Arthur Hayes, former CEO of BitMEX, stated that large banks in the United States hold the key to the demand for government bonds up to $6.8 trillion, thanks to the boom of stablecoins.
He explained that US Treasury Secretary Scott Bessent intends to turn banks that are too big to fail into sources of stablecoin issuance, thereby raising deposits to purchase government bonds to fund the budget without raising bond interest rates.
MAIN CONTENT
Large US banks could convert $6.8 trillion in deposits into sources for bond purchases through stablecoins.
Eliminating interest on bank reserves frees up an additional $3.3 trillion for investment in bonds.
FinTechs have no competitive advantage due to the Genius Act restricting interest-bearing stablecoin issuance.
How do stablecoins help banks turn deposits into government bonds?
Arthur Hayes asserted that the eight largest banks in the United States hold about $6.8 trillion in deposits, most of which are currently not being used effectively. The issuance of stablecoins would turn this money into "buyers" of bonds that trade quickly and without the risk of holding time.
For example, JPMorgan is launching the JPMD stablecoin on the public blockchain Base, encouraging customers to transfer money into the system through incentives like cashback or 24/7 access. This is not just convenient but a transformative step that helps banks better control costs, streamline personnel, and operate with artificial intelligence.
"The issuance of stablecoins will unlock up to $6.8 trillion in purchasing power for T-bills from banks that are too big to fail."
Arthur Hayes, former CEO of BitMEX, 2024
How does the Genius Act affect stablecoin issuance?
The Genius Act, passed by the US Congress with bipartisan support, prohibits tech companies like Meta from issuing stablecoins and forbids stablecoin issuers from paying interest to customers. This prevents fintech companies like Circle from competing with banks for the use of $6.8 trillion in deposits.
Arthur emphasized that whether Circle or any independent stablecoin issuer succeeds, they still cannot access the enormous deposits in the top banks in the United States. At the same time, banks are backed by the government and have a significant capital advantage.
What impact does eliminating interest on bank reserves create?
Arthur pointed out that currently, the Fed pays interest to banks on required reserves with a total value of $3.3 trillion, causing a large amount of money to be locked up without generating returns from bond investments. If Congress ends this policy, banks will convert all reserves into bond purchases, further increasing the demand for government bonds.
"The Fed's interest payments on reserves are limiting the potential for banks to support the government. Stopping interest payments will shift $3.3 trillion into bonds."
Senator Ted Cruz, US lawmaker, 2024
Overall impact and market forecast from the banking stablecoin trend
Combining both stablecoins and eliminating interest on bank reserves, Arthur predicts the total demand for government bonds will reach about $10.1 trillion, far exceeding Janet Yellen's $2.5 trillion support package in 2022. He calls this a "liquidity bazooka" – a liquidity weapon that allows the government to borrow steadily without putting pressure on interest rates, maintaining capital flows for the stock market and budget.
He also emphasized that investors should shift towards holding Bitcoin and TBTF bank stocks, based on the argument that stablecoins will enhance banks' net interest margins and drive stock prices up significantly.
Illustrative example of stablecoin impact on large banks
Bank Depository Reserves (trillions USD) Market Cap Growth Potential (%) Stablecoin Advantages JPMorgan 2.5 184% Cost savings, control through blockchain and AI Bank of America 1.8 150% Enhanced liquidity, reduced risk Other banks 2.5 Average over 150% Expanding the bond market through stablecoins
Frequently Asked Questions
How do stablecoins help large banks? Stablecoins convert deposits into assets that can quickly, efficiently, and automatically purchase government bonds through blockchain and AI. How does the Genius Act affect FinTechs issuing stablecoins? The law prohibits fintechs from paying interest on stablecoins and restricts issuance, making it impossible for them to compete with large banks in raising deposits. What does eliminating interest on bank reserves mean? It helps free up $3.3 trillion from reserves to invest in government bonds, increasing liquidity sources for the budget. Which bank leads this trend? JPMorgan is the pioneering bank applying stablecoins on the public blockchain Base, actively attracting customers. What should investors do in response to this trend? A good strategy is to invest in TBTF bank stocks and Bitcoin, based on the potential for price appreciation as stablecoins are expanded.
Source: https://tintucbitcoin.com/stablecoin-mo-khoa-68-nghin-ty-usd/
Thank you for reading this article!
Please Like, Comment, and Follow TinTucBitcoin to stay updated with the latest news about the cryptocurrency market and not miss any important information!
