Guillaume Poncin of Alchemy predicts that the recently passed Genius Act will pave the way for major financial institutions to enter the stablecoin market. This legislative milestone is expected to bring regulatory clarity, enabling banks to develop their own stablecoins and blockchain networks, significantly altering the financial landscape.

The Genius Act: A Turning Point for Stablecoins

The U.S. Senate’s approval of the Genius Act is a game-changer for the stablecoin ecosystem, providing long-awaited regulatory guidelines. This move is anticipated to encourage major financial institutions, which have been hesitant due to unclear regulations, to embrace blockchain technology. Guillaume Poncin, CTO of Alchemy, shared insights on this development, emphasizing that the Act could lead to every major bank issuing its own stablecoin and operating its own blockchain network.

Why Banks Are Poised to Issue Stablecoins

According to Poncin, banks stand to gain several advantages by issuing their own stablecoins:

  • Revenue Generation: Stablecoin issuance allows banks to capture the float on reserves, potentially generating hundreds of millions in annual revenue from treasury yields.
  • Customer Retention: Banks maintain control over customer relationships and transaction flows, eliminating reliance on third-party stablecoin issuers.
  • Enhanced Services: Clients benefit from instant settlement, 24/7 availability, and programmable money backed by the trust and regulatory compliance of traditional banks.

With the right Web3 infrastructure, banks can implement these capabilities efficiently, bypassing the need for extensive blockchain development.

Impact on Existing Stablecoin Issuers

The entry of banks into the stablecoin market raises questions about its impact on established players like Circle and Tether. Poncin believes there is room for coexistence:

  • Market Segmentation: While Circle and Tether dominate crypto-native use cases and international transfers, banks can target corporate treasury functions, institutional flows, and integration with traditional banking services.
  • Additional Asset Control: Bank-issued stablecoins provide institutions with more control over assets and the ability to generate yield.

“The market is massive and growing. There’s room for specialized players,” Poncin stated, emphasizing that the rise of bank-issued stablecoins validates the stablecoin infrastructure as legitimate financial technology.

Circle vs. Tether: Different Approaches

Poncin highlighted the contrasting strategies of Circle and Tether:

  • Circle: Focuses on transparency and regulation, making USDC attractive for institutional use cases. It adopts a cautious approach to technical changes.
  • Tether: Prioritizes global liquidity and ease of use across multiple markets. It is more aggressive in adopting multi-chain strategies.

This differentiation allows institutions to choose stablecoins based on their specific needs, whether it be compliance, transparency, or market reach.

Layer-1 vs. Layer-2: What Will Banks Choose?

When it comes to blockchain infrastructure, the choice between Layer-1 and Layer-2 networks depends on the intended use case:

  • Layer-1: Suitable for large-scale operations requiring maximum security and transaction finality, such as B2B transactions.
  • Layer-2: Ideal for retail applications due to lower transaction costs, customizable security settings, and opportunities to capture transaction revenue through sequencer fees.

For instance, Layer-2 networks like Coinbase’s Base generate significant revenue while still benefiting from Ethereum’s security. This trend is promising for Ethereum, as Layer-2 solutions continue to settle on its network, reinforcing its foundational role in the blockchain ecosystem.

Interoperability: The Key Challenge

As banks adopt blockchain technology, interoperability between their networks will be crucial. Poncin envisions a future where cross-chain messaging protocols, shared sequencer networks, and atomic swaps enable seamless communication between bank blockchains. This would eliminate the delays associated with traditional correspondent banking, offering trustless and instant settlement solutions.

Alchemy’s Role in Bank Blockchain Adoption

Alchemy plays a pivotal role in helping financial institutions transition to blockchain technology. As Poncin explains, the company acts as the infrastructure layer for Web3, simplifying complex blockchain operations for banks. Key services include:

  • Node management and data indexing
  • Wallet and rollup infrastructure
  • Developer tools for a range of applications, from custody solutions to launching custom blockchains

“Think of us as the AWS for Web3. We handle the technical challenges so banks can focus on building products,” Poncin said, adding that demand from major banks has surged following regulatory clarity.

With regulatory barriers diminishing, banks are no longer asking “if” they should enter the blockchain space but rather “how quickly” they can do so. Alchemy’s infrastructure makes this transition seamless, empowering financial institutions to unlock the potential of blockchain technology.

The Genius Act marks a significant milestone, setting the stage for transformative changes in the financial sector. As banks and fintech firms embrace stablecoins and blockchain networks, the market is poised for exponential growth, with ample opportunities for all players involved.

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