The passage of the GENIUS Act seemingly marks a turning point for stablecoins, potentially setting the stage for a transformation in how money moves and markets operate. Mike Cagney, Co-Founder and Executive Chairman at Figure Markets, outlines several milestones in the evolution of stablecoins that aim to challenge existing financial systems and hopefully unlock various opportunities.
These milestones—two unfolding concurrently and a third with far-reaching implications—signal a seismic shift in global finance.
Today, stablecoins are not cash, and the world outside crypto trading still runs on fiat currency.
Imagine buying a coffee with a stablecoin: the merchant accepts it but must convert it to fiat to pay employees, suppliers, or rent.
This conversion creates friction, as it relies on intermediaries—likely banks, given their structural advantages—to provide 24/7 redemption services for a fee.
The GENIUS Act sets the foundation for this first milestone by enabling stablecoins to function as a practical medium of exchange.
Banks or similar entities will step in to facilitate instant, round-the-clock swaps between stablecoins and fiat, bridging the gap between digital and traditional economies.
This infrastructure will make stablecoins more accessible, allowing them to integrate into everyday transactions while fiat remains the backbone of commerce.
Simultaneously, the second milestone addresses a core issue with stablecoins: trust.
Currently, stablecoins are IOUs, backed by reserves that holders must trust are there.
The GENIUS Act mandates that issuers back stablecoins with U.S. Treasuries, but verifying those reserves in real time remains a challenge.
Treasuries, as they exist today, are not blockchain assets, leaving room for doubt about their presence.
The solution lies in migrating Treasury issuance to the blockchain, where reserves become transparent and verifiable by anyone, anytime.
This shift from trust to truth eliminates the IOU problem, as every holder can independently confirm the backing assets on-chain.
This transparency not only boosts confidence in stablecoins but also streamlines transactions, reducing reliance on opaque intermediaries and paving the way for broader adoption.
The third milestone, which follows the first two, is the most transformative.
Once (and if) stablecoins are ubiquitous, backed by on-chain Treasuries, and supported by 24/7 fiat rails, a pivotal moment arrives: merchants no longer need to convert stablecoins to fiat.
Employees, suppliers, and landlords will accept stablecoins directly, rendering fiat rails obsolete.
This shift eliminates the need for constant on- and off-ramping between digital and traditional currencies, creating a self-sustaining stablecoin ecosystem.
The implications are seemingly profound, particularly for banking. Cagney predicts a massive reallocation of banking liabilities, as deposits—the lifeblood of traditional banks—face disruption.
Some deposits will exit the system entirely, moving into Treasuries held on-chain.
Others will flow to the largest stablecoin issuers, likely banks themselves, who can hold reserves as deposits.
Smaller banks will struggle to compete in this new landscape, where scale and infrastructure dominate.
The ripple effects of this third milestone extend beyond banking.
Interchange fees, a cornerstone of the payments industry, could face upheaval as stablecoin transactions bypass traditional card networks.
This could erode the revenue models of payment processors, forcing them to adapt or lose relevance.
Moreover, the ability to verify reserves on-chain could redefine trust in financial systems, potentially influencing other asset classes or even government securities markets.
The move to a stablecoin-driven economy also opens greenfield opportunities—new markets and business models that leverage the efficiency, transparency, and global reach of blockchain-based currencies.
The next few years will be transformative as these milestones unfold.
The GENIUS Act has apparently set the stage, but the journey to a stablecoin-centric world is just beginning, according to insights from Cagney and other industry professionals.
Banks, merchants, and consumers may need to adapt to a reality where digital currencies outperform fiat in everyday use.