tl;dr
BlackRock highlights stablecoins as central to the future of finance, noting the GENIUS Act's establishment of a federal regulatory framework that classifies stablecoins as payment instruments rather than investments. Stablecoins, pegged to fiat currency and backed by reserves, have grown to about $...
BlackRock has emphasized that stablecoins are now central to the “future of finance,” highlighting the recent approval of the GENIUS Act, which firmly establishes stablecoins as everyday payment instruments rather than merely investment products.
In a report dated July 28, the BlackRock Investment Institute noted that stablecoins "look here to stay," pointing to the GENIUS Act’s creation of a federal regulatory framework specifically for payment stablecoins. Defined as digital tokens pegged to fiat currency and backed by reserves, stablecoins have rapidly grown since 2020 to approximately $250 billion, representing about 7% of the total crypto market by value.
The new legislation legally classifies stablecoins as payment methods, prohibits paying interest on stablecoin balances, and restricts their issuance to federally regulated banks, certain registered nonbanks, and state-chartered firms. This regulatory structure aims to bolster the US dollar’s role globally by enabling a tokenized dollar payment network capable of efficient cross-border transactions. However, the ban on interest payments might limit adoption within major economies where attractive bank deposit rates already exist.
Regarding reserves, issuers are required to hold primarily repos, money market funds, and US Treasury bills with maturities of 93 days or less. BlackRock highlights Tether and Circle as the largest holders in this category, together owning around $120 billion in Treasury bills, which accounts for roughly 2% of the $6 trillion total outstanding bills. Despite potential increased demand, the institute anticipates only a minor impact on Treasury bill yields, as funds are expected to rotate between similar low-risk assets and the Treasury plans to expand bill issuance.
BlackRock places this US regulatory shift within the context of a larger global competition. While Hong Kong is actively courting stablecoin activities and Europe is exploring a digital euro with safeguards to protect banking systems, other regions may allow interest-bearing stablecoins or promote central bank digital currencies, potentially challenging the dollar’s dominance in trade finance. US policymakers might respond by considering future allowances for interest payments on stablecoins.
On the topic of market dynamics, BlackRock foresees limited impacts on short-term Treasury yields from stablecoin expansion. Meanwhile, it distinguishes bitcoin as a separate investment vehicle, recognizing it primarily as a unique source of return rather than a payment mechanism.