Investment Opportunities in the Stablecoin Arena

For those in the Web3 industry, stablecoins are a term that couldn't be more familiar. From the very first day of trading cryptocurrencies, purchasing stablecoins with fiat currency has been a standard practice.

So, why could Circle, the first stablecoin company to go public, achieve an astonishing threefold increase in its stock price within just two weeks of listing?

The Genesis of the GENIUS Stablecoin Bill

The most significant catalyst stems from the GENIUS Stablecoin Bill, which was passed by the US Senate on June 17. Let's delve into the main content of this bill and explore why it was able to gain Senate approval and is highly likely to be formally implemented.

Key Regulatory Points of the Stablecoin Bill

Dual-track regulatory framework: The GENIUS Bill establishes a federal and state "dual-track" regulatory framework, setting clear operational rules for the stablecoin market. Stablecoin issuers must choose between federal or state regulatory pathways based on their scale. Large-scale issuers (with an issuance volume of over $10 billion) are required to be under federal regulation to ensure compliance and transparency.

1:1 reserve requirement: The bill mandates that all stablecoins maintain a 1:1 reserve ratio, limited to highly liquid and secure assets. The bill explicitly allows the following reserve assets: US dollar cash, insured bank demand deposits, US Treasury securities maturing within 93 days, repurchase/reverse repurchase agreements, government money market funds that invest solely in the aforementioned secure assets, and tokenized forms of these assets in compliance with the law. Issuers are prohibited from using high-risk assets such as cryptocurrencies as reserves.

Information disclosure and audit mechanism: To enhance market transparency, stablecoin issuers are required to disclose their reserve status monthly and undergo independent audits. This measure aims to bolster public trust in the stablecoin system and guard against bank runs.

Licensing and compliance requirements: Issuers must apply for licenses from regulatory authorities and adhere to banking regulatory requirements. There is an 18-month transition period during which existing stablecoins in the market must complete compliance adjustments.

Anti-money laundering and sanctions compliance: Stablecoin issuers must comply with the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations, establishing customer identification (KYC) and monitoring systems to prevent illegal fund flows.

Consumer protection: The bill stipulates that in the event of the bankruptcy of a stablecoin issuer, coin holders have priority in compensation, ensuring that their reserve assets are not misappropriated.

The second point reveals a piece of information that is also likely the primary reason why the stablecoin bill was given significant attention during Trump's tenure: debt reduction.

Senator Bill Hagerty's blueprint to "strengthen the dollar's dominance" is being rapidly cashed in by capital: Standard Chartered Bank estimates that if the bill passes, the global stablecoin market value could soar to $2 trillion by 2028. This is equivalent to creating an additional giant buyer specializing in short-term US Treasury bonds out of thin air. More astonishingly, Tether and Circle, the two major issuers, currently hold $166 billion in US Treasury bonds. Wall Street analysts predict that in the coming years, stablecoin issuers will surpass hedge funds to become the third-largest player in the US Treasury market, only behind the Federal Reserve and foreign central banks. Treasury Secretary Scott Bessent has done the math: if the stablecoin market size reaches several trillion dollars by the end of this decade, the private sector's demand for US Treasury bonds could reduce government borrowing costs by several basis points. This is akin to using the hot money from the crypto world to give the US Treasury's financing costs a discount. More subtly, this demand essentially "sucks in" funds for US Treasury bonds on a global scale, and the status of the dollar as a reserve currency is being doubly consolidated through the pipeline of stablecoins. No wonder Trump had this to say about the bill, "Get it to my desk as soon as possible."

Investment Implications of the Stablecoin Bill

Although the final passage of the bill still requires approval and a vote in the House of Representatives before it can be submitted to the President, based on market expectations, the implementation of the stablecoin bill is a foregone conclusion.

Impact on Investments

Let's first look at Circle. With Circle's current market value of approximately $50 billion, its profit for 2024 was $160 million. Based on the Q1 financial report, an optimistic estimate for the full-year profit in 2025 is $490 million, corresponding to a price-to-earnings ratio of over 100 times. This assumption is made on the premise that the issuance volume of USDC will be close to three times that of the end of 2024, reaching a scale of $120 billion. To achieve this, it would need to double from the $60 billion base as of June 2025, while Tether's USDT issuance scale is only $150 billion. Such financial estimates are clearly an almost impossible task for Circle.

However, the market is not foolish. Why then does it give Circle such a high premium?

Arthur Hayes, the founder of Bitmex and an investor in the Ethena stablecoin, commented as follows:

US Treasury officials believe that the assets under custody (AUC) managed by stablecoins could grow to $2 trillion. They also believe that dollar stablecoins could become a spearhead, both advancing and maintaining dollar hegemony and acting as buyers insensitive to Treasury bond prices. This is an absolutely crucial macro tailwind.

The dream of the market's valuation lies in the fact that stablecoins have almost been portrayed as a financial lever for Trump to maintain dollar hegemony, enhance the attractiveness of US Treasury bonds, and further push the Federal Reserve to lower interest rates. Is it expensive to sell such a leading stock in this track for $50 billion? Forget about the price-to-earnings ratio; even at $100 billion, one would not dare to say it is expensive.

Other Investment Opportunities in the Stablecoin Landscape

If we consider stablecoins as automobiles, the automotive manufacturing industry can be divided into car manufacturing (original equipment manufacturers), car sales (distributors), car parts, car repair, and car maintenance services. By analogy, the stablecoin industry chain includes stablecoin issuance (issuers), stablecoin sales (distribution channels), related application scenarios (services), and technical support (components).

The issuance of stablecoins has already become a track for the elite. Tether has captured the entire underground dollar (gray and black market) segment and is actively working to legitimize its operations. Circle currently dominates the compliant market, but it will face significant competition in the future. Payment giants like PayPal and Stripe have their own channels, and their distribution costs are likely to be less than half (for a detailed cost analysis of Circle, refer to my previous writings). USD1, backed by Trump's team and in cahoots with the Cosmos exchange, is expected to take a share of the pie from Tether and Circle.

I am more inclined to view other issuers as extensions of distribution channels. For example, multinational logistics and e-commerce companies may find that the cost-effectiveness of issuing their own stablecoins is not as high as using mainstream stablecoins to earn a share of the profits.

For startups, I am more optimistic about stablecoin service providers in niche scenarios, similar to Square in traditional payments. If I can tell merchants that my stablecoin acceptance fee is 90% lower than that of traditional card payments, it will be much easier to convince them than trying to educate them to accept a stablecoin called USDC. In my view, small cross-border payments are a pain point. Remitting small amounts through SWIFT can cost $10 to $30, with a settlement time of 1 to 3 working days. In contrast, stablecoins offer second-level settlement times and almost negligible transfer costs, which can improve the user experience by more than tenfold. Channel providers that can connect such niche scenario demands may become the PayPal of the stablecoin era.

As for technology support service providers, such as custody and Regtech, I believe they are entrepreneurial directions with a relatively low return on investment. 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 a stable cash flow or for internal incubation within large companies, such as Ceffu and CB Custody.

Other Opportunities in the Secondary Market for Stablecoin Concepts

Aside from Circle, the increase in Circle's market value directly benefits Coinbase. Before the unequal treaty is abolished, Coinbase can reap the benefits with a 50% channel fee.

Other newly listed stablecoins also have the potential to be hyped up like Coinbase. In addition, the progress of brokerage firms, payment companies, and card organizations in accessing the stablecoin network will determine their prospects.

Impact on the Crypto Space

The growth in the scale of stablecoins means a significant increase in the supply of on-chain DeFi assets, which is beneficial to DeFi lending protocol leaders such as Aave and Morpho. It also means that yield layers, especially those that tokenize US Treasury bonds, such as Ondo and Maple Finance, will have the most direct advantages.

Investment Opportunities in the Stablecoin Arena

For those in the Web3 industry, stablecoins are a term that couldn't be more familiar. From the very first day of trading cryptocurrencies, purchasing stablecoins with fiat currency has been a standard practice.

So, why could Circle, the first stablecoin company to go public, achieve an astonishing threefold increase in its stock price within just two weeks of listing?

The Genesis of the GENIUS Stablecoin Bill

The most significant catalyst stems from the GENIUS Stablecoin Bill, which was passed by the US Senate on June 17. Let's delve into the main content of this bill and explore why it was able to gain Senate approval and is highly likely to be formally implemented.

Key Regulatory Points of the Stablecoin Bill

Dual-track regulatory framework: The GENIUS Bill establishes a federal and state "dual-track" regulatory framework, setting clear operational rules for the stablecoin market. Stablecoin issuers must choose between federal or state regulatory pathways based on their scale. Large-scale issuers (with an issuance volume of over $10 billion) are required to be under federal regulation to ensure compliance and transparency.

1:1 reserve requirement: The bill mandates that all stablecoins maintain a 1:1 reserve ratio, limited to highly liquid and secure assets. The bill explicitly allows the following reserve assets: US dollar cash, insured bank demand deposits, US Treasury securities maturing within 93 days, repurchase/reverse repurchase agreements, government money market funds that invest solely in the aforementioned secure assets, and tokenized forms of these assets in compliance with the law. Issuers are prohibited from using high-risk assets such as cryptocurrencies as reserves.

Information disclosure and audit mechanism: To enhance market transparency, stablecoin issuers are required to disclose their reserve status monthly and undergo independent audits. This measure aims to bolster public trust in the stablecoin system and guard against bank runs.

Licensing and compliance requirements: Issuers must apply for licenses from regulatory authorities and adhere to banking regulatory requirements. There is an 18-month transition period during which existing stablecoins in the market must complete compliance adjustments.

Anti-money laundering and sanctions compliance: Stablecoin issuers must comply with the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations, establishing customer identification (KYC) and monitoring systems to prevent illegal fund flows.

Consumer protection: The bill stipulates that in the event of the bankruptcy of a stablecoin issuer, coin holders have priority in compensation, ensuring that their reserve assets are not misappropriated.

The second point reveals a piece of information that is also likely the primary reason why the stablecoin bill was given significant attention during Trump's tenure: debt reduction.

Senator Bill Hagerty's blueprint to "strengthen the dollar's dominance" is being rapidly cashed in by capital: Standard Chartered Bank estimates that if the bill passes, the global stablecoin market value could soar to $2 trillion by 2028. This is equivalent to creating an additional giant buyer specializing in short-term US Treasury bonds out of thin air. More astonishingly, Tether and Circle, the two major issuers, currently hold $166 billion in US Treasury bonds. Wall Street analysts predict that in the coming years, stablecoin issuers will surpass hedge funds to become the third-largest player in the US Treasury market, only behind the Federal Reserve and foreign central banks. Treasury Secretary Scott Bessent has done the math: if the stablecoin market size reaches several trillion dollars by the end of this decade, the private sector's demand for US Treasury bonds could reduce government borrowing costs by several basis points. This is akin to using the hot money from the crypto world to give the US Treasury's financing costs a discount. More subtly, this demand essentially "sucks in" funds for US Treasury bonds on a global scale, and the status of the dollar as a reserve currency is being doubly consolidated through the pipeline of stablecoins. No wonder Trump had this to say about the bill, "Get it to my desk as soon as possible."

Investment Implications of the Stablecoin Bill

Although the final passage of the bill still requires approval and a vote in the House of Representatives before it can be submitted to the President, based on market expectations, the implementation of the stablecoin bill is a foregone conclusion.

Impact on Investments

Let's first look at Circle. With Circle's current market value of approximately $50 billion, its profit for 2024 was $160 million. Based on the Q1 financial report, an optimistic estimate for the full-year profit in 2025 is $490 million, corresponding to a price-to-earnings ratio of over 100 times. This assumption is made on the premise that the issuance volume of USDC will be close to three times that of the end of 2024, reaching a scale of $120 billion. To achieve this, it would need to double from the $60 billion base as of June 2025, while Tether's USDT issuance scale is only $150 billion. Such financial estimates are clearly an almost impossible task for Circle.

However, the market is not foolish. Why then does it give Circle such a high premium?

Arthur Hayes, the founder of Bitmex and an investor in the Ethena stablecoin, commented as follows:

US Treasury officials believe that the assets under custody (AUC) managed by stablecoins could grow to $2 trillion. They also believe that dollar stablecoins could become a spearhead, both advancing and maintaining dollar hegemony and acting as buyers insensitive to Treasury bond prices. This is an absolutely crucial macro tailwind.

The dream of the market's valuation lies in the fact that stablecoins have almost been portrayed as a financial lever for Trump to maintain dollar hegemony, enhance the attractiveness of US Treasury bonds, and further push the Federal Reserve to lower interest rates. Is it expensive to sell such a leading stock in this track for $50 billion? Forget about the price-to-earnings ratio; even at $100 billion, one would not dare to say it is expensive.

Other Investment Opportunities in the Stablecoin Landscape

If we consider stablecoins as automobiles, the automotive manufacturing industry can be divided into car manufacturing (original equipment manufacturers), car sales (distributors), car parts, car repair, and car maintenance services. By analogy, the stablecoin industry chain includes stablecoin issuance (issuers), stablecoin sales (distribution channels), related application scenarios (services), and technical support (components).

The issuance of stablecoins has already become a track for the elite. Tether has captured the entire underground dollar (gray and black market) segment and is actively working to legitimize its operations. Circle currently dominates the compliant market, but it will face significant competition in the future. Payment giants like PayPal and Stripe have their own channels, and their distribution costs are likely to be less than half (for a detailed cost analysis of Circle, refer to my previous writings). USD1, backed by Trump's team and in cahoots with the Cosmos exchange, is expected to take a share of the pie from Tether and Circle.

I am more inclined to view other issuers as extensions of distribution channels. For example, multinational logistics and e-commerce companies may find that the cost-effectiveness of issuing their own stablecoins is not as high as using mainstream stablecoins to earn a share of the profits.

For startups, I am more optimistic about stablecoin service providers in niche scenarios, similar to Square in traditional payments. If I can tell merchants that my stablecoin acceptance fee is 90% lower than that of traditional card payments, it will be much easier to convince them than trying to educate them to accept a stablecoin called USDC. In my view, small cross-border payments are a pain point. Remitting small amounts through SWIFT can cost $10 to $30, with a settlement time of 1 to 3 working days. In contrast, stablecoins offer second-level settlement times and almost negligible transfer costs, which can improve the user experience by more than tenfold. Channel providers that can connect such niche scenario demands may become the PayPal of the stablecoin era.

As for technology support service providers, such as custody and Regtech, I believe they are entrepreneurial directions with a relatively low return on investment. 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 a stable cash flow or for internal incubation within large companies, such as Ceffu and CB Custody.

Other Opportunities in the Secondary Market for Stablecoin Concepts

Aside from Circle, the increase in Circle's market value directly benefits Coinbase. Before the unequal treaty is abolished, Coinbase can reap the benefits with a 50% channel fee.

Other newly listed stablecoins also have the potential to be hyped up like Coinbase. In addition, the progress of brokerage firms, payment companies, and card organizations in accessing the stablecoin network will determine their prospects.

Impact on the Crypto Space

The growth in the scale of stablecoins means a significant increase in the supply of on-chain DeFi assets, which is beneficial to DeFi lending protocol leaders such as Aave and Morpho. It also means that yield layers, especially those that tokenize US Treasury bonds, such as Ondo and Maple Finance, will have the most direct advantages.