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Treasury Secretary Bessent’s initiative on stablecoins may channel $34 trillion into Ethena, Etherfi, Hyperliquid.
Treasury Secretary Scott Bessent’s support for dollar-pegged stablecoins opens a route for as much as $34 trillion to be directed into decentralized finance platforms like Ethena, Ether.fi, and Hyperliquid.
Arthur Hayes noted in his blog entry dated Aug. 27 that Bessent intends to channel funds from the $13 trillion Eurodollar market and $21 trillion in retail deposits from the Global South into stablecoin frameworks that acquire Treasury bills.
He indicated that this approach tackles two issues: the Treasury’s challenge in monitoring Eurodollar transactions and the necessity for buyers of government debt who are not sensitive to price fluctuations.
The strategy utilizes US social media networks as avenues for the adoption of stablecoins. Meta’s WhatsApp could introduce crypto wallets to billions of users globally, facilitating smooth transactions with stablecoins while circumventing local banking infrastructures.
DeFi protocols set for “secular rise”
Stablecoin issuers are required to invest their deposits in Treasury bills to uphold dollar parity, thereby ensuring a consistent demand for government debt.
Tether generates a net interest margin of 4.25% to 4.5% by holding T-bills, while offering no interest on USDT tokens. This business model scales in direct correlation with deposit increases, providing Bessent with price-insensitive purchasers for short-term government securities.
Bessent can leverage dollar supremacy to enforce compliance with the adoption of stablecoins.
One scenario highlighted by Hayes involves the potential exclusion of foreign banks from Federal Reserve swap lines during financial emergencies. This action would redirect Eurodollar deposits toward US-regulated stablecoin platforms.
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In this context, Hayes anticipates a total stablecoin circulation of $10 trillion by 2028. He posited that three protocols are well-positioned for a “secular rise.”
The first is Ethena, which operates the synthetic dollar system USDe to generate yields by shorting crypto derivatives against long positions. At the time of reporting, Ethena had $12.4 billion in total value locked (TVL) within the protocol.
Path to 25% market share
The analysis predicts that USDe could capture a 25% market share of the overall stablecoin market, potentially reaching a supply of $2.5 trillion.
Hayes also referenced Ether.fi. This protocol provides stablecoin spending via Visa-enabled debit cards, allowing users to utilize their crypto wherever Visa is accepted.
The platform generates revenue at a rate similar to JPMorgan’s 1.78% fee-to-deposit ratio and can also gain significant value from the growth of the US dollar-pegged stablecoin sector.
The third protocol mentioned in the post is Hyperliquid. This protocol leads in decentralized perpetual trading, holding a 63% market share.
Additionally, Hayes noted that Hyperliquid handles daily trading volume that accounts for 26.4% of the total stablecoin supply in trading activities.
Given his $10 trillion forecast, the interactions of these three protocols with stablecoins could greatly benefit them and their native tokens.
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