Stablecoin bill could pave the way for a multi-year crypto bull market, Bitwise CIO says

The U.S. Senate voted to progress landmark stablecoin legislation on Monday, a move that could pave the way for a multi-year digital asset bull market, according to Bitwise CIO Matt Hougan. He described it as akin to Wall Street and crypto "getting married."

Senators voted 66-32 to advance the GENIUS Act with bipartisan support, including 16 Democrats who flipped from opposing it last week. Crypto leaders and lawmakers hailed the vote as a "historic" win that could help "ensure U.S. dollar dominance." However, following the cloture vote, lawmakers must approve any potential amendments before holding a final vote on the bill.

"Politicians in Washington did the right thing," Hougan wrote in a note to clients late Tuesday. "I don't want to count my chickens before they hatch, but it looks like we will have our first full-fledged piece of crypto legislation passed in the U.S. by the summer."

Aside from the January 2024 approval of spot bitcoin ETFs , including Bitwise's BITB , with BTC up around 155% since, this marks the most significant regulatory milestone in crypto's history, in Hougan's view — and could be bigger. "I believe it sets the stage for a long-term, sustained rally in crypto assets beyond bitcoin. The largest beneficiaries are Ethereum (ETH), Solana (SOL), and various decentralized finance (DeFi) assets like Uniswap (UNI) and Aave (AAVE)," he said.

In the hours leading up to the vote, crypto supporters sent more than 60,000 emails to senators urging them to support the bill, according to advocacy group Stand With Crypto. "This groundbreaking, bipartisan legislation will bring America's payment system into the 21st century," Republican Sen. Bill Hagerty, who led the legislation, said.

However, not everyone is happy about the stablecoin bill, with some warning that it could create a backdoor toward a central bank digital currency. Democratic Sen. Elizabeth Warren also criticized the bill for overlooking President Trump's crypto ties and family connections to World Liberty Financial's USD1 stablecoin.

A $2.5 trillion market

The GENIUS Act legislation would mandate full backing of stablecoins with U.S. Treasurys and dollar equivalents and introduce provisions related to foreign issuers. The bill also requires federal bank regulator registration and annual audits for issuers with market capitalizations exceeding $50 billion. Stablecoin issuers will also need to apply anti-money laundering restrictions to their tokens.

As one of crypto's "killer apps," stablecoins have already grown to a market cap of more than $236 billion, according to The Block's data dashboard . However, they have long existed in a regulatory gray zone, the Bitwise CIO noted, but the bill would put federal weight behind them, allowing big banks to issue stablecoins and merchants to accept them.

"With those protections in place, I expect this will be a $2.5 trillion market in no time," Hougan said. "Close your eyes and imagine a world where JPMorgan and Bank of America issue stablecoins, where Amazon gives you a 2% discount if you buy using stablecoins instead of Visa, and where it's as common to accept stablecoins as it is to accept Venmo or PayPal. That's the world we're going to be living in soon."

'A genius act indeed'

In Hougan's view, stablecoins are just the beginning. Once moving dollars over blockchain networks becomes normalized, with some of the largest financial institutions in the world participating, it will be a small step to moving stocks, bonds, and other financial assets over the same rails.

"This is the fundamental thesis for investing in non-bitcoin crypto assets like Ethereum, Solana, and the like: that $100+ trillion of financial assets will eventually move over blockchains. Passage of this bill starts that ball rolling downhill," he said. "A genius act indeed."