Goldman Sachs(US:GS)2025-07-28 02:18Summary of Key Points from the Conference Call on Payment Stablecoins Industry Overview - The focus of the conference call is on the implications of payment stablecoins within the financial system, particularly in light of recent US legislation, specifically the GENIUS Act, which establishes a regulatory framework for payment stablecoins [2][5]. Core Insights and Arguments 1. Stablecoin Definition and Purpose: Stablecoins are blockchain-based digital currencies designed to maintain a stable value, primarily pegged to fiat currencies like the US Dollar, and serve as a medium of exchange [3][4]. 2. Regulatory Framework: The GENIUS Act mandates that US-issued payment stablecoins must be fully backed by permitted reserves, which include safe assets like Treasury securities and bank deposits, and prohibits them from paying interest [2][5]. 3. Impact on Safe Asset Demand: The adoption of payment stablecoins could increase demand for safe assets, particularly Treasury securities, depending on the scale and speed of adoption, as well as the source of inflows [1][5][19]. 4. Credit Disintermediation Risks: A significant shift from bank deposits to stablecoins could lead to credit disintermediation, increasing liquidity requirements for banks and potentially destabilizing the banking sector [1][32][45]. 5. Seigniorage Transfer: The transition from physical currency to stablecoins may transfer seigniorage value from central banks to the private sector, increasing public sector interest expenses as more central bank liabilities become interest-bearing [1][50][41]. 6. Treasury Issuance Strategy: The demand for safe assets driven by stablecoin adoption could influence Treasury's issuance strategy, potentially skewing issuance towards short-term securities, which may lower expected debt costs but increase funding cost variability [1][57][66]. Additional Important Considerations 1. Market Size and Composition: The stablecoin market is currently valued at approximately $260 billion, with USDT and USDC accounting for the majority of market share, and over 80% of their backing reserves held in safe assets [6][7][10]. 2. Consumer Adoption Challenges: Despite potential benefits, the lack of a clear value proposition for consumers may hinder widespread adoption of payment stablecoins, as they function similarly to non-interest-bearing store value instruments [12][11]. 3. Turnover Velocity: The speed of turnover in stablecoin transactions will affect the amount of safe assets required to support outstanding stablecoins, with faster turnover potentially reducing the necessary stock of stablecoins [13][15]. 4. Foreign Demand: There is potential for increased demand for USD stablecoins from foreign investors, particularly those facing restrictions on traditional USD assets, which could further drive demand for US safe assets [42][43]. 5. Financial Stability Risks: The introduction of payment stablecoins could exacerbate financial stability risks, particularly during periods of banking stress, as they may compete with traditional bank deposits for liquidity [47][48]. This summary encapsulates the key points discussed in the conference call regarding the implications of payment stablecoins on the financial system, highlighting both opportunities and risks associated with their adoption.