Proposed Stablecoin Regulation Escalates Liquidity Cannon Worth Trillions and Boosts Bitcoin, as Elucidated by Arthur Hayes and JPMorgan Chase
In a significant development for the financial sector, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act has been proposed, potentially reshaping the landscape of both traditional banking and cryptocurrency.
### Impact on Banks
The GENIUS Act lifts the previous $10 billion cap on stablecoin issuance, effectively transferring control of the stablecoin market to banks by barring non-banks from issuing interest-bearing stablecoins. This move boosts the legitimacy and credibility of stablecoins by integrating them within a compliant, federally overseen financial framework, encouraging broader institutional adoption and reducing operational and regulatory risks.
Arthur Hayes, co-founder of BitMEX, calculates that banks could see a combined market capitalization increase of over 180% due to cost savings, enhanced net-interest margins, and the ability to convert deposits into blockchain-based stablecoins that facilitate treasury bill purchases. Banks benefit operationally as stablecoin issuance reduces compliance costs (estimated at around $20 billion annually) and improves profit margins by unlocking up to $6.8 trillion in treasury purchasing power.
The act also prohibits tech firms like Meta from issuing stablecoins independently, requiring them to partner with banks or fintechs, further consolidating banking dominance in the space.
### Impact on Bitcoin
Hayes views the GENIUS Act as a structural improvement that strengthens stablecoin credibility and promotes institutional interest in cryptocurrencies, which could contribute to Bitcoin gaining renewed momentum. However, he warns of a potential temporary liquidity drain stemming from Treasury actions, which may cause Bitcoin to trade sideways or even dip temporarily to the mid-$90,000 range before recovering.
Over the longer term, Hayes predicts that systemic stablecoin regulation and banking integration could support Bitcoin price growth, potentially leading to all-time highs above $100,000 once liquidity conditions normalize.
### Summary
The GENIUS Act effectively shifts stablecoin issuance and control to major banks, boosting their market value and operational efficiency. It strengthens stablecoin legitimacy and institutional crypto adoption, which Hayes believes will be positive for Bitcoin's long-term price and market development. There may be short-term volatility for Bitcoin due to fiscal liquidity factors, but overall, the legislation is seen as a bullish structural development for the crypto ecosystem.
The increased liquidity from stablecoin issuance by banks, along with other fiscal policy measures, could potentially send Bitcoin's price pumping 10x to $1 million. As the GENIUS Act continues to unfold, it remains to be seen how it will impact the broader financial landscape and the future of digital assets.
- As banks take control of the stablecoin market due to the GENIUS Act, there may be an increased opportunity for some investors to consider altcoins, such as Bitcoin, as a complement to traditional finance and stablecoin investments.
- The regulatory environment established by the GENIUS Act could foster a more favorable environment for long-term investing in cryptocurrencies like Bitcoin, particularly if these regulations facilitate a surge in stablecoin issuance and overall liquidity in the market.
