Stablecoins issued by traditional financial institutions may face challenges in gaining significant market adoption, according to Matt Hougan, chief investment officer at Bitwise.
“TradFi stablecoins will find it harder than they think to win market share,” Hougan said in an X post on Feb. 26.
Hougan referred to the newly announced stablecoin plans by Bank of America (BofA) CEO Brian Moynihan, who on Feb. 25 said BofA would likely launch a US dollar-pegged stablecoin once regulators came up with relevant legislation.
Source: Matt Hougan
The news came shortly after Jeremy Allaire, co-founder of Circle — issuer of the second-largest stablecoin, USDC (USDC) — argued that all USD stablecoin issuers should be registered in the US.
Stablecoins as new CBDCs?
The BofA stablecoin news triggered mixed reactions from the community, with many seeing the news as a good sign for crypto adoption, while others viewed bank-issued stablecoins as a new version of central bank digital currencies (CBDC).
“So are they going to just ‘rebrand’ CBDC’s and just call them ‘stablecoins’?” one commentator wrote on X.
“Sounds CBDCish,” another industry observer said.
Other community members disagreed, highlighting fundamental differences between a potential BofA-issued stablecoin and a CBDC.
“There’s a fundamental difference. A CBDC is a direct liability of the central bank while a stablecoin is a liability of the issuer. This has huge consequences,” digital asset researcher Anderson wrote.
An excerpt from the “Strengthening American leadership in digital financial technology” EO. Source: White House
Community concerns over the US CBDC “rebrand” to centralized US dollar-pegged stablecoins may align with the new US strategy of boosting the US dollar with the help of stablecoins.
On Jan. 23, US President Donald Trump signed an executive order that pledged to promote the US dollar’s sovereignty, “including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide.” On the other hand, the order banned the development of CBDCs in the US.
The community is worried that Tether will be outlawed
Amid the BofA news, some in the community expressed concerns over potential implications for Tether, which issues the eponymous USDt (USDT) stablecoin, the largest stablecoin by market capitalization.
“So Tether will likely be outlawed or treated differently compared to other US stablecoins. They are lobbying for this,” one commentator wrote.
Related: Paolo Ardoino: Competitors and politicians intend to ‘kill Tether’
Tether CEO Paolo Ardoino took to X on Feb. 26 to describe the new legal stablecoin developments in the US as “very troubling,” referring to a tweet by Rumble founder and CEO Chris Pavlovski.
Source: Tether CEO Paolo Ardoino
“I’m getting a strong feeling that this toxic stablecoin legislation is negatively impacting Bitcoin price and hurting confidence in crypto,” Pavlovski wrote. He also suggested that the draft legislation is “designed to kill competition in the stablecoin market.”
Ardoino previously told Cointelegraph that Tether encourages competition in the stablecoin market but doesn’t aim to compete with stablecoin issuers in the US and Europe.
“Our focus has to be where we are needed the most,” he said, adding that Tether’s biggest demand comes from developing countries like Argentina, Turkey and Vietnam.
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