These 4 areas of the market are set to get a boost from the stablecoin boom, BofA says
With legislators in Washington, DC, kicking off Crypto Week on Monday, commentators expect stablecoins to be a major beneficiary from the new legislative push to support digital assets.
The GENIUS Act would establish a regulatory framework for stablecoins, encouraging adoption and integration into traditional payment systems.
While stablecoin technology is still nascent, Bank of America is eyeing several key areas as possible beneficiaries as the market begins to grow and evolve.
For stablecoin-curious investors, investing in the picks and shovels of the technology might be a winning move, according to Ebrahim Poonawala, Bank of America's head of North American banks research.
At the core of stablecoin technology lies the cryptocurrency ethereum. Ethereum is critical for stablecoin technology because it allows programmable tokens, a key feature for the smart contracts that power stablecoins. The crypto hosts over half of the existing stablecoins, making it a key part of the ecosystem for the fiat-backed tokens. In the last month, ethereum has rallied over 18%, partly due to optimism surrounding stablecoin adoption.
Traditional banks, such as JPMorgan and BNY, are betting on stablecoin technology and could stand to benefit from friendly legislation. In June, JPMorgan launched its own tokenized deposit coin, JPMD, which operates on an ethereum-based blockchain developed by Coinbase.
Meanwhile, BNY partnered with blockchain payments company Ripple on July 9 to serve as the primary reserve custodian for the company's US dollar stablecoin, ensuring its reserves are held securely by a major global bank.
Payments companies like Visa, Mastercard, and PayPal could also be set to benefit from increased stablecoin adoption, Bank of America said. These companies have been developing stablecoin capabilities for years, making them well-positioned to integrate new technology into their existing infrastructure.
Mastercard has been building out blockchain capabilities since 2015. In 2020, Visa settled its first transaction with Circle's USD Coin (USDC). PayPal launched its own stablecoin called PayPal USD back in 2023. More recently, Mastercard announced in April a partnership with Circle to enable stablecoin payments on its merchant network using USDC for crypto-to-fiat conversions.
Shopping and payments services like Shopify are the last area the bank flagged. The e-commerce platform has announced plans to roll out USDC payments in partnership with Circle and expand its crypto checkout options.
According to Poonawala, cross-border payments could be a prominent use case for stablecoins within the payments space. He believes Shopify's stablecoin features will allow merchants to connect more easily with global customers.
It could take between three to five years to fully build out the infrastructure needed for widespread stablecoin adoption, according to Poonawala. But with a friendly legislative environment and increased attention from traditional banks and payment companies, stablecoins could become a disruptive force in coming years.
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