Stablecoins issued by traditional financial institutions may struggle to gain significant adoption in the market, according to Matt Hougan, chief investment officer at Bitwise.
“TradFi stablecoins will find it harder than they think to win market share,” Hougan stated in a post on X (formerly Twitter) on February 26.
Hougan referenced Bank of America (BofA) CEO Brian Moynihan’s recent announcement that the bank is considering launching a U.S. dollar-pegged stablecoin once clear regulations are in place. The statement has fueled discussions within the crypto community regarding the role of TradFi in the digital asset space.
A New Form of CBDC?
The news about BofA’s stablecoin has triggered mixed reactions. Some see it as a positive development for crypto adoption, while others argue that bank-backed stablecoins could function similarly to central bank digital currencies (CBDCs), raising concerns about financial control and surveillance.
“Are they just rebranding CBDCs and calling them stablecoins?” one user questioned on X.
Others pointed out key differences, arguing that a CBDC is a direct liability of the central bank, whereas a stablecoin is issued by a private institution. According to digital asset researcher Anderson, this distinction has significant implications for financial stability and regulatory oversight.
U.S. Strategy on Stablecoins and the Dollar
Some community members believe that the U.S. government’s recent stance on stablecoins aligns with a broader strategy to strengthen the dollar’s dominance. On January 23, President Donald Trump signed an executive order promoting the growth of legitimate dollar-backed stablecoins while simultaneously banning the development of a U.S. CBDC.
Concerns Over Tether’s Future
As discussions around regulated stablecoins continue, concerns have emerged about the future of Tether (USDT), the world’s largest stablecoin by market capitalization. Some speculate that regulatory moves favoring bank-issued stablecoins could lead to restrictions on Tether.
“So Tether will likely be outlawed or treated differently compared to other U.S. stablecoins. They are lobbying for this,” a commentator noted.
Tether CEO Paolo Ardoino weighed in on the matter, calling the legal developments “very troubling.” He suggested that new regulations could negatively impact Bitcoin prices and reduce confidence in the crypto market. Some industry observers believe the proposed legislation is designed to limit competition in the stablecoin market, favoring traditional financial institutions.
Despite these concerns, Ardoino has reiterated that Tether’s focus remains on serving markets where it is needed most, particularly in developing economies like Argentina, Turkey, and Vietnam, where stablecoins provide an alternative to volatile local currencies.
As the landscape for stablecoins continues to evolve, the competition between traditional financial institutions and existing crypto-native issuers will shape the future of digital assets.
