A recent development in the financial sector has the potential to unlock a massive influx of capital into decentralized financial protocols. According to Finance Minister Scott Bessent, the introduction of stablecoins pegged to the US dollar could pave the way for up to $34 trillion to flow into protocols like Ethena, Ether.fi, and Hyperliquid. This monumental shift in capital allocation is made possible by the Minister’s plan to redirect funds from the $13 trillion Eurodollar system and $21 trillion in global South single-trading deposits into stablecoin infrastructure.
In a blog post dated August 27, Arthur Hayes reported on Bessent’s ambitious strategy, highlighting two significant challenges: the inability of the Treasury to track Eurodollar flows and the need for price-sensitive buyers of government debt. To overcome these hurdles, the plan leverages US social media platforms as sales channels for introducing stablecoins. For instance, Meta’s WhatsApp could facilitate cryptocurrency exchanges for billions of users worldwide, enabling seamless transactions with stablecoins while bypassing local banking systems.
Positioning DeFi Protocols for Secular Rise
Stablecoin issuers must invest deposits in financial accounts to maintain dollar parity, creating a guaranteed demand for government debt. Tether, for example, earns a net interest rate of 4.25% to 4.5% by holding T-bills and does not pay interest on its USDT token. This business model scales directly with deposit growth, ensuring a steady supply of short-term government securities. As the dominance of the US dollar continues to shape the global financial landscape, Bessent’s stablecoin push could force countries to comply with the introduction of stablecoins.
An example cited is the threat to exclude foreign banks from Federal Reserve swap lines during financial crises, which would drive deposits from the Eurodollar system to US-regulated stablecoin platforms. In this scenario, Hayes projects a total stablecoin circulation of $10 trillion by 2028. He argues that three protocols – Ethena, Ether.fi, and Hyperliquid – are poised for a “secular rise” in this environment.
Path to 25% Market Share
Ethena, which operates a synthetic dollar system, generates earnings by shorting cryptoderivatives against long positions. With a total value locked (TVL) of $12.4 billion at the time of writing, Ethena is well-positioned to capture a significant share of the stablecoin market. According to Hayes’ analysis, USDE could achieve a market share of 25% of total stablecoins, potentially reaching an offering of $2.5 trillion.
Hayes also highlights Ether.fi, a protocol that offers stablecoin issuance through Visa-driven debit cards, allowing users to spend their crypto everywhere Visa is accepted. The platform achieves sales ratios comparable to JPMorgan’s 1.78% fee rates and could acquire significant value in the expanding US dollar stablecoin market. The third protocol mentioned, Hyperliquid, dominates decentralized perpetual trading with a market share of 63% and processes daily volumes accounting for 26.4% of the entire stablecoin offer in commercial activity.
In light of Hayes’ forecast of $10 trillion in stablecoin circulation, the interactions between these three protocols and stablecoins could yield significant benefits. As the financial landscape continues to evolve, it is essential to monitor the developments in the stablecoin market and their potential impact on decentralized financial protocols.
For more information on this topic, please refer to the original article: https://cryptoslate.com/treasury-secretary-bessents-stablecoin-push-could-drive-34-trillion-into-ethena-etherfi-hyperliquid/
