Goldman Sachs writes on "Stablecoin Summer" in a collection of articles on the topic. The piece explains, "It's been the summer of stablecoins. The GENIUS Act that recently became law in the US has created the first-ever federal regulatory system for stablecoins.... Walmart and Amazon as well as major financial institutions are reportedly exploring launching their own stablecoins. And Circle -- issuer of USD Coin (USDC), the second-largest stablecoin in the world by market cap ... -- recently went public to much fanfare. So, does the stablecoin summer have staying power, and what could that mean for issuers, the existing payment and banking systems, markets, and financial stability more broadly?" (Note: With just under a month to go, register soon for our European Money Fund Symposium, which is Sept. 22-23, 2025 in Dublin!)
It asks, "But first, what are stablecoins, and how are they used today? In short, stablecoins are digital currencies that operate on blockchains.... Their value is typically pegged on a 1:1 basis to fiat currencies, most often the US Dollar, which differentiates them from other cryptocurrencies whose values are determined by the supply and demand of the coins. The stablecoin market has grown significantly since Circle launched USDC in 2018, with a total market cap of around $270bn today, as stablecoins have gained traction as a means to transfer money across borders and to access dollars outside of the US."
Goldman continues, "So, will the stablecoin market continue to grow? We speak with Brian Brooks, Former Acting Comptroller of the Currency, who believes so. He expects a stablecoin 'gold rush' following the recent passage of the GENIUS Act, which, he says, creates a new sense of safety around stablecoin usage given the regulatory oversight and 1:1 backing with high-quality assets like US Treasuries and bank deposits that the Act requires."
They comment, "So, what might be the implications of such growth? James Yaro, GS Brokers, Crypto & IBanks analyst, first lays out the business models and commercial opportunity for the entities closest to these digital assets: stablecoin issuers. He sees the opportunity growing as asset tokenization, which is currently in nascent stages, expands."
The article states, "We then explore what stablecoin proliferation could mean for the entities seemingly most in stablecoins' crosshairs: traditional payment rails. Will Nance, GS Payments and Digital Assets analyst, argues that the risk to existing remittance companies is overstated, noting that most of the costs in cross border payments are in areas that stablecoins don't directly address, such as on/off-ramp costs and regulatory/compliance related costs (though Brooks points out that avoiding some of these costs by staying in blockchain-based assets is much easier in many developing countries than many people think given that a number of places accept dollars and cryptocurrencies)."
It also asks, "What about the implications for Treasuries, the asset most widely used to back stablecoins? Brooks expects stablecoins to provide a meaningful source of Treasury demand, noting that Tether, which didn't exist before 2014, recently disclosed that it's in the top 20 of Treasury debt holders globally. But GS senior rates strategists William Marshall and Bill Zu find that the impact on Treasury demand will ultimately depend on the timing and scale of stablecoin adoption, the speed of stablecoin turnover, and the source of inflows into stablecoins, with inflows from money market funds likely to have the smallest net impact on Treasury demand while inflows from physical currency holdings, foreigners seeking dollar exposure, and bank deposits could have a larger impact."
Goldman then writes, "Richard Ramsden, GS Head of the Financials Group, then assesses the potential for such migration from US bank deposits to stablecoins, arguing that any significant migration would require stablecoins to offer either better economics than traditional deposits or lower payment frictions -- neither of which seems likely anytime soon."
A piece on the "implications for USTs" states, "Lastly, and crucially, the impact on safe asset demand depends on the source of inflows that stablecoin growth pulls from -- in other words, what users are holding stablecoins in lieu of -- and the composition of stablecoin reserves. Payment stablecoin inflows should largely come via shifts from four traditional channels: money market funds (MMFs), bank deposits, physical cash, and foreign demand for dollars. Inflows from money market funds would have the smallest net impact on safe asset demand, as both MMFs and stablecoins are fully backed by safe assets (assuming it's a government MMF, which represent >80% of the universe)."
It adds, "Since MMFs are already fully backed by safe assets, any outflows into stablecoins merely transfer safe asset demand from MMFs to stablecoin issuers, leaving overall safe asset demand unchanged. That said, demand preferences within the safe asset pool (e.g., Treasury bills vs. repo) may differ between stablecoin issuers and MMFs, influencing the relative pricing of these assets."
The Financial Times also writes on the topic in, "US banks lobby to block stablecoin interest over fears of deposit flight." The article tells us, "Banks are pushing to change new US stablecoin rules over fears they will spark trillions of dollars' worth of outflows, underlining growing competition between Wall Street and the cryptocurrency industry. Banking lobbies including the American Bankers Association, the Bank Policy Institute and the Consumer Bankers Association last week warned lawmakers of a 'loophole' in regulation that will let some crypto exchanges indirectly pay interest to stablecoin holders."
It says, "However, crypto exchanges will be able to indirectly offer interest and rewards to holders of stablecoins that are issued by third parties such as Circle or Tether. Banks fear this would create an uneven playing field and spark mass deposit outflows away from them, if customers choose to earn yield by holding stablecoins at crypto exchanges rather than coins or cash dollars at banks. A US Treasury report in April estimated stablecoins could drain about $6.6tn of deposits away from banks, depending on whether stablecoins can offer yield, the banking industry representatives said. They warned of 'greater deposit flight risk, especially in times of stress, that will undermine credit creation throughout the economy.'"
The FT piece adds, "This could in turn result in 'higher interest rates, fewer loans and increased costs for Main Street businesses and households', they added. Ronit Ghose, head of Citi's Future of Finance think-tank, compared the potential upcoming deposit outflows to the rise of money market funds in the 1980s, which had more attractive interest rates than current accounts, most of which do not reward customers with interest."
