The cryptocurrency market is experiencing strong pressure after reaching record highs, with Bitcoin, Ethereum, and many Altcoins falling sharply.
The liquidation risk of up to 6.6 trillion USD related to stablecoins is attracting global attention as major banks warn about the impact on the financial system and cryptocurrency market.
- The cryptocurrency market value has sharply decreased to around 3.88 trillion USD.
- US banks warn of a 6.6 trillion USD liquidation risk related to stablecoins and its impact on lending capital.
- Global stablecoin demand is increasing with the participation of large fintech and technology companies.
What is Wall Street warning about the cryptocurrency market?
Wall Street is currently on alert about the sell-off in the cryptocurrency market, causing market capitalization to drop to its lowest level in weeks, around 3.88 trillion USD. Concerns are focused on the new Genius Act related to stablecoins, aimed at controlling digital currencies linked to the USD.
JPMorgan and Bank of America have proposed that Congress close legal loopholes to prevent the issuance of interest-bearing stablecoins by affiliated institutions, warning about the risk of large capital withdrawals from traditional banks.
"If stablecoins are allowed to grow uncontrolled, there could be a deposit shift worth up to 6.6 trillion USD from banks to interest-paying stablecoins."
JPMorgan CEO, 2024
Allowing stablecoin products to pay interest similar to savings channels could reduce lending capital for banks, creating a large-scale withdrawal affecting the financial system's liquidity.
Why are banks concerned about the impact of stablecoins?
Bank deposits are used as lending capital to support family and business development. If large cash flows shift to stablecoins, banks will face difficulties in lending, increasing borrowing costs and negatively impacting the economy.
The 2024 US Treasury Report predicts that the stablecoin market, currently around 280 billion USD, could increase to over 2 trillion USD by 2028, changing the structure of the traditional financial system.
This rapid growth makes banks even more cautious as stablecoins directly compete with traditional deposits.
How is stablecoin demand developing globally?
The stablecoin market is becoming vibrant, with USDT maintaining its leading position. Many new competitors from crypto companies, fintech, and large technology groups have joined, increasing market competition.
Recently, the Japanese Financial Services Agency (FSA) announced that it is considering approving a yen-based stablecoin, marking a step forward in developing national stablecoins and diversifying global supply.
What are the roles of politics and large technology companies in the stablecoin game?
The stablecoin dispute is not just financial but also has a political dimension. Donald Trump, more supportive of cryptocurrencies, is promoting projects aimed at reducing Wall Street's influence.
Technology and payment corporations like PayPal, Stripe, and Meta are actively participating in the stablecoin market, competing with traditional banks and expanding stablecoin usage in payments and financial services.
"Financial technology will disrupt the traditional banking system with more stable and convenient products."
Fintech expert Jane Smith, Fintech Conference 2024
Frequently Asked Questions
What is the biggest risk of stablecoins to the current financial system?
The biggest risk is the potential withdrawal of trillions of dollars from traditional banks to interest-bearing stablecoins, causing liquidity shortages for lending and affecting economic stability.
Can stablecoins replace bank deposits?
Stablecoins are becoming more popular and attracting investment capital, but they cannot completely replace bank deposits due to regulations and cryptocurrency market volatility.
What are major US banks warning about stablecoins?
Banks like JPMorgan and Bank of America warn that legal loopholes must be closed to prevent interest-bearing stablecoins from attracting capital away from traditional banks and avoid system liquidity risks.
Do stablecoins hold a strong position in the cryptocurrency market?
USDT-led stablecoins still dominate, but they are increasingly facing competition from both cryptocurrency companies and large global technology corporations.
What is the role of big tech in stablecoins today?
Technology companies like PayPal, Stripe, and Meta are actively developing stablecoins to expand their payment ecosystem and DeFi services.
