‘When Goldman Sachs and JPMorgan enter the space, they’ll issue 500 billion dollars of stable coin in trillions of dollars, and so you’ll go from 150 billion to 1.5 trillion. When they start issuing in that size, you’ll see Amazon, Google, and Microsoft using stablecoin for international remittance and corporate remains. Then you’ll see it get built into Apple Pay, Google Pay, and Amazon as a payment method, and then you’ll actually see billions of people using this stuff instead of hundreds of millions or tens of millions.’ – Michael Saylor said.
Stable coins are the talk of crypto after the epic collapse of Terra Luna shook the crypto world. According to Bitcoin Bull Michael Saylor, the crash was a blessing in disguise in a 40-minute interview with CoinMarketCap. Saylor discussed the aftermath of the collapse. Saylor believes that the collapse will cause more investors to educate themselves on stable coins, which will help the cryptocurrency industry overall. In addition, he believes the crash will attract more eyeballs from regulators. Some crypto enthusiasts and cowboys shun the idea of more regulation as most see crypto as an alternative to get away from the system. But Saylor believes more regulation oversight will provide exponential growth to the industry as the heavy hitters such as Goldman Sachs, Google, Amazon, and other household names will be able to support the idea of a stable coin.
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‘If you look at the entire crypto universe, you have a lot of different creatures. You have crypto commodities. You have crypto securities. You have crypto exchanges. You have crypto currencies, and then you have a set of applications and protocols that interlace with all of these instruments, and what you have is a bunch of people in the ecosystem that don’t necessarily understand or have the information to make the best decisions. You also have a lot of people outside of the ecosystem that are afraid to enter the ecosystem because they don’t have the clarity they need.
So, for example, what’s a stable coin is a currency in theory, if I can move a million dollars from me to you without incurring a tax bill, that looks like a stable currency. A stable euro, a stable yen, a stable dollar, there’s a huge amount of demand for it. There’s probably a trillion to five trillion dollars of demand for it. Everybody wants it. However, you have three different types of stable coins off the top of your head. You could have stable coins that are backed one to one with dollars and they look fairly secure. And if you saw 10 billion dollars of that stable coin with 10 billion dollars of currency equivalents backing it or cash equivalents backing it, then uh, that’s something that you could probably trust and put a lot of weight on. There’s another set of stable coins that are backed by something. Let’s say, maybe they’re backed by equities or maybe they’re backed by debt, and maybe I build a stable coin with 10 billion dollars of junk bonds backing it, not quite as the 10 billion dollars of junk bonds. Maybe I have 10 billion dollars of real estate backing a stable coin. They’re not liquid. They’re not marked to market, but it’s still something tangible, less tangible, and then the third stable coin would be I just issued 10 billion dollars of stable coins with nothing back. They’re all quote-unquote stable coins, but you know, one of them collapsed to zero because it literally didn’t have anything backing it or maybe the backing was five percent. It might have been back five or ten percent. I don’t think they had 18 billion dollars worth of cash equivalents, so they probably didn’t have 18 billion dollars of real estate or junk bonds backing when they got to 18 billion. They had 18 billion dollars worth of uh, Luna right.
So you have something highly risky but not perceived as risky because there aren’t really clear disclosures. If you’d asked a thousand people what the difference between UST and Tether and circle is, you’d get They couldn’t tell you but those would be the three examples right sort of tethers in the middle circles on one extreme, USD is on the other side.
This crash is going to cause a lot of clarity to form there. First, the community is getting educated right. I bet you everybody in the crypto community today knows the difference between a dollar in the bank and UST. And I bet you they have an intelligent conversation about the difference between Circle and UST and the business model of the two. We saw last week that Tether had to redeem billions and billions of dollars of tether and they could. So they could, but if you had actually tried to redeem seven billion dollars of UST in a couple of days, and they couldn’t.
I think the industry got educated, but also, I think that there are a lot of people that would like to issue stable coins, like Caitlin Long’s bank would like to issue stable coins, and if you look at the banks like Silvergate and uh, Signature. They’re FDIC insured banks, but they can’t issue stable coins. So and so and if you look at JP Morgan and Goldman Sachs and Citigroup, they can’t issue stable coins now. If you roll the clock back uh six months, the president’s working group put out a memo on stable coins and when they put out the memo they said we’d like for FDIC institutions to issue stablecoin.
Put aside whether you agree with that or not, there’s been a regulatory deadlock on Capitol Hill because in the six months after they put out that memo saying they thought that banks should issue stable coins, no bank issued a stable coin. That’s because, according to the president’s working group memo, “Congress should pass the law making this clear until then, we’ll think of it this way.” The banks are waiting for Congress to pass the law. Congress didn’t pass the law and all the way up until last month, there was really no clear consensus to move on this and we didn’t expect any clear legislation or regulation before 2023 or 2024.
So, if we just take the example of stable coins, the crypto crash and the UST crash have simultaneously educated the existing crypto market and all the investors. It’s also introduced the concept of risk. Not everything is equal, right? There are 19,500 things you know about CoinMarketCap, but they’re not all equal. To say, well, this is risk-free, that is, you know, they all have different flavors of risk. How do you assess the risk? I think that the industry’s getting more sophisticated and I think that the regulators now have some pressure. The secretary of the treasury was in a congressional hearing with Senator Toomey and he’s been an advocate of some stable coin legislation and he asked her if she thought we needed to get it done this year and she said yeah. I think we can and should get it done this year, so the consensus among the regulators and the politicians is that, yeah, we probably need to do this now. You could say, if you’re a crypto anarchist, I hate regulators. I don’t want them to do anything. Well, um, that’s one way to view it, but as long as they don’t do anything, the industry stays a trillion dollars, 1, 2, or 3 trillion dollars. When they do something, then you’re going to see people like… So let’s say David Solomon was on CNBC last week. He’s the CEO of Goldman Sachs. Well, whatever Goldman Sachs thinks is probably what JP Morgan thinks, Citigroup thinks, Bank of America thinks, and Wells Fargo thinks. So what he says is, “Yeah, we know the crypto economy is here to stay. We can’t have it yet. We’re afraid to custody these assets like we’re not allowed his actual words where we’re not allowed to right now. “ If I speak to CEOs of publicly traded companies and banks like publicly traded banks, they’ll say our regulators won’t let us watch the full interview.
What do you think of Sailor’s thoughts here? Do you see the future of stable coins being that big?
[This article is a transcription of a video made by Only The SAVVY]
Original video: https://youtu.be/23IYQmFbetQ ]
