Experts warn of a stablecoin bubble

The successful flotation of Circle will mark the start of a “stablecoin mania”, but most new issuers will fail, said former BitMEX CEO Arthur Hayes.

IPO under the ticker CRCL took place on June 5. Investors valued the company at $6.9 billion. On the first day of trading, the shares rose 168% — from $31 to $82.

At the time of writing, its market capitalisation is $36 billion, according to Yahoo.Finance.

One of the major participants in the IPO was ARK Invest, run by Cathie Wood. On June 16 it sold part of its holdings for $51.7 million, offloading 342,658 CRCL across three of its ETFs.

“The bubble will burst”

Hayes believes Circle’s successful listing will trigger a wave of IPOs by copycats. He is convinced most will be overvalued and ultimately fail.

The expert added that the bubble will burst after the debut of an issuer able to “separate fools from tens of billions of their capital”. At the same time, the former BitMEX boss warned traders against shorting the shares of such firms.

Georgy Verbitsky, founder of crypto-investment platform TYMIO, agrees that Circle’s success could unleash a flood of overvalued issuers. Speaking to ForkLog, he said the effect is already visible: even small projects in the sector such as Plasma are raising oversubscribed rounds. That confirms strong demand, which really could lead to a bubble.

However, in Verbitsky’s view, the key differentiators will be regulatory compliance and the right choice of jurisdiction. These will help separate viable issuers from bubble participants.

“That is precisely what underpinned Circle’s success—they built their business from the outset within the American legal system, where stablecoin regulation is now taking shape. This gave them the transparency and trust they needed. Unlike them, Tether still does not demonstrate the same level of regulatory sophistication, especially in the context of the United States,” the expert noted.

He added that only projects able to ensure reserve transparency, legal compliance and access to key markets through reliable jurisdictions will prove resilient.

Lack of distribution

The main challenge for new issuers will be distribution channels, Hayes argues. In his view, to reach millions at scale they must use one of three routes:

• large cryptocurrency exchanges;
• social-media giants Web2;
• traditional banks.

If a project lacks access to any of these channels, it has no chance of success, the BitMEX founder claims.

Hayes called the USDC issuer “insanely overvalued”. He noted the company hands 50% of its interest income to the Coinbase exchange, yet the stock price will “keep levitating” amid the broader frenzy.

Tether’s lessons and the cost of access

Hayes unpacked Tether’s success, which he said was driven by genuine demand from traders in China and Hong Kong. They needed a way to move dollars as banks began closing crypto-linked accounts. USDT solved the problem, and trust from China’s crypto community laid the foundations of its dominance.

The watershed for Tether was the 2017 ICO boom. Exchanges without fiat access began using USDT to create trading pairs with altcoins. That made the token an “indispensable tool” for the entire market.

Tech giants and banks will build their own

The expert is convinced that social networks such as X, as well as traditional banks, will not partner with third-party stablecoin issuers. They have vast user bases and the resources to build in-house products.

“I spoke with a board member of a big bank, and he said: ‘We are finished.’ He believes stablecoins are unstoppable,” Hayes said.

He added that financial institutions will adapt, but will do so on their own, without partners.

For his part, Verbitsky was sceptical that traditional banks and social networks can become independent and effective stablecoin issuers.

“Large financial institutions could create their own ‘stable coins’; they have both the resources and regulatory experience. But banks are extremely conservative. If the current model is profitable and does not require taking technological risks, why change it?” the founder of TYMO argues.

As for social networks, he said they lack an understanding of financial and regulatory mechanics—something underscored by the failure of Meta’s Libra project. For them this is “alien territory”, Verbitsky explained.

“Therefore, in short: banks can but are unlikely to want to; social networks will want to but will not be able to,” the speaker concluded.

Profitability as bait for investors

Despite the bleak outlook for newcomers, Hayes expects strong demand for their shares. The reason is the “extraordinary” profitability of the stablecoin business. Issuers earn income by placing reserves in US Treasury securities and pocketing the interest-rate spread.

Tether, he said, keeps all of that income because it has the strongest network and “its clients have nowhere to go”. This model will be the chief lure that convinces investors to back “dubious companies with slick pitch decks”.

Regulation and the stablecoin segment

On June 17, US authorities took an important step toward regulating stablecoins. The GENIUS Act moved closer to passage after the Senate voted for its amended version.

A majority (68 votes to 30) backed the measure. The House of Representatives must now approve it.

“Thanks to the bill, the United States has moved one step closer to becoming the world leader in cryptocurrency,” said the author of the GENIUS Act, Senator Bill Hagerty.

He added:

“Once the GENIUS Act becomes law, companies of any size and Americans across the country will be able to make payments almost instantly, rather than waiting days, and sometimes weeks.”

Treasury Secretary Scott Bessent said in a post on X that passage makes more likely a scenario in which the stablecoin market could grow to $3.7 trillion by the end of the decade.

Recent reporting projects that stablecoins could grow into a $3.7 trillion market by the end of the decade. That scenario becomes more likely with passage of the GENIUS Act.

A thriving stablecoin ecosystem will drive demand from the private sector for US Treasuries, which back…

— Treasury Secretary Scott Bessent (@SecScottBessent) June 17, 2025

In his words, a thriving stablecoin ecosystem will spur demand for US Treasury securities. That could lower the government’s borrowing costs, help contain the rise in the national debt and “bring millions of new users around the world into a dollar-based digital economy.”

Bessent called this a “triple win” for the private sector, the Treasury and consumers, describing the initiative as “the fruits of smart, pro-innovation legislation”.

Earlier, Circle CEO Jeremy Allaire said that stablecoins are on the verge of a technological revolution.