Stablecoins drive demand for Treasuries and are fundamental to the US economy – Cantor Fitzgerald CEO

(Kitco News) – Following the launch of multiple spot Bitcoin (BTC) exchange-traded funds (ETFs) in the U.S., financial institutions have slowly started to become more open to the idea of engaging with digital assets, with some recognizing that the underlying blockchain technology will play a pivotal role in financial markets moving forward. 

 

One of the latest chief executives to tout the benefits of crypto is Howard Lutnick, CEO of Cantor Fitzgerald LP, a global financial services firm founded in 1945. 

 

According to Lutnick, who spoke at the Chainalysis conference in New York on Wednesday, stablecoins offer multiple benefits to the US economy, and the tokenization of financial assets will likely increase moving forward. 

 

“Dollar hegemony is fundamental to the United States of America. It matters to us, to our economy,” Lutnick said, according to a report from Bloomberg. “That’s why I’m a fan of properly backed stablecoins. I’m a fan of Tether. I’m a fan of Circle.”

 

Cantor currently serves as a custodian for Tether Holdings Ltd., the firm responsible for issuing Tether (USDT), the largest stablecoin by market cap. Lutnick has previously affirmed that Tether does in fact hold the money it says it does, pushing back against years of speculation by crypto proponents that USDT is backed by nothing.  

 

Despite warnings from many on Capitol Hill, Lutnick said that stablecoins like USDT do not pose a systemic risk to the world. Instead, he said they help drive demand for U.S. Treasuries and are therefore “fundamental for the U.S. economy.” 

 

“It’s just an evolution,” he said. “It’s better and it’s everywhere. And thank goodness.”

 

Lutnick said the real danger comes from central bank digital currencies (CBDCs), which would give the government unparalleled abilities to spy on the purchases of everyday Americans. 

 

“My fear is that central banks would like to issue a central bank digital currency. That makes sense right?” he said. “But the problem is what will China think? They will define it as the American spy wallet.”

 

He also sees the real-world asset (RWA) tokenization movement gaining traction in the years ahead and foresees a time when assets like bonds will be primarily traded on blockchains. 

 

“I think when proper blockchains – I mean blockchains that are fast and cheap, are available – I think you will see over the next 10 years, fundamental tokenization of financial assets,” Lutnick said.

 

He also highlighted the growing interest among financial giants like BlackRock, Brevan Howard, and KKR in tokenizing various parts of funds, and noted that Citigroup estimates that the tokenization market will reach $5 trillion by 2030, which further underscores the potential magnitude of this evolving trend.

 

According to Tether CEO Paolo Ardoino, the tokenization trend will only ramp up from here, and “There will always be a place for the dollar on the blockchain.”

 

“The dollar’s stability and widespread acceptance make it a natural fit for blockchain-based transactions, ensuring seamless integration with existing financial systems and facilitating global trade and commerce,” he said in an interview with Kitco Crypto. “Additionally, its status as a reserve currency and the backing of trusted institutions provide confidence and familiarity in an increasingly digitized financial landscape, reinforcing the dollar’s enduring role on the blockchain.”

 

“Tokenizing real-world assets, such as real estate, stocks, commodities, and even intellectual property rights, can unlock liquidity, reduce friction in trading, and enable fractional ownership, opening up new investment opportunities and democratizing access to assets traditionally reserved for institutional investors,” Ardoino noted. “Additionally, tokenizing RWAs can enhance transparency, streamline processes like settlement and ownership transfer, and reduce counterparty risk.”

 

He suggested that as the infrastructure and regulatory frameworks for tokenizing RWAs continue to mature, “it’s likely that these emerging applications will play an increasingly significant role in shaping the future of tokenization, complementing stablecoins and expanding the utility and versatility of blockchain-based assets.”

 

On Thursday, USDC issuer Circle announced a new smart contract functionality that would allow holders of the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) to transfer their shares to Circle for USDC. 

 

“Circle’s breakthrough smart contract functionality enables the frictionless transfer of BUIDL shares for USDC to Circle on the secondary market,” Circle said in a press release. “USDC provides a trusted and transparent method for users looking to sell their BUIDL shares but remain holders of digital dollars.”

 

In response to the announcement, crypto investor Ryan Sean Adams said, “Stablecoins will happen in the U.S. because BlackRock and the banks want them to happen. This could not be more obvious.” 

 

“The new BlackRock BUIDL fund on Ethereum is a high bandwidth pipeline between U.S. Treasuries and USDC. Pipelines will bring trillions on-chain,” he said. “The USDC issuer Circle will (likely) IPO soon. BlackRock has ownership in Circle.”

 

“The banks will backdoor themselves into stablecoins – by acquiring/partnering/controlling crypto native companies – and they’ll lobby for stablecoin legislation and make it happen along the way,” Adams predicted. “The US does not have the political will to build a central bank digital currency. They’re [creating] one defacto through private bank-issued stablecoins on public crypto networks like Ethereum.”

 

“As long as we preserve open, permissionless, decentralized protocols like Ethereum at the bottom of the stack, then crypto wins,” Adams concluded. “The liquidity and legitimacy from this will make crypto unstoppable.”

 

Multiple recent headlines add further credence to the growing popularity of stablecoins as an avenue to blockchain adoption.

 

Last Thursday, XRP issuer Ripple announced plans to launch a stablecoin pegged 1:1 with the U.S. dollar, and PayPal announced that Xoom, the company’s cross-border money transfer service, will now allow U.S. users to fund money transfers to friends and family abroad using USD converted from PayPal’s stablecoin, PayPal USD (PYUSD). 

 

On Friday, Sony Bank announced that the gaming giant has initiated a proof-of-concept (PoC) pilot to explore the potential benefits of fiat-pegged stablecoins, including reduced payment and remittance fees, and explore ways to adopt them in Sony’s gaming and sports intellectual properties.