Legislation, stablecoins, IPOs, treasury – cryptocurrencies are subverting US financial markets

# Source: Wall Street Insights  

From the legislation on stablecoins, the surge of emerging stablecoins, to the IPO boom of cryptocurrency companies and the large - scale acquisition of crypto assets by traditional stock firms, these four major trends have enabled cryptocurrencies to integrate into the traditional financial system with unprecedented depth and breadth. While creating billions of dollars in profits for the industry, they have also brought new risks to investors and regulators.  

As mentioned by Wall Street Insights in July this year, U.S. President Trump signed the first cryptocurrency bill passed by the U.S. Congress, which provides a legal framework for stablecoins. Subsequently, banks, fintech companies, and payment giants have entered the market one after another to explore the potential of stablecoins in reducing transaction costs and improving efficiency.  

At the same time, crypto companies have set off an IPO boom and are sought after in the public market. More notably, some listed companies have begun to allocate a large amount of their corporate treasuries to crypto assets such as Bitcoin, closely linking their stock prices to the fluctuations of cryptocurrencies.  

However, this rapid integration has also brought new challenges. The expansion of stablecoins may affect the deposit base and lending capacity of banks, and hides systemic risks. The high volatility behind the IPOs of crypto companies, as well as the actual losses caused by the "treasury - to - crypto - treasury" strategy of listed companies to secondary market investors, all indicate that this crypto - driven financial transformation is far from being settled.  

## Legislative Breakthrough Vindicates Stablecoins  

In July this year, President Trump signed a bill on stablecoins, marking the first time that the cryptocurrency field has obtained legal recognition at the national level.  

A stablecoin is a blockchain token pegged one - to - one to fiat currencies such as the U.S. dollar. It maintains its value by holding liquid assets such as cash and short - term U.S. Treasury bonds, and functions similarly to a money market fund.  

This legislative breakthrough has greatly enhanced the legitimacy of stablecoins and opened the door for their wider application.  

Banks, fintech, and payment companies have begun to pay close attention and explore the use of stablecoins to achieve faster and cheaper transactions than traditional wire transfers.  

In some emerging markets, U.S. dollar - denominated stablecoins have been used to hedge against inflation and avoid fluctuations in local currencies. This move may also boost the demand for U.S. Treasury bonds, which are the main reserve assets of stablecoins. On the other hand, the popularity of stablecoins may also divert deposits from traditional banks, thereby affecting the lending capacity of banks.  

Next, U.S. regulators will negotiate on regulatory details under the intense lobbying of the crypto industry and the traditional financial sector.  

One of the controversial issues is whether crypto platforms can pay interest to stablecoin holders. Banking groups oppose this on the grounds that it threatens their deposit base, while the crypto community hopes to use this to provide competitive products.  

## Competition Between Old and New Forces in the Stablecoin Market  

Driven by the favorable legislative environment, the stablecoin market has expanded rapidly and is no longer dominated solely by Tether's USDT (with a circulation of 171 billion U.S. dollars) and Circle's USDC (with a circulation of 74 billion U.S. dollars).  

Start - ups, banks, and fintech giants are entering the market one after another, either launching their own U.S. dollar - denominated stablecoins or integrating with existing stablecoins:  

This growing acceptance has paved the way for the application of stablecoins in areas such as merchant payments, treasury management of multinational corporations, and inter - bank settlements.  

However, the influx of new participants has also intensified competition.  

It is reported that Hyperliquid, an emerging crypto exchange, recently selected a cooperative stablecoin issuer through bidding and user voting, triggering competition that may squeeze the profits of issuers.  

More importantly, the proliferation of stablecoins increases the risk of volatility in the crypto market spilling over into the traditional financial system. The collapse of any single stablecoin may trigger a crisis of confidence among investors, leading to a run on other stablecoins and ultimately causing a sell - off of U.S. Treasury bonds, which are the cornerstone of the global financial market.  

## IPO Boom Pushes Crypto Companies to the Public Market  

As the regulatory environment has become more favorable, crypto companies are ushering in an IPO boom.  

Stablecoin issuer Circle, blockchain lending company Figure, and crypto platforms Gemini and Bullish all recorded sharp stock price increases on their first day of listing. Legal professionals point out that the U.S. Securities and Exchange Commission (SEC), which has become friendly to the crypto industry under the Trump administration, is giving the green light to the IPO applications of these companies.  

The enthusiasm of the public market for these companies has even exceeded the expectations of industry insiders. For example, Circle's stock price has soared by 358% since its IPO in June.  

Nevertheless, this phenomenon means that the risks of the crypto industry are being transferred to stock exchanges. The valuations of these companies are often linked to the highly volatile trading volume of cryptocurrencies, and investors seem to have forgotten the lesson from the collapse of the crypto exchange FTX less than three years ago.  

This IPO boom is still continuing. Crypto exchanges Kraken and OKX, custodian BitGo, and asset management firm Grayscale are preparing for their listings, and some are expected to complete the process within this year.  

At the same time, the crypto industry is promoting its next goal: tokenizing stocks and trading them on crypto exchanges.  

Companies such as Robinhood, Kraken, and Galaxy Digital have begun preliminary attempts to promote tokenized securities that represent exposure to stocks such as Tesla and NVIDIA to overseas users who may not have access to the U.S. market.  

## From "Treasury" to "Crypto Treasury": Listed Companies Embrace Crypto Assets  

One of the most unexpected market trends this summer is the integration of "meme stocks" and speculative cryptocurrencies.  

Software manufacturer Strategy (formerly known as Microstrategy) is the pioneer of this model. By purchasing Bitcoin worth 75 billion U.S. dollars, the company has transformed itself into a proxy for Bitcoin in the stock market.  

Now, this strategy is being replicated by a large number of small listed companies.  

According to data from crypto consulting firm Architect Partners, more than 130 U.S. listed companies have announced plans to raise over 137 billion U.S. dollars this year to purchase various crypto assets, including Ethereum, Solana, Dogecoin, and even the World Liberty token issued by the Trump family.  

However, this strategy has not brought good returns to secondary market investors. Data from 35 related stocks tracked by Architect Partners shows that:  

As the hype subsides, the market value of these companies has begun to decline relative to the value of the crypto assets they hold, weakening their ability to continue raising funds to buy cryptocurrencies.  

At the same time, NASDAQ is strengthening the review of such financing activities and, in some cases, requiring shareholder approval. Factors that once pushed up stock prices may now start to have the opposite effect.  

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