The "ChatGPT Moment" of Crypto Assets: How Much Impact Does It Have on Banks?

Author: thedefireport

Compiled by: Vernacular Blockchain

Stablecoins — long considered by cryptocurrency insiders as the backbone of on-chain finance — are on the verge of receiving legal recognition from U.S. regulators.

As Tom Lee put it, this is cryptocurrency’s “ChatGPT moment” — the first crypto product with mainstream utility and institutional clarity.

Summary of New Legislation

The Guidance and Establishment of a United States Stablecoin National Innovation Act (GENIUS Act) may be the most influential legislation in the history of cryptocurrency.

The bipartisan bill establishes the first federal framework for payment stablecoins, aiming to instill confidence, clarity, and institutional legitimacy into the more than $260 billion stablecoin market.

Key Takeaways:

• Asset backing: The issuer must back the stablecoin with high-quality liquid assets at a 1:1 ratio. The allowed reserve assets are limited to US dollar cash, insured bank deposits, money market funds, or short-term government bonds. USDT does not currently meet this requirement (more on this later).
• Payment only: Issuers are not allowed to pay interest to stablecoin holders, ensuring that stablecoins are only used as digital cash equivalents (avoiding becoming quasi-bank products). This is a "strategic concession" to banks, buying time for them before stablecoins cause deeper disruptions to the financial system.
• Bankruptcy protection: If the issuer goes bankrupt, stablecoin holders have priority claims on reserve assets ( over the issuer ).
• Transparency and Audits: Issuers are required to disclose their reserves on a monthly basis and undergo regular audits.
• Anti-Money Laundering Compliance: The Act requires strict AML (anti-money laundering) and KYC (customer identity verification) measures, and issuers are required to implement Bank Secrecy Act compliance programs, verify customer identities and report suspicious activities.
• Regulatory structure: The bill authorizes federal and state (assets < $10 billion) regulators to supervise issuers, with the U.S. Treasury as the primary regulator.
• Issuer qualifications: Banks, fintech companies and even large retailers ( such as Walmart ) can issue stablecoins, but public companies primarily engaged in technology, social media or e-commerce are prohibited from issuing them.

By combining the reliability of the U.S. dollar with modern public blockchain networks, the bill lays the foundation for widespread adoption of stablecoins in business and finance while being subject to strict oversight by U.S. regulators.

Impact on USDC and USDT

Is the GENIUS Act a good thing for Circle?

We think this is not the case. Although the bill requires stablecoins to be backed by US dollar assets 1:1 (cash, money market funds, treasury bonds), and Tether (USDT)'s current asset composition (80-85% meets the requirements, and the rest includes gold, Bitcoin and corporate debt) does not meet the bill's standards, this is not fatal to Tether.

Why is Tether not affected?

According to the bill, if an offshore issuer ( such as Tether ) wants to enter the US market, the Treasury Department can conduct a compliance comparison test. As long as its rules are consistent with US standards, Tether can continue to operate in the US market. Therefore, Tether has multiple ways to achieve compliance, and we expect them to do so.

USDC vs USDT: Which will dominate the US market?

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

The answer is not yet clear, and we don’t know what the product will look like. But we expect there will be a large number of stablecoin issuers, and competition will drive down issuance fees. The ultimate winner may win through services around stablecoins, such as:

Salary Payment: Smart contracts + stablecoins can be used for salary/contractor payments, automatically triggering milestones or delayed payments, and simplifying management and accounting processes.

Faster payments: Increase the velocity of money and create a yield-generating currency.

Emerging Markets

Emerging markets are not a “race to the bottom.” These markets are blue ocean markets full of potential, and Tether is a dominant player in them.

In emerging markets, stablecoin holders do not need to earn a yield because holding the stablecoin itself is valuable. In Argentina, for example, stablecoins protect holders from double-digit or even triple-digit inflation.

[Personal observation: I spent 5 weeks in Buenos Aires last year and witnessed the popularity of stablecoins. Many locals received Argentine pesos and exchanged them for USDT as a "value storage" tool through crypto trading platforms (such as BN). ]

We believe that Tether will continue to dominate emerging markets while developing a closer relationship with the U.S. government (see subsequent analysis for details).

Impact on FinTech Companies

We expect that every major fintech company will launch its own stablecoin in the next few years. Paypal has taken the lead, and Stripe may be next.

Block (Square/Cash App), Robinhood, SoFi/Chime, and international fintech companies (such as Revolut, Wise, MercadoPago) are all potential candidates.

reason?

These companies have large user bases, global infrastructure, and strong balance sheets and banking partners.

Stablecoins provide a global 24/7 payment channel, reducing costs for merchants and e-commerce customers while creating new sources of revenue (under the GENIUS Act, fintech companies can retain the proceeds).

Impact on Bank of America

Banks are in a dilemma. We believe that the banks of the future will be fintech companies built on cryptocurrency rails, very different from the banks of today.

But just as the post office survived the spread of email, banks will not disappear. Innovative banks and fintech companies will thrive, and banks that move slowly will become the post office in five years.

Why are Bank of America in trouble?

• Lack of innovation: Banks are large, bureaucratic, and employees lack incentives to take risks.
• No motivation to issue stablecoins: Stablecoins will subvert the banking business model. Banks make profits through deposits, investments, and net interest margins. If stablecoins are issued, the funds cannot be used for lending and become "dead capital." Although banks may issue stablecoins for interest income, they will eventually have to share the profits with holders.

Banks are not going away, but the GENIUS Act accelerates the crisis for those who move slowly.

Impact on Visa/MasterCard

Reminder: Stablecoins can be settled almost instantly, support global peer-to-peer transactions, and have low costs.

Traditional card payment fees are as high as 200-300 basis points ( including issuance/acquiring fees, exchange rate differences and transaction fees ), and settlement takes 2-3 days.

Stablecoins are clearly a superior product and will be used for:

Merchant payments, e-commerce, remittances, subscriptions, cross-border payments, payroll, etc.

This would bypass the card payment track entirely, posing a major threat to the $200 billion per year card payment fee industry.

reason?

Anyone can build services on a public blockchain, and Visa/Mastercard has no control over the infrastructure.

Fintech companies, wallets and stablecoin issuers can directly access global money flow rails without the need for card network membership.

Visa/MasterCard's countermeasures:

• Transition from "card payments only" to a multi-rail infrastructure supporting stablecoins as settlement currencies.
• Provide compliance services: fraud detection, chargeback/dispute processing, identity verification.
• Launch stablecoin branded cards supported by USDC and PYUSD to maintain front-end competitiveness.

what does that mean?

Stablecoins are forcing Visa/Mastercard to transform from a “value transfer” network to a “trust and tools” provider. Savings on card payment fees will benefit merchants, stablecoin issuers, consumers, and fintech companies that integrate new services.

Impact on the dollar’s dominance

Stablecoins are extremely positive for the United States and the U.S. dollar, and can be called a “godsend for cryptocurrency.”

reason?

• Tether was the fifth largest buyer of US debt last year!
• If Tether were a country, its holdings of U.S. debt would rank 18th in the world!
• This trend has only just begun ( thanks to the new regulatory framework ).

Bold prediction: Tether could become one of the most important innovations in the history of the dollar’s growth.

我们相信，目前的政府希望支持Tether在国内和国外的发展。Tether由Cantor Fitzgerald提供储备保管，拥有4.5亿全球用户(，其中大多数在美国以外)。

When international users purchase USDT as a store of value, Tether will purchase U.S. debt, thereby diversifying the holders of U.S. debt from sovereign states to individuals around the world. This is undoubtedly what the U.S. government is happy to see.

Stablecoins not only expand the global network effect of the US dollar, but also diversify the holding base of US debt.

Scott Bessent is well aware of this, and has therefore become an active promoter of stablecoins and the GENIUS Act.

All stablecoin issuers are critical to the dollar, but offshore issuers (like Tether) are particularly critical - they bring new buyers of U.S. debt, expand the dollar’s network effect, and provide financial services to the unbanked.

We believe that the relationship between Tether and the U.S. government will become increasingly close and deserves close attention.

How to invest in stablecoins

Stablecoins are mainly distributed on Ethereum ( including L2, which accounts for 55% ). Tom Lee called Ethereum "the home of stablecoins" on CNBC.

I personally prefer USDC on Solana because of its better user experience, but currently only 4.2% of stablecoins are on Solana.

Investment advice:

• ETH/SOL: The safest long-term stablecoin investment option.
• COIN and HOOD: Alternatives to consider, but both are at all-time highs.
• Circle: The valuation is too high (TTM P/E ratio is 2612), and it is not recommended to chase high prices.
• High risk/high reward: Ethena and Sky (MakerDAO). Ethena is attractive due to regulatory arbitrage (offshore sharing of revenue) of the GENIUS Act, and the positive correlation between USDe demand, ENA price and ETH open interest.

Data: Glassnode

In summary, stablecoin supply, on-chain transaction speed, price, and volatility are all on the rise.

Fasten your seatbelts!