Big tech, banks, and even Trump. How to make money with stablecoins.

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Trump undoubtedly attracted attention when, in March of this year, he launched his stablecoin Usd1 through the company World Liberty Financial , controlled by him and Steven Witkoff , who, among other things, in full conflict of interest like his partner, is also the president's special envoy to the Middle East.

The rush for currency . Banking giants are starting to look at them with increasing interest, but even large groups, starting with Big Tech , are considering stablecoins.

Stability. They're called "stable" because, unlike cryptocurrencies, their value isn't volatile , as it's backed by an underlying asset, often in a one-to-one ratio. If it's the dollar, one stablecoin is worth one dollar.

Amazon , but also the king of US supermarkets Walmart and Uber , are sniffing out the business, while some large financial operators active in payments, such as PayPal , have already entered the field with their own currency.

Circle's debut . The veil on the stablecoin business was lifted at the beginning of June by the listing of Circle , the American group that created USDC , the second stablecoin by market capitalization ( 60 billion ) behind the undisputed leader, Tether , launched by the Italian Giancarlo Devasini and led by another Italian, Paolo Ardoino , which exceeds 150 billion dollars .

The stock market boom . Having entered Wall Street at $30 just over a month ago with a total market capitalization of around $9 billion , it closed yesterday above $200 , after having reached a peak of nearly $300 in previous trading sessions. This is a jump tenfold compared to its IPO value, which occurred when the US Senate approved the Genius Act (Guiding and Establishing National Innovation for US Stablecoins Act) in mid-June, the bill that aims to regulate stablecoins, now under discussion in the House.

The mechanism is very simple . Those who issue stablecoins collect money and set it aside to ensure they have the liquidity to repay when a buyer wants to resell their virtual currency. And these reserves yield a profit .

How Tether does it . Tether, for example, has raised $150 billion with its digital currency, 81.5% of which, according to a prospectus published by the company itself, has been invested in cash or cash equivalents: about $100 billion is US Treasury securities , the rest is repurchase agreements.

How much does Tether earn ? This wallet , together with the Repos, guaranteed Tether a return of 7 billion dollars for 2024. This, combined with 5 billion in unrealized profits on Bitcoin and gold held in the vault, plus a billion generated by other investments , brought Tether's net profit to 13 billion dollars , more than the profits of the two largest Italian banks, Banca Intesa (8.7 billion) and Unicredit (9.3 billion).

How Circle does it . Circle, on the other hand, with €60 billion in assets, collected €1.7 billion from its reserves, generating a profit of €155.7 million versus €64.8 million in 2023.

Why does it earn less? This is a lower return not only due to the smaller assets under management, but also because Circle, unlike Tether which operates from El Salvador , and therefore without any constraints, has decided to adhere to US regulations (the Genius Act ) and European ones (the Micar ).

Constraints. The latter, for example, require significant operators to place at least 60% of their reserves in liquid bank deposits as collateral for subscribers. And it's clear that liquidity in current accounts generates less return , if any, than an investment in US government bonds , which, although considered safe (Tether invests primarily in three-month bonds), are still subject to fluctuations in value.

Those who smell a bargain . Faced with the results of Tether and Circle , large groups like Amazon have become greedy for how much they could earn with their business : in 2024, Bezos' group generated revenues of 640 billion dollars and the value of e-commerce in the United States it is $ 1.1 trillion .

Amazoncoin. Creating a digital currency could allow Amazon to channel a portion of the money circulating on its platform into reserves on which to earn good interest , just like Tether and Circle.

The Genius Act ban . However, President Trump also sensed a deal for himself ( USD1 raised $2.2 billion in capital) and for the state by having Treasuries purchased as collateral for stablecoins.

But to prevent Big Tech from exploiting their dominant position in many sectors, he inserted into the Genius Act a temporary ban on large tech companies directly issuing virtual currencies.

Another benefit: In addition to making money, stablecoins could also serve to save costs, reducing the transaction fees paid by companies and consumers.

In Europe , Mastercard charges fees between 0.2 and 0.3% of the transaction value , while in the United States they range from 1.5 to 2% .

With Tether, the costs are much lower . Fees for sending a payment range from fractions of a cent to a couple of dollars at most per transaction.

Those who smell danger . If some see the deal, others sense the danger. One of the first companies to realize that stablecoins could impact the payments business was Mastercard , which, through collaboration with several industry players, has already included stablecoin transactions among its options.

PayPal has moved on its own and gone further, launching its own stablecoin whose value in circulation is now just over $ 870 million .

Those who sense danger are back . But even the big banks have seen the danger, because the companies that issue stablecoins actually offer an alternative to deposits .

The sentence . “If people are using stablecoins as a transactional account, we need to be prepared to keep those transactional deposits within our network... otherwise we will see a massive migration of deposits out of the industry.”

Bank of America, Citi, and JP Morgan . These are the warning words raised by Bank of America CEO Brian Moynihan, who, together with Citi and JP Morgan, is considering launching a joint stablecoin .

The future . The real issue, however, beyond the rush for money and the fantastical numbers of the stablecoin market touted by the advisors behind Circle's listing ( Goldman predicts that in a few years, stablecoins in circulation will go from the current 250 billion to 1,000 billion ) is whether they are truly 1) valid substitutes for current payment systems and 2) bank deposits .

A plus . First of all, to be a means of payment , the currency must have a constant value . And it can be said that stablecoins tend to have this . Tether 's price against the dollar always fluctuates around parity.

The playing fields . To date, they have been used for three types of payments : 1) to buy and sell crypto-assets (almost 80% of transactions), 2) for cross-border payments , and recently also 3) in emerging markets , where, faced with strong fluctuations in the value of the local currency, a stable currency and de facto bridge to the dollar is being sought.

The most likely challenge . Of these, the sector most likely to propose stablecoins as a fearsome alternative to regular payments is cross-border transactions . For two reasons: 1) because it eliminates exchange rate risks and 2) because when it travels on unregulated platforms like Tether, it is not subject to any tax or anti-money laundering controls.

The most difficult challenge . The road that should lead stablecoins to compete with deposit accounts is the most arduous, at least in regulated markets like Europe. Because here the authorities have set the limits.

The prohibitions . The MICAR , in fact, prohibits companies that manage virtual currencies from paying interest . And the same goes for the Genius Act . But in the end, nothing prevents the creation of a remunerated stablecoin account where these rules don't exist. Like in El Salvador with Tether .