➡ Banks traditionally serve three main functions: storing money, facilitating payments, and providing loans. However, the rise of cryptocurrencies and stablecoins is disrupting this model. Stablecoins, which are digital currencies pegged to a stable asset like the US dollar, allow individuals to store and transfer money without needing a bank. This shift could potentially lead to a banking model failure, as people may prefer earning higher returns from stablecoins than the low interest rates offered by banks.

➡ The article discusses the importance of understanding the ‘operating system’ beneath our assets, not just the assets themselves. It explains how increasing global liquidity, like water filling a bathtub, raises asset prices. The government can use stablecoins to create more liquidity, which can benefit certain assets, especially those not tied to the US dollar. The article emphasizes that this is a significant shift that can impact our portfolios if used correctly.

Banks aren’t fighting stablecoins because they’re dangerous. They’re fighting them because stablecoins expose a part of the banking system that only works if you can’t opt out. Now on the surface this gets framed as regulation or safety, maybe even politics, but that’s not what’s really happening. Now this is a very quiet power struggle over who controls money once custody and settlement stop requiring permission. Now if you’ve been following my work on stablecoins and liquidity expansion, then this is the resistance phase that always comes right before the money moves. So let’s break it all down.

Let’s go. All right, so jumping right in. Let’s start with just a little bit of the news, why I’m talking about this today. And of course, we’re not here to talk about the news. We’re here to talk about what it means, what’s really underneath this, and more importantly, what we should understand about it so we know how to navigate what’s going on. Now stablecoins are a massive piece. Of course, Bitcoin, cryptocurrency, stablecoins, it’s a massive piece. That’s why I continue to do videos every couple of months on this. But what’s happening right now? Right now we have political theater.

Right now we have this fighting that’s going on because the Trump administration pushed through a bill called the Genius Act, which is to push stablecoins out into the world. And the banks are fighting it. They don’t want the Genius Act to go through. On top of that, we have the World Economic Forum happening over in Davos. They’re talking about it. This is massive news. And I’m gonna tell you why. So first of all, we have banks lobbying regulators. So the banks are out there trying to figure out how they can get their way.

What is the way that they want? Well, we see that what they want is they want to stop the stablecoin that the Trump administration is pushing through. US crypto regulation stalls out. So the regulation was supposed to happen. We’re supposed to get the Clarity Act, the Genius Act, all these things we could have clarity so that builders, entrepreneurs, investors, allocators could all have a clear path forward, but they want to stall it out. Lawmakers warn of falling behind global competitors for years. So the industry, the builders, the entrepreneurs, the tech guys, even the Trump administration wants to stay at the forefront.

We understand that technology changes things. We understand the way that technology changes money is happening right now. And if we stay on top of this, we can stay a leader. The problem is, if we fall behind, then other nations passes up new technologies passes up. And that’s exactly what’s happening here. So they’re warning like, hey, we’re gonna fall behind global competitors for years, unless we act. Now, of course, the banks are doing this for your safety. Of course, it’s always for your safety, right? You’re not smart enough, you’re too dumb, you don’t know what you’re doing.

So let’s make sure that you’re we’re going to frame it up as safety every single time. Now, what they’re calling for is something completely different. And rather than me trying to explain to you, let’s just hear directly from Brian Armstrong, the CEO of Coinbase, so you can hear what he has to say. Let’s play the clip because they do something called fractional reserve lending. They don’t actually store all your money at the bank. They’re lending out a good chunk of it. And that’s what actually causes additional risk, which can be these runs on the bank.

I actually believe that fractional reserve lending or fractional reserve banking, I should say is intruders more risk into the system. I think it’s more risky to keep your money there. By contrast, under the Genius Act, stablecoin reserves are held 100% in short term US treasuries. And so there is no fractional reserve with these stablecoins. They should not be subject to the same regulation as banks. Okay, so you heard it directly coming from him. What he’s saying is that while they’re saying this is for your safety, because it’s too risky, he’s pointing out that the banking system as it works today is too risky.

The entire business model they have a fractional reserve banking, and then lending out duration mismatch, all that I’m going to get into that deeper, all that that’s the risk. And what happens is, as we update the system with new technology to stay globally competitive, as I said earlier, it makes what the banking systems model is dangerous, not only dangerous, but it makes it obsolete, which of course is more danger for them. Alright, the incumbent never wants to change, right? The incumbent wants to stay in power. Okay, why banking breaks? Why does this change banking overall? Well, again, the banks want to protect their own now.

So the Federal Reserve is not federal, it’s a it’s a private bank, it’s a bank that controls all the other banks, right? It’s made up of 12 member banks. And so all they’re trying to do is protect their banking interest. Okay, so what does that mean? They want to protect their own, we have to understand banks are not just a custody business. They’re not just a storage business. Certainly, that’s one of their three core functions. But that’s not all they do. We will have to understand that there’s something much bigger in the banking industry.

And it’s what we call claims versus custody. I’m going to break that down for you. But we want to understand there’s a conflict between cryptocurrency advocates, the ones pushing for the stablecoins, including Scott Bassett, the US Treasury, Secretary of Treasury and the Trump administration, of course, and some in the banking industry. So the banking industry don’t want what Scott Bassett wants, what what Trump wants, what what the crypto market wants. They worry that stablecoins could steal their business, of course, of course, they will. Because they’re obsolete. Okay, we’ll come back to that.

Congress approved already, Congress already approved it. And President Trump already signed it into law. It’s already done. The will of the people demically democratically elected the Congress and demically elected the President. It’s already been passed through the proper channels already signing a law the Genius Act that was done last year. However, a provision in the legislation allows some stablecoin holders to earn rewards. That’s the problem. Earn rewards. They don’t want that to happen. Why? Well, they are afraid they will what they’re trying to do is derail this entire market structure bill. It says here, not a lack of policymaker engagement, right? Because that’s already been done.

But the relentless pressure campaign by the big banks to rewrite this bill why to protect their own, okay, so what’s really going on here is they don’t want to give up control of the money. They are a storage business, but they’re not just a storage. When I say storage, meaning like you Parker saving you Parker checking, right, they keep your money. But what they don’t want to happen is they don’t want to break apart the claim to the money and the custody of the money, right? They want to keep the money. And the reason why is they want to create this duration mismatch.

So what do I mean by that? So they receive your deposit, your money, you’re checking your savings, right? But then what happens is they’re going to pay you some yield like 0.4% or something like that. And then they’re going to loan that money out. All right. Now when they loan that money out, it could be for a five year car loan, it could be for a 30 year auto loan, it could be something like that. That’s the duration here I created a little infographic. Thanks to AI helped me create these infographics and I kind of show you what I mean.

So a customer brings their withdraws into the bank. The problem for the bank is that the duration so for the customer, they want those deposits to be available at any given time. But in order for the banks to make money, they want to send it out to home loans, or they want to send it out to commercial building loans, maybe again, they may put out to auto loans or whatever it is. And so this could be five years, 10 years, 20 years, 30 years, but the customer wants those funds to be available when they need them.

Now, again, in checking, I need that to be more available in savings, I’ll typically think about that longer term. That’s the duration that I’m talking about. And the banks want to protect this because how could they loan out money making all this money and giving you nothing if they can’t keep you locked inside the system. And so what they want to do is they depend heavily on regulation, because what the regulation does is it preserves their way of doing this business. And more importantly, what it does is it prevents other new better competitive ways from coming in and stealing their business.

And what stable coins do is they separate the custody part. Again, banks are storage, they hold my money, my for, you know, my paycheck goes into my bank account, my bank account holds my money, it stores my money for me. And then it makes my payments for me. But if I can separate that, if I can change the routing of it, all of a sudden, the bank’s business model gets completely disrupted, we have to understand the hidden assumptions in the banking, we want to understand what’s coming, and how this stable coin makes us a lot of money and understand this makes us a lot of money, we have to understand what’s changing, why it’s changing, so we can start to understand this better.

Okay, so what are they hidden assumptions? Well, the first hidden assumptions is what the banks even do, why they’re even there, why you need them. Now, there’s three core uses of a bank. Number one, as I already said, storage, so they receive my money, I don’t bury it in the desert, I don’t put it in my sock drawer, I keep it in the bank. Why do I keep it in the bank? Well, one, they keep it safe, that storage. Number two, I keep it there because of payments. So they’ll receive my incoming payments, and they’ll make my outgoing payments for me.

So again, my paycheck can go into there, anybody wants to send me money, they can wire it to me there. And then I can make my payments from there, right? So then I can do my automatic bill pay, pay my rent, pay my utilities, whatever. So that’s payments. And then the third function is for loans, the loans they make with your deposits, with your storage. But if we break those apart, all of a sudden, what are they even doing? So if I can custody my own money, like with Bitcoin, or even a stablecoin on an app on my phone, so now I don’t need them for storage.

And then two, I could just send that out to anybody that I want, I don’t need them for payments either. So I don’t need them for storage, I don’t need them for payments. But how do they have the deposits to make the loans? We’re going to have to understand that your deposit, when you put your money there, it’s no longer your money. It’s their funding layer. So when you make a deposit, what you’re really doing is you’re giving up ownership of your money, it’s no longer yours. What you’re doing is you’re making a loan to the bank.

The bank owes you the money, it’s an IOU. But what type of guarantees have they given you for the loan? What type of collateral have they given you for the loan? Oh, nothing, unsecured. So you’re an unsecured lender to the bank when you deposit the money in. That’s why they can tell you if you can withdraw the money, if you can wire the money or not. And so your deposit becomes an unsecured loan to the bank, it’s their funding layer. And again, if we can separate the custody versus the settlement, again, I can hold the money, but I could still transfer it.

So I’m separating that need from the bank. And then we have to understand if that’s the case, if that’s really what’s disrupting the banking model, then the big problem for them is this, why the reward debates. So what they’re really debating is about stablecoins paying rewards. Because right now, today, the banks pay you 0%, 0.4%, or whatever, they pay you basically nothing when they’re loaning the money out for 8%, 10%, 27%, but you get 0.4. Stablecoins are giving ways for people to earn yield. So for example, when I give up a dollar, they give me a dollar stablecoin back, that company that I gave the dollar to they have to hold that in a cash equivalent asset, like US Treasuries.

Now those US Treasuries are making four or 5%. So why couldn’t they give me a percent of that back? Why do they get to keep all the return? Why not give some of that back to me? Now we’ve seen other more innovative stablecoin companies put it into other cash equivalent. When I say cash equivalent, it’s because the duration, we want the demand deposit to be returned upon demand. So there’s no duration mismatch here. But there’s other cash equivalents that are paying 10%, 11%. So now, hey, I’ll give you a US dollar, you’ll give me a US dollar stablecoin, you’re gonna make 10 or 11%, you’re gonna give me eight or nine of it.

That’s great. Who wouldn’t want that? Well, of course, anyone with a bank account, which is everybody, anybody with a bank account that wants 10%, which is everybody, but who doesn’t want it? It’s the banks. The banks don’t want it because they can’t keep up with it. And if I’m enticed to go earn a reward, I can just move my money. I don’t need the bank for the storage with payments anymore. That’s the problem. It’s an entire banking model failure. That’s the hidden assumptions. That’s the hidden motivations that’s going on here. Okay, so what does this fight really tell us though, this is the key piece.

So again, I’ve made previous videos, we’ll link to them in the show notes down below, talking about why Scott Bassett is pushing stablecoins, why the company administration wants stablecoins, why we have the clarity act, why we have the genius acts already passed by Congress, already signed a law. The government wants that we the people want it, you and I want it. It means big things for our investments, but the banks don’t want it. So the fight signals that this is the middle of the story. Okay, this is the key piece here. So where are we? Everyone’s trying to understand when, when, when, when does this happen? So we don’t know the exact date and time.

I don’t know the hour, but what I can tell you is we can see the progress. So it started as what is it? You know, first, they laugh at you, then they fight you, right, then they join you kind of a thing. And so where we’re at is they laughed at us, crypto, DeFi, stablecoins, that’s all ridiculous, right? But then all of a sudden, it’s like, oh, it’s not actually ridiculous. As a matter of fact, we’re going to pass this into law, Congress approved, like, no, no, we’re going to join it.

And then we have the fight. So we’re in the middle of the story right now. And the resistance phase we’re in right now, a little bit too late, because they already got passed into law. But the resistance phase that we’re seeing is right before the adoption. It’s already passed, Congress signed it, Trump signed it. And now they’re trying to stop it right before it goes into place. So that’s where we’re at mean, it’s coming and it’s coming very soon. Now, we have to understand stables are not a crypto story. Okay, it’s not about cryptocurrency.

This is a new way for us to use dollars in the world. In a 20 whatever on a 22nd century world that we are interconnected, AI driven, you know, cryptocurrency world is a way for us to use US dollars, not replacing the dollar, which Bitcoin will eventually do at some point, but use dollars today, but in a more digital fashion. So it’s not a crypto story. It’s new liquidity rails for the US dollar system. So it’s now we can move US dollars, instantly, for free, peer to peer. Again, that’s why we don’t need the banks for the storage and the payments.

Now we can send them between each other. And we all want this. Why do we want this? Because competition creates better products, better services and better prices. And so for example, if you’re Walmart, and you’re processing, you know, $60 billion a year of transactions, you’re using mostly debit cards, probably you’re accepting visa, MasterCard, American Express at your store, you’re paying three to 5% of your money to those networks to use those networks. But why not just have your customers just pay you with a stable coin, a US dollar right there, I’m saving three to five percent of billions of dollars right to my bottom line.

On top of it, I get instant settlement, meaning that money is in my account right now. Typically with credit cards is three to five days plus up to six months, it can be charged back. So this is a massive shift. The market wants this, you and I want this, I want the yield, I want the control, I want the instant settlement, the merchants want it. Obviously, the Trump administration wants it, the banks don’t. Now we also have to understand that it’s not just a liquidity rail for the US dollar system, it’s a way that the US dollar system can expand.

Because it’s not just that you and I on the dollar want this, the rest of the world is dying for dollars. So you have countries that have doubled or triple digit inflation, their currencies are blowing up, Lebanon, Turkey, you know, Iran, Venezuela, Argentina, Peru, we can just sit there and go through the list. And they need to get into something. Eventually, maybe Bitcoin, Bitcoin is a little volatile in the short term. So how about the US dollar? And this solves it. And what it does is it allows the government to increase the money supply directly without the banks, again, cutting out the bank’s business model.

Now we understand that wealth is understanding the operating system underneath the assets. If you watch a lot of my videos, you know, I talk a lot about it’s not just the assets that we own. It’s the operating system of how we use the assets and assets just a tool. Are we using the right way? So we want to understand that this liquidity building this wealth, we have to understand it’s the operating system below the assets. So what does that really mean? Well, when liquidity flows, we see wealth accrue, right? So I talk a lot about global liquidity and understand where we are with global liquidity, because as it increases, like water filling up in a bathtub, it lifts up asset prices at the same time.

So when liquidity expands, when the dollar liquidity expands, then asset prices go up and stablecoins is a way for the government to expand or create liquidity in the dollar system at scale, at massive scale. Again, some of the other videos I’ll link to down below, I talked about some of these numbers, what Scott Basent wants to get to what that means for other asset prices. And we understand that some, notice I put that in parentheses, some assets benefit, not all assets. So what we want is assets that benefit the most that are the most sensitive to this liquidity that’s increasing.

Those are hard assets. Those are assets that can’t be printed. Those are assets that are not US dollar denominated assets. Now we also have to understand where we’re at in the cycle. Again, when will this happen, Mark? Well, it’s not an event. Don’t write on your calendar. It’s happening right now. Again, it’s already passed into law. We’re at the resistance moment. This is not failure. This is what’s going on. And this is what it means. And this actually what it does, it confirms the stakes are real. If none of what I’m saying is true, that the government could increase liquidity by using US dollar stablecoins, you and I would want them the world.

If none of that was true, then the banks wouldn’t be fighting it. The very fact that they’re trying to stop a law that’s already been passed tells you that the stakes are very real. Anyway, that’s the update on stablecoins. Hopefully you’re following along. This is a massive shift for the world, for us and our portfolios, if we use it the right way. And that’s what I got to your success. I’m out. [tr:trw].

See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.