Wall Street is talking a lot more about stablecoins
The steady creep of crypto closer to the traditional financial sector is a key theme of the markets this year.
Stablecoins — crypto assets typically pegged to the US dollar and supposedly backed by ample, easy to sell, super safe securities like US Treasurys — are thought to be the most boring corner of the crypto market. By design, they don’t offer the wild, potentially lucrative swings that have enticed crypto traders in recent years.
But try telling that to investors of Circle, the issuer of the second-largest stablecoin, USDC. Since the company started trading publicly in early June, it’s up over 600%. Coinbase, which co-launched USDC with Circle through the Centre Consortium and is a major player in increasing its adoption, is up more than 50% this year and just touched a new high.
In part, that’s because stablecoins’ status as the seemingly safest part of the crypto-verse has put the dollar substitutes at the bleeding edge of a key theme powering market momentum this year: steadily increasing connections between crypto and the traditional, regulated US financial system.
That fusion has gathered pace since President Trump’s second administration began. The White House has publicly embraced crypto and pushed to ease regulations on an industry that — as should be noted — has directly and personally enriched the sitting president and his family. (One estimate said that for the year through April, the Trump family and its business partners had made some $350 million in fees on its trump coin.)
But pro-crypto pressure is also coming from the legislative branch, where crypto has emerged as a key source of political donations over the last couple years. The bipartisan GENIUS Act — which would set the rules of the road for stablecoins — passed the Senate in June. And while it still faces hurdles in the House, the writing seems to be on the wall that stablecoins, in some incarnation, will be connected to the US banking system in the not too distant future.
Case in point: stablecoin-related chatter from S&P 500 companies is picking up steam as we head into the heart of earnings season, especially from the big Wall Street banks that reported this week.
Even before that, the appearance of the term in conference call transcripts surged to a new high in June, FactSet data shows, which doesn’t even count this week’s comments from the big US banks. At last glance, financial titans talking stablecoins included Mastercard, BlackRock, Bank of New York Mellon, JPMorgan, Citigroup, Morgan Stanley, and Goldman Sachs.
For the record, many of the bankers have merely acknowledged developments on the stablecoin regulation front, telling analysts that they’re “following closely” or some such pabulum.
But the uptick in chatter is often triggered by questions from analysts, who are likely interested to know if some of the stablecoin fairy dust that supercharged Circle shares could rub off on the old-school banks they cover. That suggests there’s a lot more stablecoin talk to come.
