Author: XinGPT
Stablecoin seems to be a very familiar term to people in the Web3 industry. Since the first day of cryptocurrency trading, depositing money to buy stablecoins has been a standard action.
So why was Circle, the first stablecoin stock, able to achieve an astonishing three-fold increase in just two weeks after its listing?
The most important catalyst comes from the US Senate's vote to pass the GENIUS Stablecoin Act on June 17. Let us analyze the main contents of the bill and why it was passed by the Senate and is likely to be officially implemented?
The main regulatory points of the Stablecoin Act are as follows:
- Dual-track regulatory system: The GENIUS Act sets clear operating rules for the stablecoin market by establishing a federal and state "dual-track" regulatory framework. Stablecoin issuers must choose a federal or state regulatory path based on their size. Large-scale issuers (with an issuance volume of more than $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, and is limited to highly liquid and safe assets. The reserve assets explicitly allowed by the bill include: US dollar cash, insured bank demand deposits, US Treasury bonds maturing within 93 days, repurchase/reverse repurchase agreements, government money market funds that only invest in the above-mentioned safe assets, and tokenized forms of the above-mentioned assets that comply with the law. Issuers are not allowed to use high-risk assets such as cryptocurrencies as reserves.
- Information disclosure and audit mechanism: To improve market transparency, stablecoin issuers are required to disclose their reserves on a monthly basis and accept independent audits. This is intended to enhance public trust in the stablecoin system and prevent bank runs.
- License and compliance requirements: Issuers must apply for a license from the regulator and accept banking regulatory requirements. The transition period is 18 months, and existing market stablecoins must complete compliance adjustments during this period.
- Anti-money laundering and sanctions compliance: Stablecoin issuers must comply with the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations and establish customer identification (KYC) and monitoring systems to prevent illegal capital flows.
- Consumer protection: The bill stipulates that when the stablecoin issuer goes bankrupt, the coin holders have priority right of repayment to ensure that their reserve assets are not misappropriated.
The second one reveals a message, which is also very likely the biggest reason why the stablecoin bill has received attention during Trump’s tenure: debt repayment.
Senator Bill Hagerty's blueprint of "strengthening the hegemony of the US dollar" is being quickly realized by capital: Standard Chartered Bank estimates that if the bill is passed, the global stablecoin market value may surge to US$2 trillion in 2028, which is equivalent to adding a giant buyer who specializes in gnawing at short-term US debt out of thin air. What is even more shocking is that the two major issuers, Tether and Circle, currently hold US$166 billion in US debt. Wall Street analysts predict that in the next few years, stablecoin issuers will surpass hedge funds and become the third largest player in US debt after the Federal Reserve and foreign central banks. Treasury Secretary Scott Bessent has calculated that if the stablecoin market size reaches trillions of dollars by the end of this decade, the private sector's demand for US debt may reduce the government's borrowing costs by several basis points-this is equivalent to using the hot money in the crypto world to discount the financing costs of the US Treasury. What is more subtle is that this demand is essentially "attracting money" for U.S. debt on a global scale. The status of the U.S. dollar as a reserve currency is being consolidated again through the channel of stablecoins. No wonder Trump commented on this bill, "Get it to my desk as soon as possible, the sooner the better."
Although the final 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 final passage and implementation of the stablecoin bill is a foregone conclusion.
What impact will the passage of the stablecoin bill have on investment?
Let’s first look at Circle. Based on Circle’s current market value of approximately US$50 billion, its profit in 2024 is estimated to be US$160 million. In 2025, based on the Q1 financial report, the optimistic estimate of the full-year profit is US$490 million, corresponding to a price-to-earnings ratio of more than 100 times. This assumption is based on the issuance volume of USDC being close to USDC.
To triple the size by the end of 2024 and reach a scale of 120 billion U.S. dollars, it needs to double the size of 60 billion U.S. dollars in June 2025. The issuance scale of Tether USDT is only 150 billion U.S. dollars. This financial estimate is obviously an almost impossible task for Circle.
But the market is not stupid. Why does it give Circle such a high premium?
Arthur Hayes, founder of Bitmex and investor in Ethena stablecoin, commented:
US Treasury staff believe that stablecoin assets under management (AUC) could grow to $2 trillion. They also believe that USD stablecoins could become the tip of the spear, both advancing/maintaining USD hegemony and acting as buyers who are insensitive to Treasury prices. This is an absolutely important macro tailwind.
The dream of the P/E ratio is that stablecoins are almost portrayed as a financial lever for Trump to maintain the hegemony of the US dollar, enhance the attractiveness of US debt, and further promote the Fed's interest rate cuts. Is it expensive to sell such a leading stock for 50 billion US dollars? Don't talk about the P/E ratio, even if it is 100 billion US dollars, it dare not say it is expensive.
What other investment opportunities are there in the stablecoin arena?
If stablecoins are regarded as cars, the car manufacturing industry chain can be divided into car manufacturing (complete vehicle manufacturers), car selling (channel distribution), car accessories, car repairs, car maintenance services, etc.; if stablecoins are used as an analogy, the industry chain includes making stablecoins (stablecoin issuers), selling stablecoins (stablecoin channels), related application scenarios of stablecoins (services), and technical support for stablecoins (accessories).
The issuance of stablecoins is already a track for the Celestial Dragons. Tether has occupied all the underground dollar (black and gray industries) markets and is actively operating to launder them. Circle is currently leading the compliance market, but will face considerable competition in the future. Payment giants (PayPal, Stripe) have their own channels, and the distribution cost is bound to be less than half (for a detailed analysis of Circle’s costs, please refer to my previous article); USD1, which has a Trump-backed team, is in cahoots with the Universe, and it is estimated that Tether and Circle will get a share of the pie.
I would rather regard other issuers as extensions of the channels. For example, multinational logistics and e-commerce companies may not have a higher cost-effectiveness in issuing their own stablecoins than using mainstream stablecoins to earn a share of the profits.
For start-ups, I am more optimistic about stablecoin service providers in niche scenarios, such as Square, which provides stablecoin acquiring services in niche scenarios. As long as I tell merchants that my acquiring fee is 90% lower than that of traditional cards, it will be much easier for them to accept it than to convince merchants and educate them to accept a stablecoin called USDC.
As for the selection of segmented scenarios, I think small cross-border remittances are a pain point. Remote small remittances via SWIFT cost 10-30 US dollars and take 1-3 working days to arrive. Compared with the stablecoin's second-level arrival time and almost negligible transfer cost, the user experience has improved by more than 10 times. Channel providers who can meet the needs of this segmented scenario may become the Paypal of the stablecoin era.
I believe that technology supporting service providers, such as hosting and Regtech, are entrepreneurial directions with a relatively low input-output ratio. They have high compliance costs, heavy operations, and low profit margins, but they are very stable and counter-cyclical. They are suitable for defensive entrepreneurs who want to earn stable cash flow, or internal incubation in large companies such as Ceffu, CB Custody, etc.
In addition to Circle, what other opportunities does the stablecoin concept have in the secondary market?
The most direct benefit of Circle's market value increase is Coinbase. Before the unequal treaty is abolished, Coin can reap the benefits by paying 50% of the channel fee.
The rest of the newly listed stablecoins may also be hyped up like Coinbase. In addition, some securities firms, payment and card organizations will depend on the progress of accessing the stablecoin network:
For the crypto, the growth in the scale of stablecoins means that the supply scale of on-chain DeFi assets has increased significantly, which is beneficial to leading DeFi lending protocols such as Aave and Morpho. Of course, it also means that revenue layers such as Ondo and Maple Finance, especially companies that put U.S. Treasury bonds on the chain, have the most direct advantages.
