Morgan Stanley thinks banks ‘likely’ to capitalize on demand for stablecoins

Morgan Stanley’s chief cryptocurrency strategist Sheena Shah expects the banking industry to profit from the demand for stablecoin deposits, CoinDesk reported Wednesday.

In the expanding decentralized finance (DeFi) industry, stablecoins, which are generally viewed as a bridge between crypto and fiat currencies, have a wide range of applications.

The market worth of stablecoins has risen to $137 billion, up from $20 billion a year ago, and Morgan Stanley’s top cryptocurrency strategist believes banks are unlikely to lose out on the sector’s exponential expansion.

Investor enthusiasm

Government and central bank stimulus, Shah noted, contributed to “hazardous assets reaching all-time highs,” with cryptocurrencies moving “similarly to risky assets.”

However, “institutional investor enthusiasm in partaking in the rising price movement is growing,” Shah said.

Bitcoin’s (BTC) supremacy is eroding, according to Shah, as “other coins outperform because to their lower costs and possible use cases.”

Stablecoins give crypto lenders, or so-called liquidity providers, access to a variety of yield prospects, allowing them to earn interest rates that are unheard of in traditional finance, which would inevitably compel regulators and governments to react, Shah added.

In a report on stablecoins recently released by the President’s Working Group on Financial Markets, US authorities suggested that issuers be limited to insured depository institutions.

New streams of revenue

In accordance with the report, insured depository institutions include “both state and federally chartered banks and savings associations, the deposits of which are insured, subject to legal limits, and which are eligible for Federal Reserve emergency liquidity.”

Morgan Stanley projected new streams of revenue for banks as the market sector continues to grow exponentially, given their capacity to participate in the minting and burning of stablecoins.

“As each blockchain gains market share, the battle of the blockchains is expected to continue,” Shah said, noting that stablecoin issuance has surged 20-fold since last year.

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Source: https://bitcoinerx.com/blockchain/morgan-stanley-thinks-banks-likely-to-capitalize-on-demand-for-stablecoins/