U.S. Stablecoin Laws: Crypto's Mainstreaming Impact

Bitwise CIO Matt Hougan has suggested that the adoption of a thorough regulatory framework for stablecoins in the U.S. could signify the much-anticipated "mainstreaming of crypto." Hougan outlined his views in a communication to clients, where he speculated that regulations governing stablecoins might have a more profound impact than the successful introduction of 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." remarked Matt Hougan, Bitwise CIO.

Hougan indicated various signs indicating that the U.S. Congress is nearing the release of a regulatory framework for overseeing fiat-backed cryptocurrencies. The Lummis-Gillibrand Payment Stablecoin Act, recently introduced in the Senate, garnered support from lawmakers representing diverse political viewpoints. Nonetheless, some industry insiders remain cautious about the bill's potential impact on free expression due to its restrictions on algorithmic stablecoins.

Last week, Maxine Waters, the Ranking Democrat on the House Financial Services Committee, disclosed a consensus reached with Committee Chairman Patrick McHenry concerning stablecoin regulations. Waters revealed to Bloomberg that several Committee members were informed and leaning toward the proposed policy, including Senate Majority Leader Chuck Schumer and Senate Banking Chairman Sherrod Brown, who is known for his anti-crypto stance.

Federal Reserve Governor Chris Waller, Federal Research Chair Jerome Powell, and U.S. Treasury Secretary Janet Yellen have all voiced support for stablecoins, indicating a potential shift in Washington's approach to this sector of the crypto industry.

According to Bitwise CIO Matt Hougan, three main factors are driving this shift in narrative. Firstly, stablecoins pegged to the U.S. dollar could strengthen the global dominance of USD by providing greater accessibility to the popular currency. Additionally, regulatory approval would boost demand for U.S. Treasuries. Stablecoin issuers currently rank 16th among the largest independent holders of Treasuries 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.

As demand for stablecoins grows, they will soon become too large for the US govt to let fail. pic.twitter.com/DOGSyu2egj — Will (@WClementeIII) October 17, 2023

"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." emphasized Matt Hougan, Bitwise CIO.

Integration into the traditional financial system would allow established entities like banks to compete with Tether's dominance. Despite having only 125 employees, the USDT provider raked in $6.2 billion in profits last year, in contrast to Goldman Sachs, which generated $8.5 billion in profits with a staff of over 45,000. S&P researchers, as reported by crypto. news, align with this perspective.