Smart investors are often those who can spot a trend before it hits the mainstream. By spotting that trend early, they are able to position themselves to take advantage of that trend – before everyone else does.
Today, we’re going to be looking at a trend that you should watch closely.
We’re talking about stablecoins. Arguably the most boring corner of the crypto market – yet one that’s poised to redefine the way the entire world looks at cryptocurrencies…
Stablecoins 101: Why this quiet crypto corner is suddenly exploding
Now, if you’re not already familiar with stablecoins, in a nutshell, stablecoins are cryptocurrencies whose prices are tied to a non-crypto asset. Usually but not exclusively the U.S. dollar.
Stablecoins are designed to be stable in price – a counterweight to crypto volatility. That makes stablecoins useful as both a medium of exchange and as a low-volatility capital preservation asset.
Crypto skeptics call stablecoins “the poker chips” of the “crypto casino.” And that’s both insulting and true – in order to buy bitcoin, you don’t have to use a stablecoin. It’s just much faster and cheaper to exchange dollars for Tether and Tether for bitcoins. Stablecoins are the “bridge currency” between currencies and crypto.
That’s why investors might be interested in stablecoins – not as an asset, but as a means to an end. The utility is clear.
Why do governments want stablecoins?
Let’s look at a specific case. Ian Hall with Global Government Fintech reports:
The U.S. state of Wyoming has this week announced the “mainnet” launch of its own stablecoin – the Frontier Stable Token (FRNT).
That’s right, a state government is starting up their own stablecoin!
Why? Here’s what they stand to gain:
Cheaper, faster transactions for state transactions
- Wyoming can use FRNT to streamline tax payments, fees, and other state transactions
- Settlements happen in real time, without waiting days for ACH or wire transfers
- Cuts down on credit card processing fees and banking intermediaries
Boost to state revenues
- FRNT reserves are backed 1:1 by short-term U.S. federal government debt, so the state earns interest income on the reserves!
- Today, that debt yields about 4% – which could add up to millions in passive revenue for Wyoming
Economic development & job creation
By being the first state to launch its own stablecoin, Wyoming strengthens its brand as both the first and the most crypto-friendly U.S. state
Which attracts blockchain startups, fintech firms and (of course) investors to set up do business in Wyoming, creating jobs and boosting the economy
Which means a more diverse, vibrant economy (and of course more tax revenue)
Financial autonomy
- FRNT gives Wyoming more direct control over its financial rails
- Instead of relying entirely on big banks, they’re using their own digital payments ecosystem – very useful if future federal banking regulations change
All in all, Wyoming gets first-mover prestige and positions itself as a financial innovator, punching above its weight nationally.
Now, all this is only possible thanks to the GENIUS Act.
The true genius of the GENIUS Act
Previous administrations have been concerned that stablecoins represent a threat to financial stability (like the 2022 Terra collapse). Rather than trying to legislate away the “problem,” President Trump and the head of the Treasury see a benefit. Again from Edwards:
U.S. Treasury Secretary Scott Bessent believes stablecoins will buoy the market for U.S. Treasuries, and the government will sell more short-term debt to meet that demand, according to the Financial Times.
It’s no secret the U.S. has a $37 trillion debt problem. With this truly genius move, the administration has used financial alchemy to create, overnight, a massive new customer for the flood of U.S. debt. Absolutely brilliant.
How big a customer? How does $400-$500 billion a year sound? It’s such a big deal that it’s rattling cages around the world. From Zongyuan Zoe Liu with Foreign Policy Magazine:
Some estimates forecast that as much as $1.75 trillion in new dollar-backed stablecoins could enter circulation over the next three years. If this comes to pass, the consequences of this expansion could reverberate far beyond U.S. borders – especially in China.
China’s leadership views these developments with considerable apprehension…
Look: China is the world’s second-largest economy – and they’re not a fan of the U.S. dollar’s role as global reserve currency (the default medium of exchange for international trade).
China’s worried for good reason. The stablecoin boom looks powerful enough to lock in the U.S. dollar’s global reserve currency status.
Where China’s leadership sees risk, others see advantage…
Institutions smell opportunity: Big banks are all in
The geopolitics of China vs. U.S. and global reserve currency status might not matter so much to you. So let’s look to major banks, those “masters of the universe” who keep their fingers on the pulse of the investment world.
What do they think about stablecoins? Jim Edwards with Fortune has details that may surprise you:
Goldman Sachs thinks we’re at the beginning of a stablecoin gold rush, according to a research paper published today by the bank’s Will Nance and others.
Right, that’s OG megabank and investment house Goldman Sachs calling this a “gold rush.”
That’s shocking.
As far as I can remember (with some help from Google), Goldman Sachs has never before referred to anything as a “gold rush.” They’re not the kind of people who just throw around phrases like that.
A few highlights from that analysis:
- The current environment mirrors past events where regulatory clarity boosted market valuations
- USDC seen as top beneficiary of the stablecoin boom, growing by $770 billion by 2027
- Projected 40% annual growth rate for USDC
- USDC’s growth driven by untapped payment sector
That’s right – stablecoin growth is expected mostly to come from the payment sector. Stablecoins are intended for spending, not for saving.
As we’ve already seen, stablecoins are hugely beneficial to those that issue them. What makes the stablecoin “gold rush” relevant for you and me?
The gateway effect: How stablecoins unlock the real crypto market
Stablecoins are fantastic for quick transactions, especially across borders, and they are necessary to buy bitcoin or real cryptocurrencies.
Because of that, you’re going to see an exploding demand for stablecoins, both from cautious investors and from people looking for people like you and me, people who are looking for real capital growth through cryptocurrencies.
This stablecoin gateway, this onramp to the crypto superhighway is going to get crowded fast, though, as more and more retail investors wake up to the possibilities.
How to get ahead of the gold rush before it peaks
Again, you want to see the trend, and get ahead of the trend by taking action now to get into the cryptocurrency marketplace, and you can start your due diligence by getting our free Essential Guide to Digital IRAs.
