# The "ChatGPT" Moment for Crypto _How bad is this for the banks?_ July 18, 2025 • Michael Nadeau --- # The "ChatGPT" Moment for Crypto ## How bad is this for the banks? Michael Nadeau July 18, 2025 Hello readers, The GENIUS Act has cleared the House and is now one signature away from becoming law. Stablecoins — long understood by crypto natives as the backbone of onchain finance — are about to be legitimized in the eyes of U.S. regulators. As Tom Lee put it, this is crypto’s “ChatGPT moment” — the first crypto product with mainstream utility and institutional clarity. In this week’s edition of The DeFi Report, we unpack the implications of the U.S. stablecoin legislation. Topics covered: - [Key Takeaways of the New Legislation](#summary-of-the-new-legislation) - [USDT & USDC](#implications-for-major-stablecoin-i) - [Fintechs](#implications-for-fintechs) - [US Banks](#implications-for-us-banks) - [Visa/Mastercard](#consequences-for-payment-networks-a) - [Dollar Dominance](#effects-on-dollar-dominance) - [How to get exposure to Stablecoins](#how-to-get-exposure-to-stablecoins) ***Disclaimer:**** Views expressed are the author’s personal views and should not be relied upon as investment advice. * [](https://bit-digital.com/?utm_source=thedefireport.beehiiv.com&utm_medium=referral&utm_campaign=the-chatgpt-moment-for-crypto)The DeFi Report is powered by BIT Digital, the leading global platform for high-performance computing infrastructure and one of the largest ETH treasury companies. NASDAQ: BTBT Let’s go. # Summary of the New Legislation The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act may prove to be the most consequential piece of legislation in crypto’s history. The bipartisan bill establishes the first federal framework for *payment stablecoins, *aiming to instill confidence, clarity, and institutional legitimacy to a $260+ billion stablecoin market. ##### Key Takeaways: - Backing. Issuers will be required to fully back their stablecoins 1:1 with high-quality liquid assets. Permissible reserves are limited to U.S. Coins and currency, insured bank deposits, money-market funds, or short-term government bonds. *USDT currently falls outside of this*. More on that in a bit. - Payments Only. Issuers are *barred from paying interest* to stablecoin holders. This ensures that stablecoins function purely as digital cash equivalents (while preventing quasi-bank products). We see this as a strategic “nod to the banks” — creating a window for them to get their house in order before stablecoins trigger a more profound disruption to the financial system (more on this in the US Bank section). - Bankruptcy. In the event of an issuer’s bankruptcy, *stablecoin holders have a priority claim* on the reserve assets (ahead of the issuer itself). - Transparency & Audits. Issuers will be required to have monthly disclosures of reserves and undergo regular audits. - Anti-Money Laundering. Strict AML and KYC rules are built into the framework, meaning issuers must implement Bank Secrecy Act compliance programs, verify customers, and report suspicious activity. - Oversight Structure. The bill empowers both Federal and State (< $10b) regulators to supervise issuers, with the U.S. Treasury Department serving as the primary regulator. - Issuer Eligibility. Notably, the bill explicitly opens the door for banks, fintechs, and even *large retailers *(Walmart?) to issue their own stablecoins under clear rules. With that said, the bill blocks publicly traded companies that primarily operate in technology, social media, or e-commerce and are not “predominantly engaged in financial activities.” We think this blocks social media giants such as Meta, Twitter, and Instagram from launching stablecoins. By marrying the reliability of the dollar with modern public blockchain networks, the law sets the stage for broad adoption of stablecoins in commerce and finance, under the watchful eye of U.S. regulators. # Implications for USDC & USDT ##### Does the GENIUS Act give Circle an advantage? We don’t think so. I can see why some might assume this to be the case, given that the new bill requires 1:1 backing with US dollar assets (currency, money markets, t-bills) — a requirement Tether currently does not meet (80-85% of assets pass the test, with gold, BTC, and corporate debt backing falling outside the bill). Why is this not a concern for Tether? According to the bill, if offshore issuers (such as Tether) wish to access the US market, the Treasury can conduct a comparability test. If their rules align with those of the US, they can continue to operate in US markets. Therefore, Tether has multiple ways in which it can become compliant. We expect them to do so. ##### Who wins the US market (USDC or USDT)? Maybe a better question to ask: Which fintech company incorporates stablecoins into a mainstream product first? Circle? Tether? Stripe? Paypal? I don’t know the answer.Or what the product will look like. But it seems like there will be lots of stablecoin issuers. This will drive their take rates down. Which means the winner will likely wrap services around the stablecoin. ##### Payroll? The programmability of smart contracts + stablecoins for payroll/contractor payments feels like a *massive business* that we’ll see emerge in the next few years. Imagine milestones & time delays prompting auto payments to employees & contractors. Smart contracts and public blockchains handle administration and accounting. Faster payments. Higher velocity of money. Yield bearing money. Stablecoins will eventually unlock this. ##### Emerging Markets Emerging markets are NOT a race to the bottom. These are much more interesting *blue ocean* markets. And Tether *dominates* them. In these markets, there is no need to pay yield to the tokenholder. Why? Holders of stablecoins in these markets are just happy to hold a stable currency. That’s a big part of the value prop (which is non-existent in US markets). For example, in Argentina, stablecoin holders can protect themselves from double and sometimes triple-digit inflation. Just by holding their savings in USD stablecoins. *That’s their yield. * [As an aside: I had the chance to spend 5 weeks in Buenos Aires last year. I can confirm that stablecoins are prevalent + intuitively understood by Argentinians. Many people I spoke to get paid in Argentine Pesos, send it to a crypto exchange (Binance was popular), and swap to USDT as their “store of value.”] We believe that Tether will continue to dominate emerging markets. We also expect to see closer alignment between Tether and the US Government (which we cover in detail later in the report). # Implications for Fintechs We believe every major fintech will launch a stablecoin in the next few years. Paypal was first. Stripe is next in our opinion. Block (Square/Cash App). Robinhood. SoFi/Chime. International fintechs (Revolut, Wise, MercadoPago, etc.) are all likely candidates as well. Why? They all have large user bases. Global infrastructure. And strong balance sheets and banking partners. Stablecoins will offer a new way to provide global, 24/7 payment rails at cheaper costs for merchants and e-commerce customers. Not to mention, new lines of revenue (Fintechs will retain the yield, as per the GENIUS Act). As for the banks…. # Implications for US Banks Banks are in trouble. In our opinion, the bank of the future is a fintech building on crypto rails. It will likely look quite different from what we see today. With that said. Let’s not forget that email went mainstream two decades ago. Yet, the post office remains in operation. We believe the same will happen with banks. The innovative banks & fintechs will do well. The slow movers will resemble the post office in 5+ years. Why are US banks in trouble? - They can’t innovate. It’s not that they don’t want to. It’s just that they are too big. Too much bureaucracy. Too much red tape. No incentive for employees to take risk. Anyone who has worked for a large corporate entity can understand this. - They are *not* incentivized to launch stablecoins. Why? It disrupts their business model. Banks make money by: 1) taking deposits, 2) investing the deposits, and 3) pocketing net interest margin (return on assets - interest paid on deposits). - If a bank issues a stablecoin, this is $ they *cannot lend out. *They can’t magically “multiply” it the way they can with USD*. *It’s “dead” capital for the bank. Of course, we think they’ll launch stablecoins anyway (to earn the interest, which can offset some of the loss of revenue from lending). But eventually, they’ll have to share the interest with tokenholders as well. Banks aren’t going anywhere — but there’s a hurricane coming for the slow-moving ones. The GENIUS Act just sped it up. # Visa/Mastercard A reminder: stablecoins settle nearly instantly. Peer-to-peer. Globally. At low costs. Now. Traditional card-based payments cost 200-300 basis points. This includes issuer/acquirer fees, FX spreads, and interchange. Never mind that they take 2-3 days to settle. *Stablecoins are simply a better product. * We think stablecoins will be used for merchant payments, e-commerce, remittances, subscriptions, cross-border payments, payroll, etc. This will bypass card rails entirely. With nearly instant global settlement. At a fraction of the cost. You better believe this is a major threat to the $200b/year card fee industry. Why? Anyone can build on top of public blockchains. Visa/Mastercard cannot control the infrastructure here. Therefore, fintechs, wallets, and stablecoin issuers can now access global money movement rails without card network membership. And they can build a better product. Of course, Visa & Mastercard aren’t standing still. Both are integrating services onto public blockchains by: - Shifting “card only” to multi-rail infrastructure so that they can support stablecoins as “just another settlement currency.” - Compliance: fraud detection, chargebacks/disputes, identity services. - Stablecoin-branded cards backed by USDC and PYUSD. This keeps them relevant in the front end, even if they no longer control the rails/infrastructure. What does all that mean? It appears that stablecoins are forcing Visa/Mastercard to shift from “value transfer” networks to just “trust and tooling.” The savings on card fees could accrue to merchants, stablecoin issuers, consumers, and fintechs who can integrate new services with their stablecoin offerings. # Effects on Dollar Dominance Stablecoins are *insanely* bullish for the U.S. and the U.S. Dollar. A savior from the crypto heavens. Why? - Tether was the 5th largest buyer of US debt last year (!) - If Tether were a country (they're a 100-200 person company), they’d be the 18th largest holder of US debt (!). - This story is just getting started (we* just* got new regulation). This may be a hot take. But we think Tether could go down as one of the most important innovations ever for the growth of the U.S. Dollar. We believe the current administration would like to support Tether's growth in the U.S and abroad. We’d be remiss not to mention that Cantor Fitzgerald provides custody for Tether reserves. And let’s consider that Tether has 450 million users globally. The vast majority are outside the US. When international users buy USDT as a store of value, Tether buys US debt. Therefore, Tether is decentralizing the holder base of US debt. From sovereign nations. To individual owners worldwide. You’d imagine the U.S. government wants to buddy up to this. Not only are stablecoins expanding the global network effect of the dollar. They are decentralizing the holder base of U.S. debt. Scott Bessent gets it. That’s why he’s become a salesperson for stablecoins and the GENIUS Act. All stablecoin issuers are important for the US dollar. But it’s offshore issuers like Tether that *really* matter. This is where the *new* buyer of U.S. debt is coming from. This is where the *network effect* of the dollar is expanding. This is where the unbanked are being banked. Tether and the U.S government will ultimately form a *very* close relationship, in my opinion. Keep an eye on this. # How to get Exposure to Stablecoins The vast majority of stablecoins are on Ethereum (55% including the L2s). Not to mention, Ethereum has grabbed the “stablecoin narrative” with Tom Lee on CNBC talking about Ethereum as the “home for stablecoins.” Personally, I prefer USDC on Solana for the better UX. With that said, just 4.2% of the stablecoin supply is on Solana today. ETH/SOL are probably the safest long-term approach to gaining exposure to stablecoins. COIN and HOOD are also viable alternatives (though both are trading at all-time highs). Circle is in a bubble, in our opinion. Not too many companies can sustain a TTM p/e of 2,612. We do not think Circle is the exception, although it could continue for a bit. Further down the risk curve, you have two crypto native firms with strong fundamentals: Ethena & Sky (MakerDAO). We like Ethena as a high risk/reward play. You can check out our recent coverage on the project [here](https://thedefireport.io/research/ethena-memo?utm_source=thedefireport.beehiiv.com&utm_medium=referral&utm_campaign=the-chatgpt-moment-for-crypto). We think the GENIUS Act is going to create *regulatory arbitrage* for stablecoin issuers such as Ethena, who share yield (but operate offshore). Not to mention the correlation between USDe demand, ENA price, and ETH open interest (which is rising). Data: Glassnode At the end of the day, the stablecoin supply across the crypto landscape is going up. Onchain velocity is going up. Prices are going up. And volatility is going up. It’s time to buckle up. Thanks for reading. As a reminder, we released the Q2 edition of The ETH Report and The SOL Report this week. These are data-only reports + dashboards covering the networks from the *tokenholder* perspective. No noise. No hype. Just fundamentals, core KPIs, and qtr-to-qtr explanation. You can download a copy + access the dashboards here: - [The ETH Report](https://thedefireport.io/the-eth-report?utm_source=thedefireport.beehiiv.com&utm_medium=referral&utm_campaign=the-chatgpt-moment-for-crypto) - [The SOL Report](https://thedefireport.io/the-sol-report?utm_source=thedefireport.beehiiv.com&utm_medium=referral&utm_campaign=the-chatgpt-moment-for-crypto) Take a Report. And Stay Curious. ***Disclaimer****: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. 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