US financial system as stablecoins move closer to the mainstream.
Circle Internet Financial, the second largest stablecoin behind Tether, made an impressive debut at the New York Stock Exchange on Thursday. The company’s shares soared 168%, as investors rallied around the USDC.
Circle stock had risen another 38% by Friday. This shows the increasing appetite of investors for digital assets tied to fiat currency.
Jeremy Allaire captured the mood of the world in a Bloomberg Interview, saying, “The stablecoin is here to remain.”
Circle makes its eye-catching debut just as legislators prepare to pass legislation that could overhaul $250 billion of stablecoin market, and redefine the way digital dollars are spent.
This sentiment is now shared by an increasing number of business leaders, financial institutions, and policymakers.
Ripple’s RLUSD stablecoin is gaining traction
Ripple has quietly increased its presence in the cryptocurrency payments market.
The company will launch RLUSD in December 2024. It is a stablecoin pegged to the dollar, and it’s issued both on the Ethereum Blockchain and XRP Ledger.
The Dubai Financial Services Authority has approved the use of RLUSD within the Dubai International Financial Centre.
The approval allows Ripple to integrate RLUSD in its licensed payment platform, but it also permits other regulated companies operating within the DIFC to use RLUSD.
Ripple’s dual strategy–supporting both crypto-native infrastructure and institutional compliance–highlights the hybrid approach now defining the stablecoin space.
The big banks are quietly exploring the possibility of issuing stablecoins.
According to The Wall Street Journal, the country’s biggest banks, including JPMorgan Chase and Bank of America as well as Citigroup and Wells Fargo, are reportedly already in discussions about creating a stablecoin that will be jointly issued.
The conversations between companies such as Early Warning Services, the operator of Zelle, and Clearing House reflect a growing concern about losing out in a rapidly changing payments landscape.
The unified stablecoin will not only serve to maintain incumbents’ dominance over the $5 trillion US payment industry, but it will also compete with emerging crypto native solutions.
Sources say that the idea is still in its early stages, but the ultimate goal is to create a universal token for use across all institutions, and possibly even beyond the banking industry.
Deutsche Bank AG also examines stablecoins, and other forms of tokenized deposit.
Sabih Béhzad is the head of Deutsche Bank’s digital assets and currencies transformaion. She said that in an interview, Germany’s biggest lender was evaluating its stablecoin options. This could include releasing its own token, or joining a industry-wide initiative.
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Tech and Fintech Players Test the Waters: From Uber to Stripe
This trend isn’t limited to the banking sector.
Uber’s CEO Dara Kosrowshahi announced at the Bloomberg Tech Summit held in San Francisco, California on 6 June that stablecoins are being actively evaluated as a faster and cheaper way to move money around the world.
He said: “While we’re in the research phase, stablecoins are one of my favorite crypto instantiations that have a more practical use than just crypto as a currency store.”
John Collison told Bloomberg that in May, the co-founder and CEO of payment giant Stripe had already begun discussions with banks to integrate stablecoins within their service.
PayPal has made the jump: in 2024, its PYUSD stablecoin was used to make its first transaction. It paid Ernst & Young.
Capitol Hill prepares first stablecoin bill, the GENIUS Act
A major milestone in the legislative process is adding fuel to fire. The GENIUS Act, which stands for “Guiding and Establishing a National Innovation Strategy for US Stablecoins by 2025”, is expected to be passed in the US Senate soon.
It would be the first federally-regulated stablecoin framework, with clear guidelines for issuance, reserves, and consumer protection.
The bill’s supporters, which include crypto players that have invested significant amounts of money in election campaigns, claim it will bring the much needed legitimacy to the cryptocurrency market, and help catalyze the adoption by institutions.
Christian Catalini of MIT’s Cryptoeconomics Lab said that the bill may trigger competition among Wall Street firms to create their own stablecoins.
Some lawmakers express concerns
Not everyone agrees.
Senator Josh Hawley from Missouri has pledged that he will vote against this bill, in its present form. He warns it gives too much control over finances to the tech companies.
He told reporters that the deal was a “huge giveaway” to Big Tech.
Hawley was concerned that companies would issue stablecoins without adequate oversight, and use them later to monitor users’ finances.
He said, “It lets these tech companies issue stablecoins with no controls.” I don’t understand why this would be done.
There are valid reasons for these fears.
Facebook’s previous stablecoin-project, originally known as Libra, and then Diem, died in 2022, after intense regulatory criticism, which included Federal Reserve chair Jay Powell who expressed “serious concern” over the implications of global monetary policies.
Stablecoins: The Promise and Peril
Stablecoins do not come without risks, despite the growing interest from institutions.
The main attraction of these currencies is their stability in terms of price. Most are pegged to U.S. dollars or other assets.
History has proven that some pegs do not hold.
In 2022, TerraUSD–an algorithmic stablecoin–collapsed, wiping out billions in value and sparking a crisis of confidence in the asset class.
In a CNN article, Darrell Duffie warned that if the value of the coins drops and the peg between the two falls, the result could be the same as a bankrun.
Other practical issues include: the loss of access to wallets by users, lack transparency regarding reserve holdings and still existing security flaws.
These concerns, however, haven’t dampened the excitement of companies looking to replace slow and expensive rails with more flexible digital payment methods.
Money itself: A new turning point
Stablecoins have moved from the margins to the mainstream of financial markets. The GENIUS Act and Circle’s IPO are gaining momentum on Wall Street, while the GENIUS Act is getting closer to being law.
It’s fast becoming the most important innovation.
The crypto-trading experiment that began in the early 2000s is poised to change everything, from business-to-business transactions and remittances to our definition and distribution of money.
Stablecoins are here and moving quickly, whether they’re powered by tech giants or banks.
The post New money order: Wall Street and tech titans embrace Stablecoins in the face of regulation may change as new information becomes available.
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