Stablecoins, in one way or another, dominate this edition of Web3 thoughts of the week. Lawyers speak out on the CLARITY Act, too.
Stablecoins
“The number of issuers is expanding quickly. A consortium of 21 financial institutions plans to launch a dollar stablecoin in 2027, with other G7 currencies expected to follow, while Revolut is rolling out EURR. We could soon have bank stablecoins, fintech stablecoins and tokenized deposits operating across multiple currencies and networks.
“That makes the ledger underneath the money increasingly important. A stablecoin tells us what value the token represents, but not who validates transactions, how consensus is reached or who controls the network.
“USDC, for example, is now natively available across 35 blockchains. Circle controls issuance and redemption, while transactions are validated by the underlying network. That creates two layers of trust: the issuer behind the monetary claim and the network establishing the integrity of the ledger.
“As banks issue their own tokens, the architecture they choose will matter. If each institution or consortium operates within its own closed network, digital money could reproduce the same fragmentation it is meant to reduce. This will determine whether digital money reduces fragmentation or simply recreates the same bilateral dependencies found in correspondent banking.
“Stablecoins are becoming more regulated, banks are issuing their own forms of digital money, and shared ledgers are making settlement increasingly programmable.
“Together, they are creating a more fragmented payments landscape. Liquidity may sit across different issuers, currencies and networks, even as the movement of money itself becomes faster.
“The test is whether these systems can work together in practice. Digital money still needs to move between issuers, access FX liquidity and reach the local payment rails where businesses and consumers can actually use it.
“Issuance is moving quickly. Connecting those different forms of money without recreating the same fragmentation in a new format will matter just as much.”
- Raj Kamal, founder and CEO, TransFi
Singapore’s reserve approach
“I think MAS is right to be firm on reserves. If a stablecoin promises redemption at par, the assets behind it should be liquid, identifiable and fully available to customers. A 100% reserve requirement gives that promise substance and broadly follows the direction of regulation in the US and Europe.
“I am less convinced by a blanket ban on yield. There is a clear difference between taking additional risk to manufacture returns and passing through income generated by permitted reserve assets such as short-term government securities. Regulators could restrict yield to income earned on approved reserves, while prohibiting leverage, lending and excessive duration.
“This also raises a wider question about deposit competition. Banks are already concerned that stablecoins could pull money away from conventional deposits, while 21 major institutions are now preparing their own stablecoin venture.
“Regulation should quietly resolve that competition by making one form of money economically less attractive. The regulator’s role should be to protect customers, redemption and financial stability, then allow different models to compete within those safeguards.
“The yield debate will therefore become bigger as stablecoins move into everyday finance. Once trillions of dollars can potentially sit in fully backed digital cash, the question of who receives the income generated by those reserves becomes economically significant.”
– Kamal
The FAB-Citi test
“The FAB-Citi transaction is a useful example of how this architecture is developing. The banks completed live US dollar transactions using tokenized deposits through Swift’s blockchain-based ledger, allowing payment activity to operate around the clock.
“But the ledger is still an orchestration layer. Swift says final settlement continues through existing systems, while banks retain control of their own assets and funding.
“A shared ledger can validate and coordinate a payment, but it does not create the liquidity needed to exchange one currency for another or connect every digital asset to the recipient’s local payment rail.
“As more currencies, issuers and networks emerge, each can create another liquidity pool that has to be connected. The infrastructure challenge is therefore moving beyond issuance and into how money is routed, converted and settled across those different systems.”
– Kamal
Crypto investing
“Capital isn’t leaving crypto, it’s rotating out of Bitcoin into everything else. On our data that is a rotation inside the asset class, not a risk-off event.
“Right now CoinMarketCap’s Community trending board has Chinese-language memecoins, tokenized Nvidia and Tesla, and tickers named after AI labs sitting side by side, one of them up 262% in a day. Retail attention has stopped distinguishing between crypto assets and everything else.
“Bitcoin open interest is in the 82nd percentile of the past 90 days, while funding sits in only the 29th. That is a large amount of leverage being held cheaply. Positioning is elevated, but traders are not yet paying up for it—the market is waiting for a catalyst rather than chasing one.
“Bitcoin’s short-term correlation with the Nasdaq has risen to 0.78, compared with 0.09 over the past 30 days. Ahead of CPI, the Fed and a Senate vote on crypto market structure, Bitcoin is trading less like a hedge and more like the highest-beta position in a risk portfolio.”
– Alice Liu, head of research, CoinMarketCap
Visa’s on-chain trading move
“Visa’s move to bring on-chain lending into the financing of stablecoin-linked card programmes is another sign that digital assets are becoming part of the infrastructure behind everyday payments.
“The less visible problem for any card program is working capital. Operators need to fund settlement before cardholder money comes in, while traditional financing can be difficult to structure for newer programmes without a long track record. We finance our own card settlement this way through Credit Coop rather than relying on pre-funded float, and volume through that facility has grown roughly tenfold since July, to $4.7m.
“Using payment data to lend against money a programme is already owed closes that gap. It means financing capacity can be tied to how the business actually performs rather than how much cash it can park in advance.
“The same logic is starting to reach consumers, and that’s the part worth watching. Borrowing against assets you own rather than selling them is well established in traditional finance. What’s changing is that this flexibility is finally being built around digital assets too. Digital wealth should give people more financial options, not leave them with a choice between simply holding an asset or selling it.”
– Artem Ponomarev, founder and CEO, XPlace
Banks building blockchains
“Banks can absolutely capture a lot of blockchain’s benefits on networks they control, so I don’t think public chains automatically win.
“The real advantage of networks like Ethereum or Solana is interoperability and access to liquidity beyond one institution’s walls. A bank-controlled network can be incredibly efficient internally, but you risk recreating the same fragmented financial system with better technology underneath it.
“Public blockchains provide shared infrastructure where banks, stablecoins, fintechs and eventually AI agents can transact across institutional boundaries. The strongest model is probably a hybrid one in which banks maintain the controls they need while using public rails where openness, liquidity and composability genuinely create additional value.”
– Chandler Fang, founder, t54
“Many banks will launch their own chains, especially neobanks that want branded rails and tighter control. At the same time, a large number will not. They will issue products, settle assets, and run applications on existing public networks.
“Isolated bank chains can work for internal workflows. Real liquidity, composability, and user reach still tend to form on open, programmable infrastructure. That is the lane we are building for with LitVM: hard-money settlement with EVM apps on top, so institutions can deploy onchain without having to become blockchain operators.
– Aztec Amaya, co-founder, LitVM, Litecoin’s Virtual Machine
“Banks adopting blockchain doesn’t automatically mean they’re embracing fully decentralized finance. In many cases, they’re taking the parts they like, such as faster settlement, lower costs and programmable payments, while keeping transactions on permissioned networks where they retain more control. That makes sense from a compliance perspective, but it also creates an interesting tension. As decentralized payments become more widely used, customers may increasingly expect money to move globally, instantly and around the clock, regardless of which infrastructure banks ultimately choose.”
– Joshua Kim, founder and CEO, DonaFi
Bitcoin’s golden cross
“The golden cross reflects improving momentum, but I still think a correction is likely. That could involve a combination of sideways trading and a price pullback. My base case is that Bitcoin’s cycle lows are already behind us. I think Bessent’s expanded long-bond buybacks could materially influence how this cycle develops. If they ease financial conditions, Bitcoin may work through the next correction without revisiting those lows.”
– Chris Mack, CTO, Quote.Trade
“Golden crosses and death crosses are lagging indicators, but they often precede bull and bear markets, respectively. The current bear market was solidified by a death cross last November, so it’s promising that a golden cross is happening at what is most likely the beginning of a new three-year bull market.”
–Michael Terpin, CEO, Transform Ventures
The CLARITY Act
“The current version of the CLARITY Act fails to include the basic consumer protections needed to protect American retirees adequately. If Congress does not get Digital Asset Market Structure legislation right, American consumers will continue to be victimized out of billions of dollars of their savings every year from fraud and direct theft by sophisticated international criminal organizations.
“Failing to include real consumer protections — such as requirements for specific antifraud policies, supervision, and compliance staff and procedures as well as preserving private rights of action for victimized consumers — is a recipe for disaster that will ultimately undermine any legitimacy of the Crypto markets and set the protection of American consumers back by a decade or more.
“Congress cannot wait for a cataclysmic market crash to include consumer protections in Crypto market structure legislation. Banks, brokerage firms, and Registered Investment Advisers have been subject to these types of consumer protections for nearly 100 years, and there can be no excuse to justify exempting Crypto market participants from the same types of basic protections.”
– Michael Bixby, president of Public Investors Advocate Bar Association and managing attorney for Bixby Law PLLC
“Preserving states’ rights to enforce anti-fraud, licensing, and regulatory requirements goes hand-in-hand with a robust investor-protection-focused approach to crypto markets. The states have maintained a critical role in investor and consumer protection since long before the federal securities laws even existed. Basic concepts of federalism dictate that states must retain their own enforcement and regulatory sovereignty over the digital asset market.”
– Joe Wojciechowski, president-elect of PIABA and managing partner for Stoltmann Law Offices, P.C. PLLC