Stablecoin Pt 5 with Olivia Haller

The biggest thing I’m concerned about is actually deposit disruption.

Hey, GonzoBankers. Tony DeSanctis back with another hot take.

Obviously, we’ve spent a lot of time talking about the GENIUS Act and some of the implications. I wanted to circle back because we haven’t really spent much time talking about stablecoin and the specific use cases we think are going to be in place.

So I’ve asked Olivia Haller to join us. She’s done a lot of research on this over the last few weeks to really dig in on what are the potential disruptions in the stablecoin space and what are some of the use cases that we need to be aware of and cognizant of.

So, Olivia, thanks for joining me.

Thanks, Tony. It’s good to be here.

So what are the biggest use cases that you’ve seen that sort of seem to resonate?

Yeah. So I know we’ve talked about it a little bit, and it’s been in the news a lot. Truthfully, the use cases for stablecoin, they’re a little touch and go. We’re going to kind of have to wait and see.

But as of right now, the top three are cross-border payments. So it would be really convenient for someone here to send money across borders, obviously.

Sure.

Then another example of a potentially compelling use case is in other countries where they’re looking for a more stable currency.

And then lastly, smart contracts and the idea that you can kind of have that programmable money and you can send for a service instantly, fast, digital.

But those are the top three-ish consumer use cases as of right now. As I said, not super-duper compelling yet, but we’re going to kind of have to wait and see.

Yeah. I think for us as domestic financial institutions, for the most part, the smart contract is the one that probably has the biggest potential to be disruptive.

For sure.

Because it automates some of the things that we’ve done historically as bankers, as intermediaries in those things. And if those things can be programmed into a smart contract and a stablecoin in that scenario, right, that’s potential fee income or other income that could be disruptive for us.

Right. And that kind of leads into a question for you. What do you think is a big takeaway from that, something that could potentially disrupt the financial industry?

Yeah. I mean, I think for domestic financial institutions, the biggest thing I’m concerned about is actually deposit disruption.

So the ABA and Bank Policy Institute and a bunch of folks have come out and asked Congress to sort of update the GENIUS Act because they did put a criteria in there that said, as a stablecoin issuer, you can’t pay interest.

Right.

Which was to protect bank deposits, candidly, but there’s nothing in there about the facilitators.

So Coinbase doesn’t issue stablecoins, but they are partnered with Circle.

Right.

And there’s a revenue share model there by which Coinbase pays interest, or they call it rewards. And so there’s the risk that the 4% yield that you earn on a stablecoin is money that you move to a Coinbase account instead of your deposit account.

And so, you know, we’ve already seen a couple trillion dollars move as rates have gone up from banks to money market accounts. This is another potential risk in that space.

Gotcha.

Still early days, folks. We haven’t sort of vetted out all the situations around stablecoin, but I do think you’re going to see cross-border and remittance, the PayPal world and some of those other solutions, leverage blockchain to move that money. Obviously, other countries are having that impact.

But the smart contracts and, I think, the deposit disruption are probably the two biggest impacts we’re keeping an eye on because we think those are the ones most likely to have both long-term and short-term effects on us as community institutions.

So let us know in the comments what you’re doing there and any impacts you’re seeing in the stablecoin space.