Could the entrance of large financial institutions into the stablecoin market signal the downfall of stablecoin issuers relying on big banks? Entities such as Tether, which are dependent on banks for fund custody and operations, might be at risk of being overtaken. This is the view of Arthur Hayes, co-founder of BitMEX and CIO at Maelstromfund.
The Possible Impact of Big Banks on Stablecoin Issuers
Hayes recently shared his insights in an interview with a well-known cryptocurrency journalist. He expressed concern that the increasing interest of major banks like JP Morgan in the stablecoin market could lead to a premature end for centralized stablecoin issuers. As traditional companies begin to explore the crypto sphere, Hayes anticipates that banks will consider issuing their own stablecoins.
At present, stablecoin issuers such as Tether back their assets with treasury bills and deposits to maintain a 1:1 parity with the US dollar. This requires relying on banks to accept their deposits and permit them to trade debit instruments. According to Hayes, the existence of stablecoin issuers is contingent on a bank holding or clearing their funds.
The Future of Stablecoin Issuers
Hayes also posited that given the profit margin of companies like Tether, it’s only a matter of time before large banks start exploring the stablecoin market. He believes that the lack of a defensible business by stablecoin issuers and their reliance on banks for fund custody makes this more likely.
Currently, Tether is the leading stablecoin issuer with over $91 billion USDT in circulation, as per CoinMarketCap data. The market cap of this stablecoin makes it the third-largest globally, surpassing altcoins like BNB, Solana, and XRP. Tether’s supply also significantly exceeds that of its closest competitor, Circle, which has around $24 billion in circulation. DeFiLama estimates the total stablecoin market to be worth approximately $130 billion.
Stablecoin Issuers and the Banking System
Hayes suggests that stablecoin issuers like Tether hold a large market share because major players in the US banking system have so far refrained from participating. However, this dominance could be challenged if banks like JP Morgan decide to dive deeper into the market.
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