#323—Tether CEO: Nobody in Europe or the US needs a stablecoin

Also, Trump names five digital assets as part of strategic reserve

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This week:

1. Tether CEO: You don’t need a stablecoin

2. Big banks join the stablecoin race

3. Trump chooses digital assets for strategic reserve

4. Stuff happens

1. Tether CEO: Nobody in Europe or the US needs a stablecoin

Retail demand for stablecoins in the Western world isn’t really there, according to Tether CEO Paolo Ardoino in an interview with The Big Whale:

Nobody in Europe or the US really needs a stablecoin, most people living in those territories already have a bank account. Those who really need them are in Asia, the Middle East, Africa, South and Central America: all regions of the world that have difficulty accessing the banking system. More and more people are using our stablecoin to protect themselves from the collapse of their local economy.

Ardoino is responding to Tether’s delisting in Europe over MiCA rules, but the numbers back his claim. The entire stablecoin market in Europe is only about $250 million, a drop in the bucket compared to Tether’s overall growth in the last few months alone:

The reason why the USDT has posted an increase in its capitalisation of almost $20 billion over the last four months is because more and more countries are desperately in need of dollars as their economies continue to deteriorate. This situation is forcing the United States to print ever more dollars, which mechanically benefits us.

Their choice to pull out of the market entirely, then, is straightforward given what they perceived as operationally onerous regulations:

At Tether, what particularly bothers us about this specific part of MiCA are the very strong constraints on how you can manage your reserves. If you are a small stablecoin issuer, 30% of your reserves must consist of cash deposits at a bank. In the case of stablecoins of systemic size like ours, this requirement rises to 60%!

These are particularly difficult requirements to meet for stablecoins that have to be very flexible to repay users who request it. In 2022, we had to repay almost $7 billion in less than 48 hours. In one month, the amount of these repayments reached 20 billion dollars, or a quarter of our reserves. This would have been virtually impossible to achieve so quickly if we had a quota of deposits tied up in banks.

As it stands, the primary use case for stablecoins continues to be trading. Here’s Anton Golub (via Greg Kidd):

Stablecoins are NOT for everyday payments.

Stablecoins are NOT for buying coffee.

Stablecoins are NOT for your grandma’s remittances.

You think stablecoins are used by retail?

You're WRONG.

Stablecoins are for professional traders - hedge funds, market makers, and prop firms - to move billions across exchanges instantly.

…

Stablecoins Are the Backbone of Crypto Trading - NOT Payments

Visa research shows 90% of stablecoin transactions are bots & trading firms -- not real consumer payments.

Market makers use stablecoins to rebalance liquidity across trading venues at lightning speed.

Stablecoins exist because banks are too slow for crypto’s 24/7, high-frequency trading world.

Relevant:

• Circle Co-Founder Wants Dollar-Backed Stablecoins to Register in U.S.: Bloomberg

2. Big banks to join stablecoin race

Here’s Thinking Crypto, whose podcast Greg Kidd appeared on last week (via Ron Oliveira):

A month ago, I posted on X about "Stablecoin Wars 2.0," predicting that with the SEC’s SAB 121 repeal, banks would aggressively move into the stablecoin and crypto space. That prediction is now materializing.

In the post I stated:

“The stablecoin market is about to get even more competitive. Why?

The SEC repealed SAB 121, removing restrictions on banks participating in crypto markets.

Stablecoin legislation is expected to pass this year, providing regulatory clarity and a green light for traditional financial institutions to dive into the space. JPMorgan was an early mover, launching JPMCoin in 2018 on the Quorum blockchain, a private, Ethereum-based network. However, it operated in a "walled garden," with limited reach and utility. Now, with the regulatory landscape evolving, JPMorgan and other banks can launch public stablecoins—a game-changer for the financial ecosystem.

Why Banks Will Enter the Game

Banks have historically controlled the flow of payments and money. However, with the rise of stablecoins, they are losing some of that dominance—and the lucrative revenue streams that come with it. Banks see the revenue Tether is generating and want a piece of the action. By issuing their own stablecoins, they will aim to regain control and tap into this rapidly growing market. Like PayPal and Ripple, banks already have the infrastructure, brand recognition, and massive customer bases to drive adoption of their stablecoins. This could spell a major challenge for existing players”

This morning news broke that Bank of America CEO Brian Moynihan confirmed that if comprehensive stablecoin legislation passes, the bank will enter the stablecoin business. He stated at the Economic Club of Washington, DC yesterday, “If they make that legal, we will go into that business.” This should come as no surprise, and other banks are surely crafting their own stablecoin and crypto strategies.

Relevant:

• Bank of America CEO Says Bank Will Likely Launch Its Own Stablecoin

3. Trump chooses 5 digital assets for strategic reserve

The big market mover of the week, here’s Trump’s lucky five:

• Bitcoin

• Ether

• XRP

• Solana

• Cardano

Here’s Reuters:

"This move signals a shift toward active participation in the crypto economy by the U.S. government," said Federico Brokate, head of U.S. business at 21Shares, a digital assets investment management firm. "It has the potential to accelerate institutional adoption, provide greater regulatory clarity, and strengthen the U.S.’s leadership in digital asset innovation."

James Butterfill, head of research at asset manager CoinShares, said he was surprised to see digital assets other than bitcoin included in the reserve.

"Unlike bitcoin...these assets are more akin to tech investments," Butterfill said. "The announcement suggests a more patriotic stance toward the broader crypto technology space, with little regard for the fundamental qualities of these assets."

4. Stuff happens

• U.S. House Committee Advances Effort to Erase IRS' DeFi Tax Rule

• Treasury Secretary Scott Bessent Hires Galaxy Digital Counsel To Advise on Crypto

• Visa advocates for ‘transformational power’ of digital identity and payments | Biometric Update

• Agentic AI will be the real banking disruptor

• Citadel Securities Plots Jump Into Crypto Trading After Trump’s Embrace

• With a Coinbase dismissal pending, what's next?

• Robinhood says it’s free from the SEC

• It’s a ‘fintech plus’: How J.P. Morgan Payments became the bank's $4.7B growth engine - Tearsheet

• Financial Institutions Support Administration’s Effort to Maintain U.S. Leadership in Digital Assets

• The Business Case for Network Tokenization in Payment Ecosystems