Peter Johnson (BH Digital) on the Relentless rise of Stablecoins (EP.451)
Sep 13, 2023
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Peter Johnson, Co-head of Venture at Brevan Howard Digital, discusses stablecoins, their rise, predictions, and the advantages of transacting in stable currencies. They explore the role of blockchains like Tron, the similarities between stablecoins and offshore US dollars, and the potential impact of CBDCs on stablecoins. They also discuss Tether's dominance and speculate on the potential runner-up to the US dollar.
Stablecoins offer access and efficiency compared to traditional banking systems, disrupting the payment industry.
Tokenized treasuries and synthetic USD stablecoins present promising opportunities for disruption and yield generation.
The usage of stablecoins in emerging markets is significant, driven by strong demand for transactional purposes and accessing US dollars.
Deep dives
The Rise of Stablecoins: Insights from Peter Johnson
Peter Johnson, co-head of venture at Brevin Howard Digital, discusses his prior predictions on the stablecoin space and his main findings from the white paper 'The Relentless Rise of Stable Coins.' He highlights the value proposition of stablecoins, particularly the access and efficiency they offer compared to traditional banking systems. Johnson also explores the emergence of new stablecoin models, such as tokenized treasuries and synthetic USD stablecoins, and the potential for stablecoins to disrupt the payment industry. Additionally, he expresses enthusiasm for PayPal's entry into the stablecoin space with PayPal USD, highlighting their massive user base and potential for driving adoption.
The Promise of Interest-Bearing Stablecoins
Johnson discusses the potential of interest-bearing stablecoins, particularly tokenized treasuries and synthetic USD stablecoins. He explains how these models can offer higher yields and more access to dollars, benefiting individuals and businesses in emerging markets. However, regulatory challenges and limitations on scalability pose obstacles to widespread adoption. Nevertheless, Johnson believes these models represent promising opportunities for disruption and the creation of fully decentralized stablecoins.
Challenges and Opportunities in Stablecoin Regulation
Johnson acknowledges the challenging regulatory landscape for stablecoins, particularly in the US. He highlights the recent negative developments in US regulations but remains optimistic about the long-term potential of stablecoins. Johnson believes that continued education and the demonstration of the value proposition of stablecoins, such as accessibility to US dollars, can eventually persuade regulators to embrace stablecoins within the US.
Stablecoins Usage and Importance in Emerging Markets
Stablecoins, particularly tether, are being widely used in various emerging markets such as Asia, Africa, Eastern Europe, and Latin America. While the specific use cases vary by country, there is strong demand for stablecoins for transactional purposes and as a means of accessing US dollars. For example, stablecoins are used for online advertising payments, receiving payments from US companies, and as a way of moving funds between different dollar accounts in multiple countries. The usage of stablecoins in these markets is significant and has become a popular choice even among individuals who are skeptical of other crypto assets.
Stablecoin Volume, Transparency, and the Future Outlook
Stablecoins have seen a rapid increase in transaction volume, surpassing traditional payment networks like PayPal in terms of settlement value. In 2020, stablecoins settled over $11 trillion onchain, comparable to the volume processed by Visa. While stablecoins currently account for a small share of interest-earning stablecoins, there is potential for significant growth in this area. Despite the skepticism that stablecoins will be replaced by central bank digital currencies (CBDCs), the transparency and operational benefits of stablecoins make them a preferred choice for many. Stablecoin issuers are likely to continue playing a crucial role in global finance, contributing to the dominance of the dollar and providing a level of control that benefits the United States.
