Every American Bank is Coming Into Crypto: Here’s Why

Every American Bank is Coming Into Crypto: Here’s Why

Circle International Group and Tether Limited are two of the largest financial firms on the planet. I’d wager 99% of the world’s population has never heard of them.

They don’t have the name recognition of Bank of America or the renown of Barclays. But collectively, they’re worth more than both.

Way more…

The Bank of America franchise traces its origins back to 1784, when Massachusetts Bank became the first federally chartered joint-stock owned bank in the United States. And Barclays traces its origins back to London’s goldsmith banking business in 1690.

Circle launched in 2013. And Tether Limited a year later in 2014.

Yet, in just over a decade, they have a greater combined value than Bank of America and Barclays, which have been around centuries.

On June 5, Circle went public at a valuation of $6.8 billion. Since then, its market cap has ballooned to over $70 billion. Tether has a private valuation of $515 billion.

By comparison, Barclays has a market cap of $61.5 billion… And Bank of America’s market cap is $343 billion.

That begs the question: How, in just a few years, did these two newcomers become more valuable than two of the world’s most storied banking franchises?

Longtime readers likely know the answer…

Circle and Tether use crypto’s underlying blockchain technology to turn an already profitable banking scheme into an insanely profitable banking scheme.

They aren’t just profitable – they’re raking in cash.

Tether reported $13 billion in profits last year with only 150 employees – making it the most profitable company per employee in history.

So it’s no surprise Wall Street is in a race to adopt the same technology used by Circle and Tether. And it’ll unleash trillions of dollars’ worth of capital into the crypto world.

Disrupting the Traditional Banking System

Tether and Circle are the world’s largest stablecoin issuers.

Tether’s USDT has a market cap of $156 billion while Circle’s USDC has a market cap of $61.5 billion, making them, respectively, the third- and seventh-largest cryptos by valuation.

A stablecoin is a cryptocurrency with a fixed price. It’s designed to maintain a stable value. Many of them are pegged to the U.S. dollar (USD) and trade at or near $1.

Unlike altcoins – which can see price swings of 50% in a matter of days – stablecoin values don’t fluctuate that much. Again, they generally stay pegged to $1 USD.

The price stability, ease of use, and fast transaction times have helped stablecoins grow in popularity, especially among unbanked populations who don't need to go through all the red tape like credit checks to open a bank account.

And they’ve become a money-making machine. How?

They use blockchain technology to supercharge one of the banking industry’s biggest profit-making schemes.

You see, banks primarily make money by charging more interest than they pay out. This difference is called the “spread.”

For example, the national average savings account yield is 0.6% annually. That means for every $1,000 you deposit in the bank, you’ll earn $6 at the end of the year.

The bank can then take the $1,000 you deposited and buy a 90-day U.S. Treasury bill at a 4% annual yield. That’s $40 per year in income.

The $34 difference between what the bank pays you and what it pockets from the Treasury yield is the spread. And it’s virtually risk-free.

Stablecoin issuers use a similar model with an insanely profitable twist.

You exchange $1,000 for the same amount of stablecoin. The stablecoin issuer takes that $1,000 you deposited and buys a 90-day Treasury bill at 4% annual yield.

Here’s the crazy thing:

Unlike banks, stablecoin issuers don’t pay yields to stablecoin holders. So they pocket the entire $40. There’s no spread. Just pure profit.

Now, that $6 difference may not seem like a lot at first glance. But when you consider U.S. banks hold $18.2 trillion in deposits, you’re talking about billions in extra profits.

Can you see why Wall Street wants a piece of this massive cash cow?

According to a report by Citi, the stablecoin market could hit $3.7 trillion by 2030. By comparison, the entire crypto market cap is $3.45 trillion today, including bitcoin. So we’ve got a long way to go with demand showing no sign of decreasing.

You see, for stablecoin users, the lack of yield isn’t a big deal. The speed and ease of use of stablecoins make the tradeoff worth it… Especially since the average savings account yield only amounts to pennies on the dollar anyway.

But for crypto investors like us, there’s a way to generate above-market yields from the rise of this multitrillion-dollar trend.

A Huge Catalyst Is on the Horizon for Stablecoins

Last week, the U.S. Senate passed the GENIUS Act with an overwhelming 68-30 bipartisan vote.

The bill regulates the stablecoin market and creates a clearer framework for banks, companies, and other entities to issue them.

The GENIUS bill now heads to the House, which has its own version of a stablecoin bill dubbed STABLE.

If passed, we believe these bills will lead to an explosion in stablecoin offerings.

Here’s the thing: Both bills prohibit yield-bearing consumer stablecoins.

At first, this may seem like a bad thing. But as I mentioned above, there’s a workaround for crypto investors like us. We call them “crypto payout” tokens.

Crypto payout tokens help facilitate payment rails for stablecoin issuers. And the two largest crypto payment rails are Ethereum and Solana.

For instance, Fiserv, one of the leading providers for payment gateways, recently announced it will launch a Solana-based stablecoin. The new asset, FIUSD, will be tailored to institutional usage.

And Societe Generale’s crypto assets division plans to launch a stablecoin, the USD CoinVertible, on both Ethereum and Solana.

Even legacy financial institutions like Bank of America and JPMorgan are trying to get in on the stablecoin action with their own assets.

And it doesn’t stop there. Amazon and Walmart are the tip of the spear for major retailers exploring the stablecoin space.

While Ethereum and Solana are both blue-chip cryptos, neither generates yield on their own. But many crypto payout tokens either have their own stablecoins that pay yields… Or allow you to generate yield from Solana and Ethereum.

What makes these tokens unique is that – unlike USDT and USDC – they have automatic payouts that generate income month after month after month… No matter what’s happening in the market.

That’s why we call them crypto payout coins.

It’s somewhat similar to the way some stocks pay dividends. Instead of receiving cash, though, you receive more of the underlying crypto.

These recent developments that will ultimately boost crypto payout coins are all part of a phenomenon we call The Convergence. If you’re not familiar with The Convergence, it’s the confluence of three major trends…

The launch of exchange-traded funds (ETFs) focused on crypto income tokens… A friendlier regulatory landscape… And mass financialization of crypto products leading to global institutional adoption. (You can learn more by going here.)

When we first introduced our research on The Convergence, bitcoin was trading a hair below $54,000. Since then, it’s traded as high as $112,000. Over the coming years, we believe it’ll eventually trade as high as $1 million.

As The Convergence unfolds, our research suggests much of that $3.7 trillion in liquidity from the stablecoin market will flow into the tiny subsector of crypto tokens we cover that have automatic payouts.

Teeka recently held a special briefing to explain how these catalysts will push crypto payout tokens much higher. He also shared details about six crypto payout tokens we’re targeting in this niche sector.

You can stream the replay right here.

In the future, I believe these crypto payout tokens will allow you not only to generate yield on stablecoins… But a range of financial services, from buying and selling stocks and bonds to borrowing and lending money.

This is what mass adoption looks like. It’s something we’ve been prophesying for years. And we’re on the cusp of it. You just need to position yourself before the big unlock happens.

Stay curious,

Graham Friedman