Arthur Hayes, former BitMEX CEO, has released a new essay titled “Quid Pro Stablecoin”, arguing that the U.S. government’s current push for bank-issued stablecoins is less about financial innovation and more about empowering the Treasury with vast liquidity.
Hayes claims that eight major banks hold about $6.8 trillion in deposits that could convert into on-chain stablecoins. These stablecoins, exemplified by JPMorgan’s upcoming “JPMD” token, could then be used as collateral to purchase Treasury bills. This shift could create up to $6.8 trillion in Treasury buying power while reducing compliance costs through automated AI-driven transaction monitoring.
He adds that if Congress removes the Federal Reserve’s ability to pay interest on reserve balances, banks might compensate by buying an estimated additional $3.3 trillion in short-term Treasuries. Combined, this could result in a $10.1 trillion liquidity injection into the government debt market, potentially boosting risky assets similarly to previous multipronged stimulus efforts.
The bipartisan GENIUS Act, Hayes notes, restricts non-bank issuers of interest-bearing stablecoins, effectively favoring large banks and limiting competition from fintech firms like Circle. This could increase the market capitalization of major banks by over 180%, a trade Hayes describes as uncommon but scalable.
Despite his bullish outlook, Hayes warns of a near-term liquidity tightening when Congress replenishes the Treasury General Account, potentially pulling nearly $500 billion out of circulation. He forecasts Bitcoin prices may retreat to the mid-$90,000 range and remain range-bound until the Federal Reserve’s Jackson Hole symposium in late August.
“Between now and the August Jackson Hole Fed speech,” Hayes writes, “the market will trade sideways or slightly lower. If the Treasury Account refill tightens liquidity, Bitcoin could dip to $90,000–$95,000. If not, it will hover around $100,000 without breaking the $112,000 all-time high.”
In closing, Hayes criticizes advisors waiting for explicit Federal Reserve announcements before investing in risk assets, calling such investors “exit liquidity.” He urges buying Bitcoin and JPMorgan shares now, viewing bank stablecoins as the next covert form of quantitative easing that will channel liquidity to these assets.
Hayes concludes: “Don’t sit on the sidelines waiting for Powell to bless the bull market. The liquidity horse has already bolted. Buying Bitcoin now is crucial or you risk missing a 10x surge to $1 million.” At the time of writing, Bitcoin was trading at approximately $109,449.