This is an act many are going to get involved with. It is also something that could change the makeup of the entire banking system.
We are seeing reports that the GENIUS Act, the stablecoin bill in the US Senate, could be voted on next week. It is expected to pass, meaning it would go to the House. If passed there, both houses would have to reconcile the bill, which would head to the President for signature.
Until this is signed into law, there is still a degree of speculation. Mark Zuckerberg was on Capitol Hill being grilled by Senate members about Meta's plans on bringing out a stablecoin. He denied that was the plan, something the likes of Elizabeth Warren were not buying.
Now we have a report, this time from the Wall Street Journal, stating that both Amazon and Walmart are considering the idea of issuing their own stablecoin.
Regulatory clarity will be required before companies of this magnitude move forward. At this point, they are using their best estimates to see where things could be heading. The fact we are getting reports of interest shows the value that these corporations realize is available.
Stablecoins can help to streamline services. It makes payments quicker while also providing the issuer with an additional revenue stream. For companies like Amazon and Walmart, this could be a no-brainer.
As stated in other articles, the key is the issuer is providing $1 in transaction value for each stablecoin. To the user, it is the same. For the company, however, there is the interest received on the assets backing the coins. If they go with T-bills, the present payout is over 4%.
Here is what the companies are seeing:
Walmart and Amazon are exploring plans to issue their own U.S. dollar-backed stablecoins to reduce payment friction, speed up settlement, and lower costs tied to traditional financial rails, The Wall Street Journal reported on Friday.
Simply put, it is better technology. The existing financial system is too slow. It was built for a physical world. Crypto is based solely in the online world. This is its advantage.
Of course, like most disruptions, this causes problems for the existing entities. The banks are not really happy about this.
But what threat could Amazon and Walmart pose to them?
The banks are doing their best to protect themselves. Amazon and Walmart are two companies that cause a lot of pain for these institutions. Meta is another one.
To grasp would could occur, we simply look at the number of transactions. As payments move to blockchains, with stablecoins riding on top, this removes the banking system. While there are still deposits, it is only a portion of the transactional value available. Stablecoins allow issuers to increase the effective monetary supply, something now dominated by the commercial banks.
Banks are having their lobby group do their best to achieve regulatory capture. One of the components of the GENIUS Act is that a stablecoin issuer has to have finance as the primary business. If this is not met, an exemption must be granted.
This would prohibit Amazon, Walmart and Meta from entry, at least without getting a waiver.
Of course, fragility is cited as the reason, with lawmakers promoting the nonsensical idea that only banks (and other financial institutions) can protect the public. Have they not been watching what happened the last 20 years or so?
Resiliency comes from distribution. My view is that we would increase the stability of the system by having more issuers, from both inside and outside the financial system, issuing stablecoins.
Amazon and Walmart have sales that register in the hundreds of billions of dollars each year. Stablecoins from these companies could mirror USDC, being placed on many different networks. This would help to distribute the activity across a greater range of infrastructure, pulling more from the banking system.
Settlements would be near instantaneous, with payments going from one wallet to another. The lower fees would benefit the retailers, causing another hit to the banking system.
Ultimately, I think this becomes the norm. It might not happen with the passage of these bills but the system will realize its mistake in a few years.
Walmart and Amazon will not be the last to look into this.
