Arthur Hayes Warns That Bank-Backed Stablecoins Will "Outcompete" Circle's USDC

Arthur Hayes, co-founder of BitMEX, publicly warned that bank-backed stablecoins would “outcompete” Circle’s USDC.

Arthur Hayes, co-founder of BitMEX, publicly warned that bank-backed stablecoins would “outcompete” Circle’s USDC.

On May 23, 2025, he posted on X (formerly Twitter), “Bye bye Circle. Thanks for playing,” in response to media reports of Wall Street’s biggest banks planning a joint stablecoin.

Arthur Hayes argued that banks’ regulatory advantages, capital resources, and trust in the traditional financial system could erode USDC’s market share.

He noted that the GENIUS Act, which would require stablecoin issuers to maintain 100 percent reserves and obtain a federal license, would give banks a clear path to issuance, potentially sidelining non-bank issuers like Circle.

USDC’s slight de-pegging proved that crypto-native issuers remain vulnerable when perceived market power shifts toward regulated entities.

Arthur Hayes Warns Amid Wall Street’s Stablecoin Plans

According to The Wall Street Journal, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo are in early talks to develop a jointly issued stablecoin aimed at corporate and institutional use. Arthur Hayes sees this as a threat to Circle’s stablecoin market share.

The project is still conceptual. However, the U.S. Congress is set to decide on the bipartisan GENIUS Act, which would potentially grant banks explicit permission to custody reserves and issue stablecoins.

The banks are evaluating this consortium as a means to modernize cross-border payments, reduce transaction costs, and deepen customer engagement.

Arthur Hayes estimates that a bank-backed coin could capture 10–20 percent of current stablecoin transaction volume. That would be equivalent to $20–$46 billion—within its first year. This is if it meets corporate demand for compliance and speed.

On May 21, 2025, the U.S. Senate advanced the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act by a 66–32 vote.

The bill mandates that any “payment stablecoin” issuer hold 100 percent reserves in U.S. dollars or short-term Treasury assets, undergo monthly reserve audits, and publicly disclose reserve compositions.

It also prohibits public companies outside the financial sector from issuing stablecoins unless they meet strict capital, data-privacy, and conflict-of-interest rules. Supporters argue these measures will enhance consumer protection and maintain dollar dominance in the digital asset layer.

Why Did Arthur Hayes Warn Circle’s USDC?

Circle’s USDC currently ranks as the second-largest stablecoin with $41 billion in assets under management as of December 2024.

It benefits from deep integrations in DeFi, over $75 billion in circulating supply historically, and partnerships with Visa for on-chain payments.

Yet, USDC’s dominance hinges on public and institutional trust—precisely what a bank-backed coin could rival. If banks deploy a fully compliant coin, they could leverage existing customer networks to onboard corporate treasuries, negotiate lower transaction costs, and undercut USDC’s role in payment rails.

Circle has taken measures to shore up resilience, including filing an S-1 for an IPO in April 2025 and launching its Circle Payments Mainnet, designed for corporate and institutional clients.

However, IPO filings also reveal that a 1 percentage-point change in interest rates could reduce USDC’s reserve income by $441 million annually, highlighting its sensitivity to macroeconomic shifts.

With the GENIUS Act’s enactment expected by mid-2025, Circle may need to obtain federal or state licenses. It would have to adhere to stricter capital requirements.

As of May 2025, USDC’s slight peg slip to $0.9987 serves as an early indicator of market reaction to these developments.

Arthur Hayes’ stark warning underscores a crucial moment for stablecoins. Circle’s USDC must now navigate a landscape where regulated financial giants could leverage licenses, capital, and institutional relationships to capture a substantial stablecoin market share.

Hayes Famed for Viral Market Commentaries

Arthur Hayes is famed for his blunt, active presence in crypto circles. His bold price forecasts, harsh regulator critiques, and sweeping macro commentary often sway market sentiment.

Just yesterday, he reignited interest in HYPE with a viral post. In the post, he quoted Lookonchain’s report of a $1.1 billion Bitcoin long by @JamesWynnReal—as “the best advertising for $HYPE,” and set $100 as its next milestone.

Today, HYPE climbed to a new all-time high of $37.24, marking its strongest valuation ever. The rally capped a week of blistering gains driven by positive regulatory engagement with the CFTC, major whale positions, and record $9 billion open interest in its decentralized derivatives