Global investment management giant BlackRock has released a statement suggesting stablecoins are becoming a key component in the “future of finance.” They also believe the recently enacted GENIUS Act in the US provides a solid framework for their use as routine payment methods.
In a comprehensive report dated July 28, the BlackRock Investment Institute conveyed its confidence that stablecoins are “here to stay.” The report emphasizes that recent legislative action in the United States positions these digital currencies primarily for payments, rather than as speculative investment vehicles.
BlackRock’s perspective is directly linked to the GENIUS Act, which establishes a regulatory structure at the federal level specifically for payment-focused stablecoins. The report defines stablecoins as digital tokens whose value is directly tied to a fiat currency, with the token issuer maintaining reserve assets.
The report further notes that the adoption of stablecoins has surged since 2020, currently representing approximately $250 billion in value, which is roughly 7% of the total cryptocurrency market capitalization.
Stablecoins: Now Officially a Payment Option
BlackRock’s analysis highlights how the new legislation is redefining the landscape. The GENIUS Act officially designates stablecoins as a valid payment instrument, prohibits the accrual of interest on stablecoin balances, and limits issuance to federally regulated banks, certain registered non-bank entities, and firms chartered at the state level.
BlackRock anticipates this regulatory structure may bolster the dominance of the US dollar by enabling a tokenized payment network for international transactions. However, the prohibition of interest on stablecoin holdings might dampen adoption in developed economies where traditional bank deposits already offer attractive interest rates.
The BlackRock report also delves into the composition of stablecoin reserves. It specifies that issuers are expected to hold a majority of their reserves in repurchase agreements (repos), money market funds, and short-term US Treasury bills with maturities of 93 days or less. BlackRock identifies Tether and Circle as the largest holders of these assets, currently possessing at least $120 billion in T-bills, representing roughly 2% of the outstanding $6 trillion market.
Despite potential growth in stablecoin demand, BlackRock anticipates a minimal impact on Treasury bill yields. This is attributed to the expectation that capital will largely shift from similar asset classes, and the US Treasury’s plans to continue expanding the supply of bills.
The Global Race for Stablecoin Dominance
BlackRock views the US’s regulatory shift as part of a broader global competition. Hong Kong is actively working to attract stablecoin activity, while European regulators are exploring the possibility of a digital euro, implementing safeguards to protect the existing banking system.
BlackRock suggests that if other countries permit interest-bearing stablecoins or prioritize central bank digital currencies, the dollar’s role in international trade finance may face growing competition. However, US policymakers could potentially address this by allowing interest on stablecoins in the future.
Regarding the impact on the broader market, BlackRock projects limited effects on short-term Treasury yields stemming from stablecoin growth, while maintaining a separate view of Bitcoin as a distinct investment driver.