Circle's place
This isn't just any crypto company though, and the figure above is actually pretty low, at least in my mind.
Those of you who have been reading this daily newsletter for a while probably already know my thoughts on the future of central bank digital currencies (CBDCs) in the U.S.
Simply put, there probably won't be any centralized FedCoin anytime soon. They're way too far behind, and that's not really how the system is set up anyway.
Most U.S. dollars are born not at the Federal Reserve or even the Treasury, but from the banks themselves. When someone takes out a loan, the bank simply clicks a few buttons and magically creates the money.
Thanks to fractional reserve banking, the bank only needs to hold a very small amount of the cash in their coffers. At the start of the pandemic, that reserve requirement was set to zero, meaning that banks could lend as much money as they wanted without holding anything in their reserves, but I digress.
The future of stablecoins in the U.S. will more likely come from the banking sector itself. Rather than creating new U.S. dollars, the bank will simply create some new JPM Dollars, or Wells Fargo Bucks.
This is actually very healthy for the system, because it reduces the risk of contagion. If Wells Fargo goes bankrupt, it won't bring the entire U.S. economy down.
Rather, all dollars in circulation will be directly traceable back to their point of origin, and there can exist a small premium for dollars issued by stronger institutions.
Many existing financial institutions, however, may opt not to issue their own coin, but rather rely on a third party service that will issue the stablecoins for them.
At the moment, there is only one that is widely circulated and is compliant with all known U.S. regulations, and that's USD coin.
In our assessment, USD coin has a fair chance of becoming the most widely used iteration of the U.S. dollar.
