Author: XinGPT
For those in the Web3 industry, stablecoins are an all-too-familiar term; from the first day of trading, depositing to buy stablecoins has been a standard practice.
So why did the first stablecoin stock, Circle, achieve an astonishing threefold increase in just two weeks after listing?
The most important catalyst comes from the U.S. Senate's approval of the GENIUS Stablecoin Bill on June 17. We will analyze the main content of this bill and why it was passed by the Senate and is likely to be officially implemented.
The main regulatory points of the stablecoin bill are as follows:
Dual-track Regulatory System: The GENIUS Bill establishes a federal and state 'dual-track' regulatory framework, setting clear operational rules for the stablecoin market. Stablecoin issuers must choose a federal or state regulatory path based on their scale. Large-scale issuers (with issuance volumes above $10 billion) must be subject to federal regulation to ensure compliance and transparency.
1:1 Reserve Requirement: The bill requires all stablecoins to maintain a 1:1 reserve ratio, limited to highly liquid and safe assets. The bill explicitly allows for reserve assets including: U.S. dollar cash, insured bank demand deposits, U.S. Treasuries maturing within 93 days, repurchase/reverse repurchase agreements, government money market funds that invest only in the aforementioned safe assets, as well as tokenized forms of the aforementioned assets that comply with the law. Issuers are prohibited from using high-risk assets such as cryptocurrencies as reserves.
Information Disclosure and Audit Mechanism: To enhance market transparency, stablecoin issuers must disclose reserve conditions monthly and undergo independent audits. This aims to increase public trust in the stablecoin system and prevent the risk of runs.
Licensing and Compliance Requirements: Issuers must apply for a license from regulatory authorities and comply with banking regulatory requirements. The transition period is 18 months, during which existing stablecoins must complete compliance adjustments.
Anti-Money Laundering and Sanctions Compliance: Stablecoin issuers must comply with the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations, establishing Know Your Customer (KYC) and monitoring systems to prevent illegal fund flows.
Consumer Protection: The bill stipulates that in the event of bankruptcy of the stablecoin issuer, holders have priority claims to ensure their reserve assets are not misappropriated.
The second point reveals an important piece of information that is likely the biggest reason the stablecoin bill received attention during Trump's presidency: debt reduction.
Senator Bill Hagerty's blueprint for 'strengthening the dollar's hegemony' is being quickly realized by capital: Standard Chartered estimates that if the bill passes, the global stablecoin market value could soar to $2 trillion by 2028, equivalent to a massive new buyer for short-term U.S. Treasury bonds. More shockingly, Tether and Circle, the two largest issuers, currently hold $166 billion in U.S. Treasuries. Wall Street analysts predict that in the coming years, stablecoin issuers will surpass hedge funds and become the third-largest player in U.S. Treasuries, behind the Federal Reserve and foreign central banks. Treasury Secretary Scott Bessent calculated that if the stablecoin market reaches trillions of dollars by the end of this decade, demand from the private sector could lower government borrowing costs by several basis points — this means hot money from the crypto world is reducing financing costs for the U.S. Treasury. More subtly, this demand essentially 'sucks in' U.S. Treasuries globally, reinforcing the dollar's status as a reserve currency through the stablecoin pipeline. It’s no wonder Trump commented on this bill, 'Get it to my desk as quickly as possible.'
Although the final passage of the bill still needs to be reviewed and voted on by the House of Representatives before it can be submitted to the President, judging by market expectations, the stablecoin bill's final passage and implementation is already a foregone conclusion.
What impact will the passage of the stablecoin bill have on investments?
Let's first look at Circle. With Circle's current market value estimated at about $50 billion, the profit for 2024 is $160 million, and for 2025, based on an optimistic Q1 financial report, the estimated annual profit is $490 million, corresponding to a P/E ratio of over 100 times, assuming that the issuance volume of USDC is close.
By the end of 2024, a threefold increase to a scale of $120 billion requires doubling from $60 billion in June 2025, while the issuance scale of Tether USDT is only $150 billion. This financial estimate is clearly an almost impossible task for Circle.
But the market is not foolish; why give Circle such a high premium?
Arthur Hayes, founder of Bitmex and investor in Ethena Stablecoin, commented:
U.S. Treasury Department officials believe that the assets under stablecoin management (AUC) could grow to $2 trillion. They also believe that dollar stablecoins could become a spearhead, both advancing/maintaining dollar hegemony and acting as buyers insensitive to Treasury prices. This is an absolutely significant macro tailwind.
The dream of market capitalization is that stablecoins are almost portrayed as Trump maintaining dollar hegemony, enhancing the attractiveness of U.S. Treasuries, further promoting the Federal Reserve to lower interest rates as a financial lever. Is it too expensive to sell you $50 billion for such a leading stock in this field? Even if the P/E ratio is $100 billion, I wouldn't dare to say it's expensive.
What other investment opportunities exist in the stablecoin space?
If we regard stablecoins as cars, the automobile industry chain can be divided into manufacturing (automakers), selling (distribution channels), car parts, maintenance, and servicing; in stablecoin terms, the industry chain includes stablecoin creation (stablecoin issuers), selling stablecoins (stablecoin channels), related application scenarios (services), and technological support (parts).
The issuance of stablecoins has become a race for the elite, with Tether occupying the entire underground dollar (black and gray markets) and actively working on legitimizing operations. Circle currently leads the compliance market, but will face considerable competition in the future, as payment giants (PayPal, Stripe) have their own channels, and distribution costs are bound to be less than half (for detailed cost analysis of Circle, please refer to my previous writings); Trump's background team’s USD1 is likely to share the spoils with Tether and Circle.
I prefer to view other issuers as extensions of channels, such as multinational logistics and e-commerce companies. The cost-effectiveness of issuing their own stablecoins may not be as high as utilizing mainstream stablecoins to earn commission income.
For startups, I am more optimistic about stablecoins as service providers in niche scenarios, akin to traditional payment companies like Square, doing stablecoin acquiring in segmented scenarios, etc. If I tell merchants that my acquiring fee is 90% lower than traditional cards, it would be much easier for them to accept stablecoin payments called USDC than to convince them.
As for the choice of niche scenarios, I believe that small cross-border payments are a pain point. Remote small remittances through SWIFT cost $10-30 and take 1-3 business days to arrive. In contrast, stablecoins allow for instantaneous transfers with almost negligible transaction costs, enhancing user experience by more than ten times. Channels that can facilitate such niche scenario demands could become the PayPal of the stablecoin era.
Technical support service providers, such as custody and Regtech, are, in my view, a low-return entrepreneurial direction. They have high compliance costs, heavy operations, low-profit margins but are very stable and counter-cyclical, suitable for defensive entrepreneurs looking for stable cash flow, or internal incubation from major firms like Ceffu and CB Custody.
Aside from Circle, what other opportunities exist in the secondary market for stablecoins?
Circle's market capitalization has increased, and the most direct beneficiary is Coinbase. Before the invalidation of the unequal treaty, Coinbase can reap the benefits with a 50% channel fee.
Other newly listed stablecoins may also be subject to speculation like Coinbase. Additionally, some brokers, payment, and card organizations will depend on the progress of integrating into the stablecoin network.
For the crypto circle, the growth of stablecoin scale means a significant increase in the supply scale of on-chain DeFi assets, benefiting leading DeFi lending protocols like Aave and Morpho. It also means that yield layers like Ondo and Maple Finance, especially those that will tokenize U.S. Treasuries, have the most direct advantages.
