This Ain’t No Crypto: Why Asset Managers Can’t Ignore Stablecoins Anymore

This article is part of The Assetizer, GenTwo's thought leadership platform.

Stablecoins seem to be everywhere this summer. Whether it’s passage of the GENIUS act in the US senate, Circle’s IPO or, as my colleague Mark Arasaratnam has been pointing out, the quiet but significant issuance of FIUSD by Fiserv, there is no end of developments.  

If you are an independent asset manager, a qualified investor, or really anyone interested in innovation in financial services, this is big news. Here are few thoughts as why.

Blockchain Is Back

Firstly, this may very well be the catalyst for – if you'll excuse the use of a very ugly but I think apropos word – the “blockchainification” of global financial rails. 

Since it came on the scene, proponents have seen digital ledgers as a replacement technology for financial infrastructure. There are tons of good reasons. Among them:

• Near-instant settlement through direct, peer-to-peer transactions
• 24/7 global operations
• Dramatic reduction of counterparty risk, also thanks to P2P
• Automation and programmability thanks to smart contracts
• Freeing up of capital otherwise stuck in collateral
• Increase in accessibility: anyone with a wallet can in theory dial in directly to the global payments system

This isn't new. I ghostwrote a white paper on the subject for UBS back in 2017.  Even back then, big institutions were taking this seriously – they could see the possibilities.

Unfortunately, it's been a bit of a slog since then. And one of the main reasons, at least in my opinion, has been the difficulty of getting fiat money on-chain in a regulated way. With the recent regulatory clarity coming down the pike (see MiCA in Europe and the aforementioned GENIUS Act in the US), that barrier has fallen. There's nothing left to stand in the way.

This Ain't No Crypto

Secondly, this is not about crypto – and if you think it is, you are in danger of missing the bigger point.

Sure, stablecoins have had a chequered past, with a number of famous bankruptcies, and continued issues with transparency, for example with Tether, the world's largest stablecoin by market cap (by far).

I'd argue that regulated stablecoins are a different beast. These are meant to be nothing more than digital representations of real money. Yes, it's private money, and that is a risk. But the regulated form is likely less of a risk than bank money, which is not fully backed.

But my main point is that it would be wrong to put these regulated stablecoins in the same basket as cryptocurrencies, NFTs or other crypto-native digital assets. They share the same technology, but not the same spirit. Unlike say Bitcoin, which was born to replace government-issued currencies, these coins are here to help propagate them.

This May Be Big Business

The more I look at it, the more I see that stablecoins hit all of the themes that I've been focusing on at The Assetizer. That makes them relevant for asset managers, qualified investors and others interested in innovation and the future of finance.

Here is what I mean:

• Infrastructure Innovation: They're not just changing payments - they're changing how money moves through every system asset managers touch
• Democratization: They're enabling 24/7 global settlement that puts asset managers on equal footing with anyone, anywhere
• Asset Evolution: They're creating entirely new product categories and yield opportunities

In future posts I will look at all of these in more detail. Until then, I will leave you with this thought, brought to my attention by my trusty AI chatbot, regarding the opportunity here.

Chainalysis data shows that 88% of stablecoin demand currently comes from crypto-native activity, with only 6% from traditional payments. But JPMorgan projects growth to $500 billion by 2028, while Standard Chartered sees $2 trillion potential. The firms that build stablecoin capabilities now will have first-mover advantages when this infrastructure becomes table stakes. And those outside the infrastructure who understand what is going on will be in the best position to take advantage of that. 

More:

• More on GenTwo’s offering for digital assets: www.gentwo.com/digital-investors.