Stablecoin legislation could prove bigger than US spot bitcoin ETFs, Bitwise CIO says

Bitwise CIO Matt Hougan has suggested that if Congress passes comprehensive stablecoin legislation this year, it could prove as big as or bigger than the launch of the U.S. spot bitcoin exchange-traded funds in terms of crypto adoption.

On Wednesday, Ranking Democrat of the House Financial Services Committee Maxine Waters  said  she and Chair Patrick McHenry were on their way "to getting a stablecoin bill in the short run."

In a  note to clients on Monday, Hougan suggested this had gone under the radar — arguing that “it looks like Congress may actually pass comprehensive stablecoin legislation this year,” with Waters indicating the deal already has widespread support.

However, Cody Carbone, Vice President of Policy for the Chamber of Digital Commerce, told The Block on Friday there is still an unresolved sticking point on who should be the primary regulator for stablecoin issuers.

Three factors driving stablecoin interest

In Hougan’s view, the bipartisan interest is being driven by three factors.

Firstly, as Federal Reserve Governor Waller noted, stablecoins can be good for the U.S. dollar, helping it maintain its position as the world’s reserve currency. Secondly, stablecoin projects are significant buyers of U.S. Treasuries — equivalent to the 16th largest sovereign holder. Thirdly, the sheer financial opportunity.

For example, the largest stablecoin issuer, Tether, earned $6.3 billion in profit last year with 125 employees compared to Goldman Sachs’ $8.5 billion with 45,000 staff, Hougan noted. “You can bet your bottom stablecoin: Wall Street is lobbying to be let into the stablecoin game,” he said.

As the first comprehensive crypto legislation passed by Congress, the Bitwise CIO argued the bill would enable banks like JPMorgan to enter the space and move from “foes to friends” in parts of the crypto ecosystem. “Millions of people and corporations would be introduced to the speed, low costs, and ease of use that crypto wallets, stablecoins, and blockchain-based payment rails offer,” he added.

‘Regularly paying with stablecoins in a few years’

Hougan suggested we could be regularly making payments with stablecoins within just a few years, citing Stripe’s recently  announced  “pay with stablecoins” feature and Visa’s on-chain analytics platform showing  rising stablecoin adoption .

The total stablecoin market is currently valued at $166.4 billion, according to The Block’s  data dashboard — up 23% year-to-date, though still down from a peak of around $181 billion in April 2022.

 

A ‘step function’ in the crypto market

Much like there was crypto before and after the ETFs, Hougan argued that before and after stablecoins go mainstream is another “step function” in the market.

Investors obviously can’t benefit from any appreciation in the value of the stablecoins themselves. However, they can invest in the “picks and shovels” associated with them, Hougan said, referring to Layer 1 blockchains like Ethereum and Solana which host large stablecoin supply and various DeFi apps that interact with the digital assets.

“In other words: Crypto is poised to take another huge leap into the mainstream,” Hougan concluded.

Last week, the Bitwise CIO made five  predictions  ahead of Bitcoin's next halving, including a $250,000 price target.