Arthur Hayes foresees banking giants overtaking Tether’s stablecoin dominance

Arthur Hayes, former CEO of Bitmex and CIO of Maelstrom, predicted that major banks like JPMorgan will overshadow Tether and other stablecoin companies once they are permitted to issue fiat-backed stablecoins.

During an episode of Laura Shin’s Unchained podcast, Hayes outlined Tether’s successful business strategy, which involves taking dollars, investing them in treasury bills, and earning profits from the interest rate spread. This model has allowed Tether to achieve significant status in the crypto market, primarily due to the absence of a similar offering from the U.S. banking system.

He highlighted that Tether owners generate substantial free cash flow annually, estimating it to be around $4 or $5 billion.

However, Hayes emphasized that the current operational model of centralized stablecoins, which relies heavily on banking services for fund custody and clearing, is not sustainable.

He expressed his criticism of bank managers for providing these services to stablecoin firms like Tether but failing to capitalize on the opportunity to issue their stablecoins.

Hayes predicted a shift in the stablecoin landscape, suggesting that traditional banks, once permitted by the U.S. Treasury, could start issuing their fiat-backed stablecoins. He believes that banks such as JPMorgan could replicate the same interest-earning strategy currently employed by Tether, thereby cannibalizing the market share of existing stablecoin companies.

Hayes further argued that the legitimacy and backing of stablecoins issued by these banks would likely go unquestioned, giving them a competitive edge.

This prediction comes at a time when Tether, the company behind the USDT stablecoin, reported a market capitalization of $91.5 billion at the close of 2023, along with $4 billion in excess reserves. Tether has been actively investing in several expansion initiatives, as stated by its CEO, Paolo Arduino.