Stablecoin craze sweeps the world. Bank of America: These four market sectors will become winners

Author:Bian Chun

Recently, stablecoins have risen rapidly and become the focus of global attention. Bank of America pointed out thatfour market areas are expected to get a boost from the stablecoin boom.

The "Cryptocurrency Week" in the U.S. Congress kicked off on Monday, and lawmakers plan to review three key cryptocurrency legislation this week, including a stablecoin bill called the Guidance and Establishment of the United States Stablecoin National Innovation Act (also known as the Genius Act).

The Stablecoin Act was passed by the U.S. Senate last month. The bill aims to establish the first federal regulatory framework for stablecoins, which will encourage more people to adopt stablecoins and integrate them into traditional payment systems. Once the bill passes the House of Representatives and is signed into law by the U.S. President, it is expected to give rise to a wave of new stablecoin participants.

However, in a procedural vote on Tuesday, Republican conservatives in the U.S. House of Representatives successfully blocked the progress of three cryptocurrency legislations, including the Stablecoin Act.

While stablecoin technology is still in its infancy, as the market begins to develop and evolve, U.S. banks are looking at several key areas that may benefit from it.

For investors interested in stablecoins, investing in the “picks and shovels” of the technology (the underlying supporting sectors) may be a wise move, said Ebrahim Poonawala, head of North American banking research at Bank of America.

At the heart of stablecoin technology lies the cryptocurrency Ethereum. Ethereum is critical to stablecoin technology because it supports programmable tokens, a key feature of the smart contracts that underpin stablecoins. More than half of existing stablecoins run on Ethereum, making it a key component of the ecosystem of fiat-backed tokens.

Prices of Ethereum have risen by more than 18% in the past month, partly due to optimism about the prospects for stablecoins.

Traditional banks such as JPMorgan Chase and Bank of New York are betting on stablecoin technology, and these banks may benefit from friendly stablecoin legislation.In June, JPMorgan Chase launched its own deposit token JPMD, which runs on the Ethereum-based blockchain developed by Coinbase.

Meanwhile, Bank of New York partnered with blockchain payment company Ripple on July 9 to serve as the lead reserve custodian for the company's US dollar stablecoin, ensuring that its reserves are safely kept by a large global bank.

Bank of America said thatpayments companies such as Visa, Mastercard and PayPal may also benefit from the popularity of stablecoins.These companies have been developing stablecoin capabilities for years, which allows them to integrate new technologies into existing infrastructure.

Mastercard has been building blockchain capabilities since 2015. In 2021, Visa completed its first USDC (Circle's USD coin) transaction. PayPal launched its own stablecoin PayPal USD as early as 2023.

In April, Mastercard announced the launch of a "full-range" stablecoin payment solution, aiming to allow 150 million merchants around the world to accept stablecoin payments.

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Shopping and payment services like Shopify are the last area listed by Bank of America.The e-commerce platform announced plans to launch USDC payments in partnership with Circle and expand its crypto settlement options.

Cross-border payments could be a prominent use case for stablecoins in the payments space, according to Poonawala. He believes that Shopify’s stablecoin capabilities will make it easier for merchants to connect with customers around the world.

Poonawala said it could take three to five years to fully build the infrastructure needed for widespread stablecoin adoption. But with a friendly legislative environment and growing attention from traditional banks and payment companies, stablecoins could become a disruptive force in the coming years. .