Crypto Assets "ChatGPT" moment

Author: thedefireport

Last Friday, Trump officially signed the GENIUS Act at the White House, marking the birth of the first stablecoin legislation in American history.

Stablecoins—long regarded by native cryptocurrency users as the backbone of on-chain finance—have gained legitimacy in the eyes of U.S. regulators.

In the long run, this is the "ChatGPT moment" for cryptocurrencies - the first crypto product with mainstream practicality and institutional clarity.

01 Summary of New Legislation

The "GENIUS Act" may be the most influential legislation in the history of cryptocurrency.

The bipartisan-supported bill establishes the first federal regulatory framework for payment stablecoins, aiming to inject confidence, clarity, and institutional legitimacy into the $260 billion stablecoin market.

Key Points:

• Asset Backing: The issuer must fully back its stablecoin with high-quality liquid assets on a 1:1 basis. Acceptable reserve assets are limited to U.S. dollar cash, insured bank deposits, money market funds, or short-term government bonds. USDT currently does not meet this requirement.
• Payment Only: Issuers are prohibited from paying interest to stablecoin holders. This ensures that stablecoins serve solely as digital cash equivalents. We view this as a strategic "concession" to banks, buying them time before stablecoins provoke deeper disruptions in the financial system.
• Bankruptcy Protection: In the event of the issuer's bankruptcy, stablecoin holders have priority claims on the reserve assets.
• Transparency and Auditing: Issuers must disclose reserve status monthly and undergo regular audits.
• Anti-Money Laundering Measures: The bill incorporates strict anti-money laundering and KYC rules, requiring issuers to implement compliance programs under the Bank Secrecy Act, verify customer identities, and report suspicious activities.
• Regulatory Structure: The bill authorizes federal and state regulators (for entities with assets below $10 billion) to oversee issuers, with the U.S. Treasury as the primary regulatory agency.
• Issuer Qualifications: The bill explicitly allows banks, fintech companies, and even large retailers to issue their own stablecoins under defined rules. However, the bill prohibits publicly traded companies primarily engaged in technology, social media, or e-commerce and not "primarily engaged in financial activities" from issuing stablecoins. This means that social media giants like Meta, Twitter, and Instagram are banned from launching stablecoins.

By combining the reliability of the US dollar with modern public blockchain networks, the law paves the way for the widespread adoption of stablecoins in commerce and finance, while being closely supervised by US regulators.

02 The Impact on USDC and USDT

Will the "GENIUS Act" bring advantages to Circle?

We don't think so. Some may believe that, because the new bill requires a 1:1 backing with dollar assets, and Tether currently does not meet this requirement (80-85% of its assets qualify, but gold, Bitcoin, and corporate debt are not included), Circle will have the advantage.

Why is this not a problem for Tether?

According to the bill, if overseas issuers wish to enter the U.S. market, the U.S. Treasury can conduct compliance comparison tests. If their rules are consistent with U.S. rules, they may continue to operate in the U.S. market.

Therefore, Tether has multiple ways to be compliant. We expect them to do so.

Who will win the US market, USDC or USDT?

Perhaps a better question is: Which fintech company will be the first to integrate stablecoins into mainstream products? Circle? Tether? Stripe? Paypal?

I don't know the answer, nor do I know what the product will look like. But it seems there will be many stablecoin issuers, which will drive down their rates.

This means that the winners are likely to be companies that provide additional services around stablecoins.

Salary payment?

The programmability of smart contracts + stablecoins for salary/contractor payments feels like a huge business opportunity that will emerge in the coming years. Imagine automatic payments to employees and contractors triggered by milestones and time delays. Smart contracts and public blockchains handle administrative and accounting tasks.

Faster payment speed, higher currency circulation speed, profit-generating currencies, and stablecoins will ultimately unlock these potentials.

Emerging Markets

Emerging markets are not "race to the bottom". These are more attractive blue ocean markets. And Tether dominates these markets.

In these markets, holders do not need to gain profits. Why? Because in these markets, those holding stablecoins only wish to hold stable currency, and that is where the value lies. For example, in Argentina, stablecoin holders can protect themselves from double-digit or even triple-digit inflation.

By merely holding US dollar stablecoins as a means of storing value, this is their "yield."

We believe that Tether will continue to dominate emerging markets, and we also expect that the relationship between Tether and the U.S. government will become closer.

03 Impact on Financial Technology Companies

We believe that in the coming years, every major fintech company will launch its own stablecoin. Paypal has taken the lead.

We believe Stripe will be the next.

Block (Square/Cash App), Robinhood, SoFi/Chime, and international fintech companies are also possible candidates.

Why?

They have a large user base, global infrastructure, and strong balance sheets and banking partners.

Stablecoins will provide merchants and e-commerce customers with a global, 24/7 payment channel at a lower cost. In addition, they can bring new sources of revenue (according to the GENIUS Act, fintech companies will retain the earnings).

04 The Impact on American Banks

Banks are facing challenges, and in our view, the future banks will be financial technology companies built on cryptocurrency rails, potentially looking very different from today.

Nevertheless, don't forget that email became mainstream twenty years ago, yet post offices are still in operation.

We believe banks will be the same. Innovative banks and fintech companies will perform well, while slow-moving banks will be similar to post offices in five years.

Why are American banks in trouble? ###

They cannot innovate. Not because they don't want to, but because they are too large, too bureaucratic, and their employees lack the incentive to take risks, which anyone who has worked in a large corporation can understand. They have no motivation to launch stablecoins. Why? Because it would undermine their business models.

The profit model of the bank is:

• Deposit absorption,
• Investment Deposit,
• Earn net interest margin (Return on assets - Deposit interest).

If banks issue stablecoins, the funds cannot be used for lending. They cannot "magically" multiply like the US dollar, which is "dead capital" for banks. Of course, we believe that banks will eventually issue stablecoins (to earn interest and offset some of the losses in lending income), but in the end, they will also have to share interest with stablecoin holders.

Banks will not disappear—but a storm is coming for slow-moving banks. The "GENIUS Act" has only accelerated this process.

05 The Impact on Visa/Mastercard

Just a reminder: Stablecoins can be settled almost instantly, peer-to-peer, globally, and at a low cost.

Currently, the cost of traditional card payments is 200-300 basis points, including issuer/acquirer fees, foreign exchange spreads, and interchange fees. Not to mention that settlement takes 2-3 days.

Stablecoins are clearly a better product.

We believe that stablecoins will be used for merchant payments, e-commerce, remittances, subscriptions, cross-border payments, and payroll.

This will completely bypass card payment rails, enabling almost instant global settlement. The cost is only a fraction of traditional card payments.

You can fully believe that this poses a significant threat to the $200 billion card payment fee industry every year.

Why?

Anyone can build on a public blockchain, and Visa/Mastercard cannot control the infrastructure here. Therefore, fintech companies, wallets, and stablecoin issuers can now access global currency flow tracks without the need for card network membership.

Moreover, they can build better products.

Of course, Visa and MasterCard did not sit idly by.

They are integrating services onto the public blockchain in the following ways:

• Shift from "Card Payment Only" to multi-track infrastructure to support stablecoins as "another settlement currency."
• Compliance: Fraud detection, chargebacks/disputes, identity services.
• Launching a stablecoin brand card supported by USDC and PYUSD, which keeps them relevant on the front end, even if they no longer control the track/infrastructure.

What does this mean?

Stablecoins seem to be forcing Visa/Mastercard to shift from a 'value transfer' network to merely providing 'trust and tools.'

The savings from card payment fees may benefit merchants, stablecoin issuers, consumers, and fintech companies that can integrate new services with stablecoin products.

06 The Impact on the Dominance of the US Dollar

Stablecoins are extremely bullish for the United States and the dollar, practically a savior from the crypto heaven.

Why?

Tether was the fifth largest buyer of US debt last year!

If Tether were a country, they would be the 18th largest holder of US debt.

This story has just begun.

This may be a bold opinion. But we believe that Tether could become one of the most important innovations in the history of dollar growth.

We believe that the current government hopes to support Tether's growth both in the US and abroad. It must be mentioned that Cantor Fitzgerald provides custodial services for Tether's reserves. Let us consider that Tether has 450 million users globally, the vast majority of whom are outside the United States.

When international users purchase USDT as a store of value, Tether buys U.S. debt.

Therefore, Tether is decentralizing the base of holders of U.S. debt, shifting from sovereign nations to individuals globally, and you can imagine that the U.S. government would want to establish a close relationship with this.

Stablecoins not only expand the global network effect of the US dollar, but they also decentralize the holder base of US debt.

Scott Besant understands this.

This is why he became an advocate for stablecoins and the GENIUS Act.

All stablecoin issuers are important to the US dollar.

But overseas issuers like Tether are particularly important; new buyers from here are entering, the network effect of the dollar is expanding here, and the unbanked population is being banked here.

I believe that Tether and the U.S. government will eventually form a very close relationship, keep a close eye on this.

07 Summary

The vast majority of stablecoins are on Ethereum, not to mention that Ethereum has already seized the "stablecoin narrative."

Personally, I prefer USDC on Solana because the user experience is better. However, today only 4.2% of the stablecoin supply is on Solana.

ETH/SOL may be the safest long-term way to gain exposure to stablecoins.

Further down the risk curve, there are two crypto-native companies with strong fundamentals: Ethena and Sky.

We like Ethena as a high-risk/high-reward option, and you can check out our recent coverage of the project. We believe that the "GENIUS Act" will create regulatory arbitrage opportunities for stablecoin issuers like Ethena, who share the profits.

Not to mention the correlation between USDe demand, ENA price, and the rising ETH open interest.

![]###https://img-cdn.gateio.im/webp-social/moments-26567256297082fa08cdec6c0f0c2dba.webp###

Data: Glassnode

Ultimately, the supply of stablecoins in the cryptocurrency ecosystem is on the rise, the on-chain circulation speed is increasing, prices are rising, and volatility is also increasing.

It's time to fasten your seatbelt.