Industry news:
— Jane Street’s crypto trading tripled last year, reports the Information.
Summary via Efinancial careers: Jane Street tripled its crypto trading volumes last year, purchasing $110bn worth of cryptocurrencies including stablecoins. The firm retreated from the market in the wake of the FTX crash (giving Sam Bankman-Fried his start didn’t exactly add to the firm’s optics), but now appears to be back in full force.
— Major banks are exploring issuing stablecoin pegged to G7 currencies, reports Reuters.
Key graf: “Ten major banks, including Bank of America, Deutsche Bank, Goldman Sachs and UBS are jointly exploring issuing a stablecoin, the latest sign of traditional finance seeking to get to grips with the growth of digital assets. The group of lenders, which includes Citi, Barclays, TD Banks, Santander, and BNP Paribas, will work together to explore creating blockchain-based assets pegged to G7 currencies, the banks said in a statement on Friday.”
— State-owned Bank of North Dakota will issue stablecoins with Fiserv, via Coindesk.
Key graf: “The token, dubbed “Roughrider Coin,” is expected to roll out next year and will run on Fiserv’s digital asset platform and plug into its white-label FIUSD system, a stablecoin network designed for regulated banking environments.”
— Citi Ventures has invested in stablecoin payments firm BVNK, via CNBC
Summary shot: Citi Ventures joins Visa and Tiger Global as investors in BVNK, a major stablecoin payments infrastructure company. The conversation notes that major banks are hedging tokenized deposit strategies by engaging with stablecoin ecosystems. BVNK reportedly surpassed $20B in cumulative payments.
There’s a chaser! Following Citi’s investment, both Coinbase and Mastercard are reportedly competing to acquire BVNK (valuation up to $2.5B). The move shows strategic positioning by traditional finance and crypto firms around stablecoin infrastructure.
— A new combined entity of StablecoinX is preparing to turning to token arbitrage and yield strategies to cash in on stablecoin growth (via SEC Filing)
Summary: CEO Young Cho outlines that the aim of the entity is to create the first publicly traded digital-asset treasury company focused on the Ethena stablecoin ecosystem. Unlike firms that simply hold crypto like MicroStrategy or SOL Strategies, Cho says StablecoinX will “buy tokens at a 30–50 percent discount” directly from blockchain foundations, allowing shareholders to benefit from that embedded value. Cho confirms that the firm has raised about $890 million to purchase Ethena’s ENA tokens, making it the largest holder, and frames the merger as a way to connect traditional investors to the next wave of blockchain-based financial infrastructure.
Cash Equivalence take: The setup above is precisely the kind of market-making arbitrage that made firms like Jane Street, Citadel, and Virtu legendary — and turned Ken Griffin into a memestock supervillain. Only this time, it’s on rocket fuel.
Tradfi veterans will naturally recognize the delta-one concept. It’s been juicing returns for ETF market makers ever since the products first began to get popular. But delta-one desks have also been a rich source of risk — often surfacing in the form of rogue trading (both Jérôme Kerviel and Kweku Adoboli were delta-one traders). Much of that vulnerability stems from the complex, composite nature of ETFs and the intricacies of their settlement process. Those layers have long enabled financing games and settlement-related shenanigans, often exploiting regulator-approved extensions in settlement cycles.
In theory, blockchain eliminates that risk through instant settlement. But considering how much “fractional positioning” and “fake shares” may underpin some of the sector’s biggest success stories, it’ll be fascinating to see how this market adapts under a hard-settlement regime. The Reddit memestock crowd, for one, remains convinced the whole thing is a house of cards.
This is also where the argument that stablecoins are simply ETFs, money-market funds, or e-money providers by another name starts to make sense — a point we’ve long made about PayPal. (We’ll refrain from detailing the other shadowy similarities… for now.)
What’s definitely clear is that if the future of stablecoins depends on delta-one strategies to synthesize risk, regulators have an entirely new kettle of risk to contend with. In Ethena’s USDe model, for example, the protocol buys spot crypto (like Bitcoin or Ethereum) while simultaneously selling futures on the same assets. In commodities trading, that’s known as a contango trade.
If the future of stablecoins depends on delta-one strategies to synthesize risk, it’s a whole new kettle of risk that needs to be considered by regulators. In Ethena’s USDe case, rather than being backed by fiat or conventional reserves, the protocol buys spot crypto (e.g. Bitcoin or Ethereum) while simultaneously selling futures contracts on the same assets. In the world of commodities, this is known as a contango trade.
Because the long spot and short futures positions offset one another, the net exposure — or delta — to price moves is roughly neutral. Gains and losses on the underlying asset are largely hedged out. The yield, instead, comes from the futures premium — the protocol captures the spread (or “carry”) between the futures and spot prices.
And this, dear readers, is why perpetual futures will be the next big thing after stablecoins. More on what CME boss Terry Duffy thinks about that at our sister site, The Blind Spot, shortly.
Central banks:
— The BoE’s executive director for financial market infrastructure confirmed the Bank has shifted its position on stablecoin asset types.
Key graf: “We are listening to industry feedback and considering what requirements will underpin viable future business models, while maintaining financial stability. Our proposed changes to the initial proposals on the backing assets requirements, as we set out previously, are a clear example of this approach. That is, the Bank will now allow systemic stablecoin issuers to hold a portion of their backing assets in a subset of high-quality liquid assets (HQLA).”
— The EU must seize unique opportunity to supplant US dollar dominance, said ECB boss Lagarde, via Euractive.
Summary: Christine Lagarde emphasized that global monetary dominance is not guaranteed and urged the EU to strengthen the euro’s international role — possibly through digital euro initiatives or euro-backed stablecoins. It ties into Europe’s digital currency ambitions. [CashEq: Same old, same old]
Token 2049 hangover:
— Sam Kazemian, Founder and CEO Frax, predicted the “hyperstablecoinization of everything” was coming soon (view the presentation here).
Summary: The presentation categorized future stablecoins into two main types — fiat coins for payments and yield-bearing stablecoins — and examines the rise of “stable chains” designed to facilitate stablecoin commerce through unique deals like zero transaction fees. Kazemian then explained how FraxNet, described as a neobank super app, intended to abstract away the complexity of numerous stablecoins, offering services like virtual accounts, high-rewards spending, and even direct real estate transactions in the US.
— A panel with Tom Lee of Fundstrat, Arthur Hayes of Maelstorm, Tom Schmidt of Dragonfly, and Tarun Chitra of Gauntlet discussed the rise of stablecoin chains and decentralized perpetual future wars (view the presentation here).
Summary: The panelists discussed how new specialized stablecoin chains were attempting to pull liquidity away from established platforms like Ethereum, potentially impairing its market thesis. They pointed out that Plasma, a so-called Layer 1 chain backed by Tether, launched with a substantial valuation of $8.5 billion. It has since achieved rapid adoption by offering zero-fee USCT transfers and employing massive client acquisition incentives — estimated at $500 million annually — to drive stablecoin outflows from Ethereum. But the panelists pointed out that to sustain long-term growth, they must originate new institutional or B2B flows (like Tempo with Stripe), as simply subsidizing demand will no longer be sustainable.
Perp wars: The panelists also discussed how the war between decentralized derivatives exchanges was driving rapid commoditization of perpetual futures. The incumbent leader, Hyperlquid, faces aggressive competition from rivals like Lighter and Aster, supported by major centralized exchanges. This competition is forcing fee compression (e.g., “no fee” models) and causing platforms to operate at negative margins. Hyperlquid’s biggest risk, supposedly, is the $500 million annual token unlock starting in November, which acts as a “sword of Damocles” over its valuation if it fails to demonstrate a strong competitive moat and dominant market share. Looking ahead, the next significant market opportunity is predicted to be decentralized fixed income/interest rate trading, which is a larger market than perpetuals.
Cash Equivalence take: Platforms with negative margins surely don’t make sense, right?
— Jeff Yan, CEO, of Hyperliquid, argued perpetual futures are superior to conventional futures because they concentrate liquidity by eliminating the need for multiple different contracts (view the presentation here).
Summary: Yan explained that the single-product structure of perps ensures the end user gets the best price when executing in size, and crucially, users never have to roll the contract like a futures contract. Second, perps are significantly more comprehensible to the end user. He also argued the product achieves the holy grail of leverage by abstracting complexity and allowing users to trade without needing to know about the funding rate. For market participants seeking delta-one exposure over a short time frame, there is likely no better product. Mathematically, he said, perps check out, functioning as the best-known way to create a liquid market for price discovery and speculation on a single number that evolves continuously over time, making them a very beautiful product for betting on that number.
Deep thoughts:
— Omid Malekan, adjunct professor at Columbia Business School, argued stablecoins aren’t the threat to your money that the banking industry would have you believe, via Marketwatch.
Summary: Malekan contends that bank claims that digital currencies could drain deposits and weaken their ability to fund loans, are misleading. He points out that U.S. banks no longer dominate credit creation — most lending now comes from capital markets and nonbank institutions — so the potential impact of stablecoins is minimal. He also argues that if stablecoins ever compete with bank deposits, banks can simply offer better rates and services rather than seek government protection. The real concern, he suggests, is not financial stability but profit margins. He concludes that instead of lobbying for restrictions, banks should embrace innovation and fair competition—an approach that has historically driven U.S. economic growth and prosperity.
Key grafs: “The Genius Act already forbids stablecoin issuers from directly paying interest to holders. But the latest bugaboo from the banking lobby is the possibility of other companies rewarding customers for using stablecoins. Incentivizing adoption of new products is a standard practice in many industries, including banking. That the banking industry wants to ban such a vanilla practice reveals an important truth: Stablecoins don’t threaten bank deposits — but they might compete with big banks’ profits, in everything from credit-card fees to the low interest rates paid on checking accounts.”
Cash Equivalence take: The Genius Act’s zero-yield restrictions are already being actively worked around with rewards and buyback mechanisms (Sharia finance reborn, ahem). Tokenized MMFs are equally well poised to offer yield-enhancing options to stablecoin users.
— An X post by Tyler Neville summarized the thoughts of former naval intel officer and entrepreneur Jack Phillips crunching how stablecoins could boost demand for U.S. debt by supplanting the opaque Eurodollar system.
Key graf: “While U.S. commercial banks generally maintain a loan-to-backing asset ratio close to 10x, supported by high-quality assets like U.S. Treasuries, in Eurodollar markets, research suggests collateral reuse and “collateral multipliers” vary widely but range in estimate from 2x to 5x or higher in some parts of the Eurodollar/shadow banking system. This absence of transparency has led to persistent uncertainty about the true scale of global dollar liquidity, as the Eurodollar market can expand or contract credit without the Federal Reserve’s direct oversight, thereby exerting significant influence over international funding markets and global financial stability.”
— Arthur E. Wilmarth, Professor Emeritus of Law, called for the repeal of the GENIUS Act because uninsured stablecoins and crypto derivatives threaten financial and economic stability (via Naked Capitalism)
Summary: Wilmarth warns that by allowing uninsured nonbank stablecoin issuers and permitting crypto‐derivatives under weak oversight, the GENIUS Act creates a dangerous “Shadow Banking 2.0” regime. He argues that such stablecoins are highly vulnerable to runs, especially in downturns, because reserves may be held in uninsured or opaque instruments. The history of crypto peg breaks and the collapse of Circle’s reserves at SVB illustrate these risks. The piece also asserts that the Act enables Big Tech and non-bank firms to enter banking without standard safeguards, threatening financial stability and data privacy. He adds that because crypto derivatives are highly leveraged and speculative, their collapse could trigger a “Subprime 2.0” meltdown with spillovers into traditional finance. To counter this, the author calls on Congress to repeal the GENIUS Act, require all stablecoin issuers to be FDIC-insured banks, and subject crypto derivatives to existing Dodd-Frank regulations.
Key graf: “The GENIUS Act also permits nonbank stablecoin issuers to sell to the public a potentially unlimited range of crypto derivatives and other crypto investments that are approved by federal and state regulators as being “incidental” to the activities of crypto asset service providers. Crypto derivatives — including futures, options, and swaps – account for about three-quarters of all crypto trading activity, and most crypto derivatives trades occur on unregulated foreign exchanges. Perpetual crypto futures contracts enable investors to make highly-leveraged, long-term bets on movements in crypto prices without owning the underlying crypto-assets.”
Cash Equivalence take: This is the most bearish and alarmist take on stablecoins we’ve seen yet.
Analysts:
— Ed Butchart, former CIO at Kepler Partners, argued stablecoins will make the financial system less elastic.
Key graf: “A financial system anchored around stablecoins would likely be less elastic. The existing monetary architecture expands or contracts with transactional demand: the central bank stands ready to lend reserves against high-quality collateral and can offer intraday settlement liquidity, while commercial banks retain the flexibility to issue money when it’s needed. These activities can serve as automatic stabilizers and are critical for a complex, fast-moving economy. Yet stablecoins lack this flexibility — additional issuance requires upfront payment — and private credit’s room for manoeuvre will be constrained by the availability of dry powder.
— We got hold of the Standard Chartered note on stablecoins that’s been doing the rounds.
Key graf: “Correspondent banking, payments and FX revenue are likely to decline. These risks could be partly offset as banks start banking the stablecoin issuers and integrating stablecoins into their own processes. Stablecoins have the potential to increase banks’ efficiencies in capital usage, settlements, custody, record-keeping, loan origination, interbank payments, trade finance and treasury management.”
— JP Morgan highlighted that tokenized MMFs are making an appearance in Japan and will soon be offering immediate redemptions using stablecoins.
Key grafs: “MMFs have historically struggled to attract meaningful subscriptions in Japan. MMFs are set to make a comeback as early as 1H26, following their disappearance in 2016 with the introduction of NIRP. At their peak in May 2000, MMFs had AUM of around JPY 22 trillion, or about 2 percent relative to JPY deposits at the time. However, MMFs suffered a major setback in November 2001 when several funds broke the buck due to the Enron scandal.”
“Today, market conditions are markedly different. Additionally, any incremental increase in the policy rate will likely widen the spread between MMF yields and demand deposit rates, as the former should have a beta closer to 100 percent, compared to around 40 percent for demand deposits to date.”
“Second, the new features enabled by tokenization may be limited by the current state of stablecoins. As noted in The Zen of Stablecoins, there are a few hurdles to overcome, such as issuance and redemption limits and the retention of funds. These constraints could ease over time, but progress will likely take some time.”
Key chart:
— Christian Catalini at the Centre for International Governance Innovation pondered how stablecoins will be integrated into the financial system.
Key argument: The future of stablecoins depends on geopolitics: in a reformed dollar-centric order, they complement banks and CBDCs; in a multipolar or fragmented world, they may coexist with or be marginalized by state digital currencies. Ultimately, Catalini foresees an interoperable system where regulated, fully backed stablecoins become the connective tissue of digital commerce, while CBDCs serve domestic policy aims and bitcoin acts as a neutral reserve asset.
Humor:
— If you want to see TRON’s Justin Sun being roasted for spending $6 million on a banana, click here.
