Analysts at Bernstein forecast a “perfect storm” of political and regulatory influences that could speed up the enactment of U.S. stablecoin legislation this year. The report, published on Wednesday, suggests that the alignment of these forces may encourage major financial institutions to consider ways of incorporating stablecoin issuance or settlement into their business operations. Increased regulatory scrutiny of past “debanking” practices is also anticipated, further integrating stablecoin issuers, exchanges, and intermediaries into the conventional financial system.
“A convergence of White House support, Republican control of both houses, and crypto-friendly heads of agencies such as the SEC and CFTC have created a ‘perfect storm’, providing a powerful boost for stablecoin regulation to pass this year,” said the Bernstein analysts. They opined that the new administration’s presence in the White House sets the stage for an environment where stablecoin legislation passing in the U.S. Congress becomes increasingly likely, potentially triggering significant engagement from traditional financial services companies.
Despite more economical payment methods for retail debit transactions, the Bernstein analysts believe credit card payments present a valuable opportunity for stablecoin integration. They underscored the potential in cross-border remittances and B2B use cases, pointing out that the existing correspondent banking system, a relic from the 20th century, is plagued by numerous inefficiencies, including high costs, delays, limited data flow, and absence of programmability.
“Stablecoins primarily function as the settlement currency of the crypto economy today – they play a key role in trading pairs on exchanges or lending-based applications on-chain. However, we are noticing emerging use cases beyond crypto in global remittance and cross-border B2B,” explained the Bernstein analysts. They also mentioned that stablecoin issuers are among the largest global holders of U.S. Treasurys at present, a factor they believe will speed up the prioritization of stablecoin regulation at a national level.
“Given that 99% of stablecoins are denominated in U.S. dollars, they bolster dollar dominance in the global on-chain economy. Moreover, the solid foundation of float income economics encourages partnerships with fintechs, leading to a powerful distribution mechanism for stablecoins,” they concluded.
The analysts believe AI agent-driven payments demonstrate potential as a long-term application for stablecoins, though they noted that credit card payment companies already have a robust infrastructure for this purpose.
Disclaimer: This article is for informational purposes only. It is not intended as legal, tax, investment, financial, or other advice. Foresight Ventures, a majority investor in The Block as of November 2023, also invests in other crypto companies. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently, delivering objective, impactful, and timely information about the crypto industry.
