Legislation, stablecoins, IPOs, Treasury—cryptocurrency is disrupting the U.S. financial market.
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From stablecoin legislation, the surge of new stablecoins, the IPO boom of cryptocurrency companies, to traditional stock companies acquiring crypto assets on a large scale, four major trends are integrating cryptocurrencies into the traditional financial system with unprecedented depth and breadth, creating billions of dollars in profits for the industry while also bringing new risks to investors and regulators.
As reported this July by WallstreetCN, U.S. President Trump signed the first cryptocurrency bill passed by Congress, providing a legal framework for stablecoins. Subsequently, banks, fintech companies, and payment giants have all entered the field, exploring the potential of stablecoins in lowering transaction costs and improving efficiency.
At the same time, cryptocurrency companies have kicked off a wave of IPOs and are sought after in public markets. Even more notably, some listed companies have begun allocating a large portion of their treasuries to cryptocurrencies such as Bitcoin, closely tying their stock prices to the fluctuations of digital assets.
However, this rapid integration also brings new challenges. The expansion of stablecoins may affect banks’ deposit bases and lending capabilities, and may harbor systemic risks. The high volatility behind crypto IPOs and the “coin treasury” strategies of listed companies causing actual losses to secondary market investors all signal that this financial transformation driven by cryptocurrencies is far from settled.
Legislative Breakthrough Grants Stablecoins Legitimacy
This July, President Trump signed a bill concerning stablecoins, marking the first national-level legal recognition for cryptocurrencies.
A stablecoin is a blockchain token pegged one-to-one to fiat currencies such as the U.S. dollar, maintaining its value by holding cash and short-term U.S. Treasury bills and functioning similarly to a money market fund.
This legislative breakthrough has greatly enhanced the legitimacy of stablecoins, paving the way for broader applications.
Banks, fintech, and payment companies are now watching closely, exploring the use of stablecoins to achieve faster and cheaper transactions compared to traditional wire transfers.
In some emerging markets, dollar-denominated stablecoins have been used to hedge against inflation and evade domestic currency volatility. This move could also boost demand for U.S. Treasury bills as the main reserve assets for stablecoins. On the other hand, the proliferation of stablecoins may divert traditional bank deposits, thus affecting banks’ lending capabilities.
Next, U.S. regulators will negotiate regulatory details under heavy lobbying from both the crypto industry and traditional finance.
One focus of debate is whether crypto platforms can pay interest to stablecoin holders. Banking groups oppose it, citing threats to their deposit base, while the crypto community hopes to provide more competitive products.
Old and New Forces Compete for the Stablecoin Market
Riding the legislative tailwind, the stablecoin market is expanding rapidly and is no longer dominated only by Tether’s USDT (in circulation: $171 billion) and Circle’s USDC (in circulation: $74 billion).
Startups, banks, and fintech giants are entering the field, either launching their own U.S. dollar stablecoins or integrating with existing ones:
Payment giant Stripe announced it will launch a blockchain called Tempo, focusing on stablecoin transactions in areas such as payroll and remittances.Banks such as BNY Mellon and Goldman Sachs have begun providing management services for stablecoin reserve assets.JPMorgan Chase has launched a “deposit token” representing users’ bank deposits.
This growing acceptance is paving the way for applications of stablecoins in areas such as merchant payments, multinational corporate treasury management, and interbank settlement.
However, the influx of new participants is also intensifying competition.
According to reports, emerging crypto exchange Hyperliquid recently selected stablecoin issuers through bidding and user voting, kicking off a potentially profit-shrinking competition among issuers.
More importantly, the proliferation of stablecoins increases the risk of crypto market volatility spilling over into the traditional financial system. The collapse of any stablecoin could trigger a crisis of confidence among investors, lead to runs on other stablecoins, and ultimately result in the sell-off of U.S. Treasuries, the cornerstone of global financial markets.
IPO Boom Pushes Crypto Companies Into Public Markets
As the regulatory environment becomes friendlier, crypto companies are experiencing a wave of IPOs.
Stablecoin issuer Circle, blockchain lending company Figure, and crypto platforms Gemini and Bullish all saw significant share price increases on their first days of listing. Legal professionals point out that, under Trump’s administration, the U.S. Securities and Exchange Commission (SEC) has become friendlier towards the crypto industry, giving the green light to these IPO applications.
Public market enthusiasm for these companies has exceeded industry expectations. For example, Circle’s share price has soared 358% since its IPO in June.
However, this trend means that the risks of the crypto industry are being transferred to stock exchanges. These companies’ valuations are often tied to the highly volatile trading volumes of cryptocurrencies, and investors seem to have forgotten the lessons of crypto exchange FTX’s collapse less than three years ago.
The IPO frenzy is continuing. Crypto exchanges Kraken and OKX, custody agency BitGo, and asset management firm Grayscale are preparing to go public, with some listings expected to complete within the year.
Meanwhile, the crypto industry is driving its next goal: tokenizing stocks and trading them on crypto exchanges.
Companies such as Robinhood, Kraken, and Galaxy Digital have made preliminary attempts, promoting tokenized securities representing exposures to stocks such as Tesla and Nvidia to overseas users who may not have access to the U.S. market.
From “Treasury” to “Coin Treasury”: Listed Companies Embrace Crypto Assets
One of the most unexpected market trends this summer is the fusion of “MEME stocks” and speculative cryptocurrencies.
Software maker Strategy (formerly MicroStrategy) pioneered this model by purchasing $7.5 billion worth of Bitcoin, turning itself into a proxy for Bitcoin on the stock market.
Now, this strategy is being copied by large numbers of small-cap listed companies.
According to crypto consultancy Architect Partners, over 130 U.S. listed companies have this year announced plans to raise more than $137 billion to buy various crypto assets including Ether, Solana, Dogecoin, and even the Trump family’s World Liberty token.
However, this strategy has not provided good returns to secondary market investors. Among 35 related stocks tracked by Architect Partners:
From the date of announcing plans to purchase crypto assets, the median return on these stocks was -2.9%.After the first trading day following the announcement, the median return dropped further to -20.6%.
As the hype fades, the market value of these companies has begun to fall relative to the value of their crypto holdings, weakening their ability to continue raising funds to buy cryptocurrencies.
Meanwhile, Nasdaq is strengthening reviews of such financings, in some cases requiring shareholder approval. Factors that once pushed share prices higher may now begin to have the opposite effect.
Risk Disclaimer and Limitation of LiabilityThe market involves risk; investors should exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable to their own circumstances. Investing accordingly is at your own risk. ```