BlackRock: Stablecoins may exist for the long term

According to the Zhitong Finance APP, Jean Boivin, head of BlackRock Investment Institute, pointed out in the latest weekly commentary that: (1) Recent U.S. legislation has solidified the status of stablecoins as a means of digital payment in the future financial sector. BlackRock believes Bitcoin is expected to become a tool for diversifying investment returns. (2) The U.S. stock market has reached an all-time high, partly due to signs that large technology companies are increasing their investment plans in artificial intelligence. The Japanese stock market has also reached an all-time high. BlackRock expects the Federal Reserve to maintain stable interest rates this week. Attention is focused on the U.S. trade agreement as the August 1 deadline approaches, as well as the impact of tariffs in the second quarter GDP data.

New U.S. regulations—especially this month's Genius Act—are solidifying the position of stablecoins as a payment method in the future financial sector, which BlackRock considers one of the five superpowers driving returns. Stablecoins are pegged to major currencies, primarily the U.S. dollar, which may reinforce the dollar's dominance in the global market, although other countries are also exploring alternatives. BlackRock believes that the rising demand for stablecoins has little impact on short-term U.S. Treasury yields. BlackRock still views Bitcoin as a unique return driver.

(Graph: Market value of stablecoins vs. market share of cryptocurrencies from 2020 to 2025)

Note: The orange line shows the nominal total market value of stablecoins, while the yellow line shows its scale relative to the entire cryptocurrency market.

BlackRock's main arguments are as follows:

This year has been a brilliant year for Bitcoin, which has risen 25% so far, as the U.S. gradually passes several key laws aimed at mainstreaming digital payments and digital assets, making the U.S. a global cryptocurrency hub. One of the laws determines which financial regulatory agency oversees different digital assets. This bill is still under consideration in Congress. Another is the Genius Act, signed into law earlier this month, which creates a comprehensive framework for payment stablecoins. Stablecoins are digital tokens pegged to fiat currencies and backed by reserve assets. They combine the frictionless transfer characteristics of cryptocurrencies with the stability of fiat currencies. Although stablecoins account for a small share of the entire cryptocurrency market, only 7%, their adoption rate has rapidly increased since 2020, with a market value reaching approximately $250 billion.

BlackRock believes the Genius Act has two effects on the dollar and U.S. Treasury securities. The act defines stablecoins as a means of payment rather than an investment product; prohibits issuers from paying interest; and restricts issuance rights to federally regulated banks, certain registered non-bank institutions, and state-chartered companies. This regulation may reinforce the dollar's dominance by establishing an international payment ecosystem based on dollar tokenization. Users in emerging markets may find it easier to access dollars than to obtain volatile local currencies. However, in major economies, the adoption of stablecoins may be limited due to the prohibition on paying interest, aimed at preventing the emergence of a low-friction competitor that could compete with bank deposits and harm traditional lending businesses The bill also clarifies the types of reserve assets that stablecoin issuers can hold: primarily repurchase agreements, money market funds, and U.S. Treasury bills with maturities not exceeding 93 days. Leading stablecoin issuers Tether and Circle together hold at least $120 billion in Treasury bills, accounting for only about 2% of the approximately $6 trillion in outstanding U.S. Treasury securities. As the stablecoin market develops, this demand may grow and stimulate new purchases of Treasury bills, but the impact on yields may be limited. First, the demand for Treasury bills from stablecoins may be offset by funds moving from similar assets, resulting in little net new demand. Second, as the U.S. Treasury tends to finance ongoing deficits through more short-term debt, the issuance of Treasury bills will continue to surge.

The U.S. is not the only one taking action. Hong Kong's new regulations aim to attract stablecoin innovation. Europe is exploring a digital euro, but its use will be restricted to avoid harming banks. If other countries allow interest-bearing stablecoins or implement central bank digital currencies, it could undermine the dollar's role in trade financing, although the U.S. may also allow interest payments by then.

This wave of mainstreaming digital assets through regulatory frameworks and U.S. government support signals that the adoption rate of digital assets will further increase, which is our core investment rationale for Bitcoin, and it also helps make it a unique risk and return driver in investment portfolios. Stablecoins still represent a relatively small proportion of the broader cryptocurrency space—and as developments unfold, it remains unclear how stablecoins will compete with other digital assets.

Bottom line: BlackRock views stablecoins as a new component of future finance—U.S. new regulations aim to position the U.S. at the center of digital asset innovation. BlackRock continues to see Bitcoin adoption as a unique risk and return driver.

Market background: The U.S. stock market has reached a historic high, with the S&P 500 rising about 8% this year. Alphabet plans to increase capital expenditures, further driving AI-related trades. After the U.S. and Japan reached an agreement on trade (with tariffs lower than previously demanded by the U.S.), the Japanese stock market surged. The Topix index rose 4% this week. U.S. Treasury yields remained largely stable, with the 10-year yield at 4.40%, currently fluctuating in the range of about 4.20% to 4.60%