Banks Expected to Replace Tether and Other Stablecoin Companies, Warns Arthur Hayes
Arthur Hayes, former CEO of Bitmex and CIO of Malestrom, believes that big banks will soon take over the stablecoin business currently dominated by Tether. Speaking on Laura Shin’s Unchained podcast, Hayes explains that Tether’s success is due to the lack of a similar product offered by the U.S. banking system.
Regarding Tether’s business model, Hayes points out that the company generates billions of dollars in free cash flow each year by investing in treasury bills using the dollars it receives. However, he highlights that centralized stablecoins like Tether rely on banks for clearing and custody services.
Hayes predicts that the situation will change once traditional banks are allowed to issue stablecoins by the U.S. Treasury. He believes that banks such as JPMorgan will eventually replace Tether and other stablecoin companies, offering the same interest opportunities. Ultimately, Hayes argues that stablecoins relying on banks for custody and trading support have no sustainable business model.
Tether currently has a market cap of $91.5 billion and $4 billion in excess reserves, with plans for further expansion.
Hot Take: The Dwindling Future of Tether and Stablecoin Companies
Arthur Hayes raises valid concerns about the long-term viability of Tether and other stablecoin companies. As the crypto market evolves, it is likely that big banks, such as JPMorgan, will enter the stablecoin space and offer similar products. While Tether has thrived due to the absence of a competing banking product, the entrance of banks into the market could cannibalize Tether’s business model. Banks have the infrastructure, regulatory compliance, and trust of the traditional financial system to potentially outperform Tether and other stablecoin companies. This scenario highlights the need for stablecoin companies to adapt and innovate to stay relevant in a rapidly changing market.
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