Weekly Market Highlights Review: The Resonance of Stablecoin Debt Transformation and the Strategic Rise of Bitcoin in a New Cycle

This week, the cryptocurrency market has been dominated by fluctuations, with Bitcoin experiencing multiple spikes, while Ethereum has remained relatively strong. Some related assets such as UNI and ETHFI have performed well. Trump Media & Technology Group has raised $2.5 billion in private financing to purchase Bitcoin, and Pakistan is establishing a national Bitcoin strategic reserve. FTX's $5 billion repayment at the beginning of the week stimulated a market rise. However, even with the positive news of relaxed staking regulations released on Friday, the market still saw a general decline. Currently, attention should be paid to the subsequent market direction.

In terms of hot topics, stablecoins remain the main theme of the market and are gradually becoming one of the directions for the U.S. government and global institutions; although the Bitcoin conference has not produced substantial benefits, mainstream opinions are worth paying attention to; the timing for regulatory easing, the staking track, and a certain trading platform's entry into the U.S. market has arrived.

1. The trend of stablecoinization of US Treasury bonds

1.Circle IPO

On May 27, stablecoin issuer Circle clarified after rumors about a potential sale to a certain exchange platform or company that it is initiating an initial public offering (IPO) and moving forward with plans to be listed on the New York Stock Exchange. Two days later, a certain asset management company announced plans to subscribe to 10% of Circle's IPO.

Key details are as follows:

• IPO Date: The IPO is expected to start trading on June 5, 2025.
• IPO Filing: Circle submitted its IPO application (S-1 filing) to the U.S. Securities and Exchange Commission (SEC) on April 1, 2025, and publicly released the prospectus on May 27.
• Stock code: The stock will be listed on the New York Stock Exchange (NYSE) under the code "CRCL".
• Stock Issuance: Circle plans to issue 24 million Class A common shares, with a price range of $24 to $26 per share. Of these, Circle itself will issue 9.6 million shares, while existing shareholders will issue 14.4 million shares. The underwriters have a 30-day option to purchase an additional 3.6 million shares to cover over-allotments.
• Funding Objective: IPO expected to raise approximately $624 million, with a valuation of about $5.65 billion. Considering options and other shares, the fully diluted valuation could reach $6.71 billion.
• Investor Interest: Notable investors have expressed interest in purchasing up to $150 million in shares.

Circle's USDC stablecoin currently has a market value of approximately $60.793 billion, accounting for 24.59% of the total market value of stablecoins, second only to Tether's 62.12%. Since the beginning of this year, the market value of USDC has grown by 38.44%, while Tether has only grown by 11.51%.

To understand why Circle is so committed to an IPO (Circle planned to go public via SPAC in 2021, but the plan was terminated at the end of 2022 due to SEC scrutiny), it is closely related to its partner trading platform.

• Successful precedent: A trading platform went public on Nasdaq in April 2021, becoming the first major cryptocurrency exchange in the United States to be listed, with a valuation that once reached 85 billion dollars.
• Market Recognition: The listing of a certain trading platform has attracted institutional investors and enhanced the legitimacy of the crypto industry. Circle's IPO has similarly attracted large institutional investors.
• Operational model reference: A certain trading platform achieved financial stability through diversified sources of income. Circle referenced a similar model, relying on interest income from USDC and trading fees to provide a solid financial foundation for its IPO.

A certain trading platform has signed a 50% revenue sharing agreement with the issuer Circle and earns 100% of the interest generated from the USDC product on that platform. For this trading platform, USDC has become the second largest revenue driver after trading. In 2024, the trading platform received approximately $900 million in USDC revenue from Circle, with almost no operating costs, accounting for about 25% of its total valuation, highlighting the financial importance of USDC to the platform.

With the relaxed regulations of the Genius Act following the IPO, Circle can not only more easily obtain funding from the capital markets for innovation, research and development, and global expansion but also attract more strategic investors or partners to further expand its business scope, such as collaborations with traditional banks or international regulatory agencies. Moreover, due to the growth of USDC directly benefiting the platform's revenue and its public chain ecosystem, it may drive the platform's stock price up.

2.Tether Shifts to Emerging Markets

On May 25, it was reported that Tether's CEO stated that despite the U.S. pushing for stablecoin legislation, Tether will still focus on overseas markets, and is paying attention to the impact of the "Genius Act" on foreign issuers. Part of the reason is that its assets such as Bitcoin and mortgages may not meet the proposed standards.

The chart below shows the collateral composition of the four major stablecoin issuers. The collateral for a certain DEX-backed stablecoin, Pax Dollar (USDP), and USDCoin (USDC) has shifted from U.S. Treasury bonds to reverse repurchase agreements and cash; the collateral for Tether (USDT) has changed from credit-risk assets (such as commercial paper and certificates of deposit) to U.S. Treasury bonds. Nevertheless, it has been reported that as of December 2024, the largest stablecoin issuer Tether still invests 18% of its reserves in lower liquidity and higher-risk assets, such as other non-stablecoin crypto assets and loans. (The 100% reserve requirement mandated by the GENIUS Act must be composed of highly liquid and low-risk assets, such as cash, U.S. Treasury bonds, and reverse repurchase agreements, which does not fully align with this requirement.)

3. The Close Connection Between Stablecoins and U.S. Treasury Bonds

The business model of stablecoins is extremely beneficial for issuers. Stablecoins are typically backed by cash and high liquidity assets (such as short-term U.S. Treasury bills) at a 1:1 ratio. Unlike banks or money market funds, issuers do not distribute the interest income from reserve assets to holders, but instead keep the profits for themselves, thus obtaining considerable profits when the interest rate environment and market demand are favorable.

The business model of stablecoin issuers is impacting the global macroeconomy by increasing structural demand for U.S. Treasuries. The two major issuers, Tether and Circle, hold as much as $116 billion in U.S. Treasuries, placing stablecoin companies among the top 20 direct holders of U.S. Treasuries, surpassing sovereign nations like Germany and Mexico.

With the imminent passage of the US Genius stablecoin bill, more and more stablecoin issuers will become channels for the digital dollar to enter the global economy, thereby enhancing the global accessibility of the dollar and expanding the reach of US monetary policy.

Moreover, the U.S. government has made it clear that it will use stablecoins to maintain the dollar's status as the global reserve currency. The Secretary of the Treasury stated at the White House cryptocurrency summit: "We will maintain the dollar as the world's primary reserve currency and will use stablecoins to achieve this goal."

Stablecoins have similarities with U.S. Treasuries in terms of economic functions:

• Security and Stability: U.S. Treasury bonds are regarded as the safest assets, and stablecoins ensure their value stability by holding Treasury bonds. The total market capitalization of the stablecoin market has reached $247.252 billion, most of which is composed of stablecoins backed by financial assets, such as Treasury bonds.
• Liquidity: Both are highly liquid, but stablecoins primarily circulate in the cryptocurrency market, while government bonds are in the traditional financial market.
• As collateral: U.S. Treasury bonds are commonly used as collateral in traditional finance, and stablecoins are increasingly being used as collateral in DeFi (decentralized finance).
• Source of Income: Stablecoin issuers earn interest income by holding government bonds, which is similar to the operation of the government bond market. Tether's profits directly come from the bond yields in its reserves, while Circle's revenue reached $1.68 billion in 2024, mainly from government bond interest.

2. Bitcoin Conference

1. Vice President Vance

• Policy Change

Vance announced that the Trump administration has ended the previous administration's hostile policies and cleared previous regulatory hurdles. He promised to establish a national Bitcoin reserve within 100 days to compete for global leadership. Additionally, he is pushing for the legislation of the GENIUS Act to establish a regulatory framework for dollar stablecoins, aiming to position stablecoins as the new engine of the dollar economy.

• The Strategic Role of Bitcoin

Vance pointed out that 50 million Americans hold Bitcoin, with a goal of increasing to 100 million. He emphasized that Bitcoin is a tool against inflation, policy risk, and financial censorship, specifically mentioning its potential as a strategic asset, especially in contrast to China's unsupportive stance.

• Regulation and Innovation

The speech mentioned that transparent and innovative regulations for digital assets will be formulated, incorporating them into the mainstream economic system. Vance criticized the regulatory approach of the former SEC chairman and pledged to continue eliminating regulators that hinder innovation.

• Community Engagement and Future Outlook

Vance calls on the crypto community to continue participating in politics, especially in the 2026 midterm elections, to promote favorable policies. He also mentioned the synergy between AI and crypto, emphasizing the need to pay attention to AI development to protect national interests.

2. US Senator Cynthia Lummis

• The Importance of Market Structure Legislation

Lummis discussed the market structure bill with the chief legal officer of a trading platform. She pointed out, "The market structure bill is particularly important for businesses involved in purchasing and holding Bitcoin, as there are many services that require custody, or companies lending Bitcoin, as well as the Bitcoin futures market, and the various ways Bitcoin interfaces with the dollar." She emphasized that this has a greater direct impact on the industry than the stablecoin bill.

• stablecoin Act

The GENIUS stablecoin bill has entered the final review stage in the Senate. The bill surpassed the procedural threshold of 60 votes last week, despite opposition from Democratic leaders and others. If passed, it will be the first successful legislation from the Banking Committee in eight years. Lummis hopes to use this to promote broader regulatory legislation for the crypto market.

• Future Tax System

Lummis proposed a tax reform suggestion, specifically to exempt Bitcoin transactions under $600 from tax. She mentioned, "The future tax system should exempt any Bitcoin transaction under $600 from tax, such as buying coffee or dinner," and associated it with technologies like the Lightning Network and certain payment companies. She has submitted the proposal to the Finance Committee with the aim of reducing the tax burden on small transactions.

• Bitcoin Strategic Reserve

She suggested that the United States purchase and hold 1 million Bitcoins, which could halve the U.S. $37 trillion national debt in 20 years. She explained, "By purchasing Bitcoin as a strategic reserve, we can utilize inefficient assets without additional borrowing, which will significantly improve the fiscal situation." This proposal sparked widespread discussion at the conference, particularly regarding national debt and fiscal sustainability.

• Regulatory Challenges

Lummis pointed out that over the past four years, regulators have taken an antagonistic stance towards digital assets, which has hindered policy advancement. She mentioned that "the lack of a confirmed IRS head has delayed the relevant legislative process," emphasizing the need for a clearer regulatory framework.

• The Global Strategic Significance of Bitcoin

She emphasized that Bitcoin is crucial for the economy and global defense, describing it as "a deterrent tool against aggression, especially the threat from China". She mentioned that "military leaders also support this view", which further reinforces Bitcoin's position as a strategic asset.

3. SEC Commissioner Hester Peirce

According to reports, SEC Commissioner Hester Peirce stated during her speech at the Bitcoin 2025 conference that, "I think Meme coins are more like collectibles, and it's clear that participants in Meme coins are not protected by securities law. I believe we will provide more guidance in this area. I think a Meme coin regulatory committee could be established; there are always gaps in regulation that need to be filled."

On October 10, 2024, the **US SEC, FBI, and DOJ jointly took action against Meme coin market makers and others.