Arthur Hayes: Forget CRCL, buy JPMorgan Chase! Stablecoins will drive bank stocks up 184%

Recently, the stablecoin issuer Circle's IPO surged, becoming a regret for most who missed out. However, BitMEX founder Arthur Hayes suggests everyone forget about CRCL and instead buy too-big-to-fail (TBTF) banks, specifically naming JPMorgan Chase, estimating that stablecoins could potentially drive TBTF bank stock prices up by an average of 184%. JP Morgan recently announced the launch of JPMD deposit token plan, viewed as a foray into stablecoins. JPMD is based on Base chain, which is Coinbase's Ethereum Layer 2 system. As a result, JP Morgan will have two types of deposits: regular deposits and JPMD stablecoin deposits. Regular deposits remain digital but require outdated inter-bank communication systems and extensive human oversight for transfers. They can only be transferred Monday to Friday, 9 AM to 4:30 PM, with minimal yield rates - FDIC estimates 0.07% for checking accounts and 1.62% for one-year certificates of deposit. JPMD, by contrast, operates 24/7/365. While legally unable to pay interest, Hayes believes JP Morgan will attract customers by offering attractive cash-back incentives to convert regular deposits to JPMD. Hayes argues JPMD could significantly reduce compliance costs. TBTF banks currently spend $20 billion annually on regulatory compliance. Blockchain could streamline reporting, making regulatory compliance more efficient and cost-effective. JP Morgan's second motivation is using custodied stablecoin assets to purchase billions in low-risk US Treasury securities, which offer yields close to the federal funds rate. Hayes calculates that using an average price-to-earnings ratio of 14.41 and considering cost savings and stablecoin potential, this could add $3.91 trillion in market value. With current TBTF bank market capitalization around $2.1 trillion, this suggests a potential 184% stock price increase. Since the US Stablecoin Act《GENIUS Act》advanced, the crypto industry has sparked a "banking" trend. After Circle announced bank license application, Ripple's CEO Brad Garlinghouse also stated on 7/3 that he has applied to the OCC to become a federally and state-regulated "national bank".

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Circle Applies for Bank License First

Stablecoin USDC issuer Circle officially applied to the OCC on 7/1 to establish the First National Digital Currency Bank, offering digital asset custody services to institutional clients while being supervised by the federal government.

Regarding this, Circle CEO Jeremy Allaire stated that this application is to proactively comply with the upcoming U.S. stablecoin legislation.

(Does Circle Want to Become a Bank? What is the Purpose of OCC's National Trust Bank Charter)

Ripple Announces Follow-up, RLUSD Becomes "Dual-Regulated" Stablecoin

Following this, on 7/2, Ripple CEO Garlinghouse announced on Twitter (X) that they are also submitting an application for a "National Trust Bank Charter" to the OCC.

Garlinghouse emphasized that Ripple has always valued compliance, and this application aims to make their stablecoin RLUSD one of the few stablecoins regulated by both federal and state governments. Currently, RLUSD is already within the regulatory framework of the New York State Department of Financial Services (NYDFS).

Ripple Also Applies to Fed for Master Account, XRP Rises in Response

In addition to applying for a bank license, Ripple is also simultaneously applying to the Federal Reserve (Fed) for a "Master Account". Garlinghouse stated that if the application is approved, Ripple can directly deposit RLUSD reserves with the Fed, further enhancing fund safety and RLUSD's credibility.

This application was submitted through Standard Custody, a crypto custody institution acquired by Ripple in February 2024.

Garlinghouse added that in the past few years, the crypto industry has suffered from the Biden administration's de-banking (Chokepoint 2.0) actions. However, the situation has now reversed, with Congress beginning to legislate and banks becoming more willing to participate, which led Ripple to take the initiative. After the news broke, XRP rose to $2.29 at one point, ultimately closing at $2.24, with a daily increase of 3.73%.

(Note: Master Account allows the holder to directly trade with the Fed without intermediary banks. Having a master account enables banks to deposit funds and earn interest from the Fed.)