Tether’s dominance could be eclipsed by banking giants, predicts Arthur Hayes.
Arthur Hayes, the former CEO of Bitmex and CIO of Maelstrom, has made a bold prediction about the future of stablecoin companies like Tether. He believes that once major banks like JPMorgan are given the green light to issue their own fiat-backed stablecoins, they will surpass Tether and other similar companies.
In an interview on Laura Shin’s Unchained podcast, Hayes praised Tether’s successful business strategy, which involves investing dollars in treasury bills and profiting from the interest rate spread. He explained that Tether’s unique offering has allowed it to become a prominent player in the crypto market, as there is currently no comparable service offered by the U.S. banking system.
Hayes estimated that Tether owners generate a significant amount of free cash flow each year, somewhere in the range of $4 to $5 billion.
However, Hayes also expressed concerns about the sustainability of the current operational model of centralized stablecoins, which heavily rely on banking services for fund custody and clearing.
Interestingly, Hayes criticized bank managers for providing these services to stablecoin firms like Tether without taking advantage of the opportunity to issue their own stablecoins. He believes that once traditional banks are granted permission by the U.S. Treasury, they could adopt the same interest-earning strategy as Tether, potentially dominating the market and overshadowing existing stablecoin companies.
Hayes argued that stablecoins issued by banks would enjoy unquestionable legitimacy and backing, giving them a competitive edge over their counterparts.
This prediction comes as Tether, the company behind the USDT stablecoin, reported a market capitalization of $91.5 billion at the end of 2023, along with $4 billion in excess reserves. Tether’s CEO, Paolo Arduino, has revealed that the company is actively pursuing various expansion initiatives.
It remains to be seen whether Hayes’ prediction will come true, but if major banks like JPMorgan enter the stablecoin space, the landscape could indeed undergo a significant transformation.
