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BlackRock states that a definitive regulatory framework in the US positions stablecoins as the payment solution for the ‘future of finance.’
BlackRock has indicated that stablecoins are now central to the “future of finance,” and the recently enacted GENIUS Act provides them with a definitive path as everyday payment tools.
In a July 28 report, the BlackRock Investment Institute noted that stablecoins “appear to be here to stay” and that new legislation solidifies their role in payments rather than as investment vehicles.
The firm connected this perspective to the GENIUS Act, which establishes a federal framework for payment stablecoins. The document characterizes stablecoins as digital tokens linked to fiat currencies and backed by reserves.
Additionally, it highlights the swift adoption since 2020, reaching approximately $250 billion, or around 7% of the total crypto market by value.
Officially a payment method
BlackRock elaborated on how the legislation alters the existing regulations. The law now categorizes stablecoins as a payment method, prohibits interest on balances, and restricts issuance to federally regulated banks, certain registered nonbanks, and state-chartered entities.
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The report evaluated that this framework could enhance the dollar’s position by facilitating a tokenized dollar payment network for international transactions. Simultaneously, the interest prohibition may limit adoption in major economies that already provide appealing bank deposit options.
The note also examines reserves. Issuers would primarily hold repos, money market funds, and US Treasury bills with a maturity of 93 days or less. BlackRock identified Tether and Circle as the largest purchasers, possessing at least $120 billion in T-bills, which accounts for about 2% of the approximately $6 trillion in outstanding bills.
Even with increasing demand, the institute anticipates only a minor impact on bill yields since funds would mainly shift from similar assets, and the Treasury intends to continue increasing bill supply.
Fight for dominance
The institute situates the US transition within a global competition. Hong Kong is seeking to attract stablecoin activity, while Europe is exploring a digital euro with safeguards to protect banks.
If other regions permit interest-bearing stablecoins or promote central bank alternatives, the dollar’s position in trade finance could encounter new challenges. However, US officials might respond by permitting interest in the future.
Regarding market infrastructure, BlackRock anticipates limited impacts on short-term Treasury yields from the growth of stablecoins, while it maintains that bitcoin remains a separate driver of returns.
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