Five Questions with an OG, Keith Bear: Stablecoins

MissionOG is fortunate to be supported by a deep network of experienced operators and entrepreneurs. This entry is part of a blog series where we share perspectives from “OGs” – original innovators from specific market segments and/or business disciplines.

 

Stablecoins have sprinted from crypto’s back office to the front lines of global finance. Market cap has surged past a quarter‑trillion dollars, tokenized money‑market funds are moving from pilot projects to real balance sheets, and Washington just sketched the first rulebook. Banks are running the numbers on potential deposit flight even as they eye new fee pools—reserve management, FX off‑ramps, and consortium coins. Meanwhile, programmable, always‑on dollars are colliding (or converging) with CBDC pilots, and infrastructure players are vacuuming up venture dollars to stitch together custody, compliance, and cross‑chain plumbing.

To cut through the noise, we turned to Keith Bear, a MissionOG Advisor, and a Fellow at Cambridge’s Centre for Alternative Finance, where he chairs the Digital Asset Research Programme and teaches a digital‑assets course for regulators, 500 of which have been through the course to date. Before Cambridge, Keith led IBM’s global Financial Markets business, and he now sits on multiple fintech advisory boards, the UK Parliament’s Digital Markets & Digital Money Group, ESMA’s Investor Trends panel, and the WEF’s Expert Council—while serving on the London Metal Exchange’s Board Risk Committee. Physics degrees from Oxford and London round out his résumé.

Below, Keith tackles five of the most pressing questions concerning stablecoins—spanning use cases, regulation, banking’s role, and where investors should place their bets.

These are his personal views and not those of CCAF or the University of Cambridge.

 

DRAWING ON YOUR COLLECTIVE EXPERIENCE AND RESEARCH, WHAT LONG-TERM ROLES DO YOU ANTICIPATE FOR “PAYMENT” STABLECOINS (E.G., USDC) VERSUS “STORE-OF-VALUE” TOKENS (E.G., TOKENIZED T-BILLS), AND WHICH STRUCTURAL FACTORS WILL SHAPE THEIR ADOPTION OVER THE NEXT FIVE YEARS?

In the run up to, and since the GENIUS Act signing, we are clearly witnessing a stablecoin explosion at the moment. Market cap is at some $260Bn and estimates from Citibank put the potential at $1.6Tn to 3.7Tn by 2030. Whilst stablecoins have come from a position of supporting cryptoasset trading (and this is still the largest use case today), recent acquisitions and announcements point to their role in transforming payment infrastructures worldwide, from merchant acquisition to international payments – leveraging their low cost, immediate settlement and programmability. They also have a store-of-value potential in those countries with weak domestic currencies.

In parallel, Tokenized Money Market funds (TMMF) have also taken off, from the initial Blackrock BUIDL fund through to offerings from Franklin Templeton, Fidelity and others. TMMF have the advantage of not only being a yield-bearing store-of-value but having a profound impact on wholesale markets by being a mobile, yield-bearing asset for collateral, removing static silos of collateral and enabling true intraday liquidity.

It remains to be seen how the Stablecoin and TMMF markets develop in parallel but between them they give more choice in how tokenization can release significant value across retail and wholesale markets.

 

CENTRAL-BANK DIGITAL-CURRENCY PILOTS ARE MOVING FROM PROOFS OF CONCEPT TO LIMITED ROLL-OUTS. HOW DO YOU SEE CBDCS CO-EXISTING – OR COLLIDING – WITH FIAT-BACKED STABLECOINS IN BOTH RETAIL AND WHOLESALE USE CASES, AND WHAT STRATEGIC PIVOTS SHOULD FINTECH FOUNDERS AND INVESTORS PREPARE FOR IF CBDC ADOPTION ACCELERATES?

One of the major reasons for a central bank to consider a CBDC is to limit the impact of new forms of private money (largely stablecoins) on the bank’s objective of delivering financial stability and implementing monetary policy. They see the two-tier monetary system (central bank money and commercial bank money) as having served the world well, and stablecoins, (with their inherent risk of de-pegging) as a risk to what monetary authorities refer to as the “Singleness of Money”.

However, CBDC’s carry with them major public concerns of privacy and surveillance (whether well-founded or not). The most extreme example is of course the US where CBDC’s are on the point of being banned.

CBDC’s are already in circulation in Nigeria, the Bahamas and Jamaica, but adoption is very limited, in part because current payment platforms work well and a lack of compelling new capabilities from a CBDC. Indeed in the last year, several central banks such as RBA in Australia and the Bank of Canada, have backed away from launching a retail CBDC. The exceptions are the continuing progress of the ECB in launching a Digital Euro, and the continuing progress of China’s eCNY (now with 261 million wallets opened, 5.6 million merchants accepting eCNY and $13.75Bn total transaction value as of 2024). With the exception of the EU and China, we are unlikely to see significant retail CBDC deployment, and for many central banks their attention has now turned to wholesale CBDC, where consumer privacy is not a concern, and where tokenized central bank money is a key enabler of tokenized financial markets.

Stablecoins may therefore continue to flourish vs retail CBDC and may also have a role as a wholesale settlement asset until central banks have released viable wholesale CBDC options.

 

WITH REGIMES RANGING FROM EUROPE’S MiCA TO MULTIPLE U.S. DRAFTS AND ASIA-PACIFIC SANDBOXES, WHERE IS THE MOST INNOVATION-FRIENDLY YET SCALABLE STABLECOIN FRAMEWORK LIKELY TO EMERGE – AND HOW SHOULD VENTURE CAPITAL AND OTHER INVESTORS POSITION PORTFOLIO COMPANIES TO CAPTURE CROSS-BORDER GROWTH WITHOUT OVERSPENDING ON COMPLIANCE?

Some say the US innovates and the EU regulates, and this has certainly been true in the world of Cryptoassets with the EU’s MiCA regulations. MiCA is seen by many as not being perfect, it doesn’t cover many topics such as DeFi and NFTs, and has major implications for stablecoins; but it does bring certainty and transparency to market participants. Due to its requirements for stablecoin issuers,(e.g. the need to hold reserves at EU banks), MiCA has seen Tether, the world’s largest stablecoin, delisted from EU exchanges.

Looking globally, Singapore’s MAS’s approach to regulation stands out, both in terms of regulations themselves but also in terms of the collaboration MAS has led through its Project Guardian with both major financial institutions and other regulators. UAE also stands out as a progressive regulatory environment, with its DIFC and ADGM constructs, making it a transparent and friendly landing zone for crypto companies, bringing in significant investment to the Emirates.

Recently I had the opportunity to present to a meeting of Global Standard Setting Bodies (FSB, FATF, IOSCO and IMF) on this topic, and it is through such greater collaboration between SSB’s and regulators that we can hope to see more effective and appropriate regulation.

 

SUPPOSE THE ‘BULL CASE’ UNFOLDS – SCALABLE REGULATION, ON-CHAIN KYC/TRANSACTION MONITORING, TOKENIZED MONEY-MARKET FUNDS AND LOANS, LIQUID MULTI-CURRENCY STABLECOIN MARKETS, AND BROAD MERCHANT ACCEPTANCE OF STABLECOINS. HOW SHOULD BANKS ADAPT – MANAGING RESERVES, ACTING AS FIAT ON/OFF-RAMPS, OR LAUNCHING A CONSORTIUM-ISSUED STABLECOIN – AND WHAT CORE FUNCTIONS WOULD THEY STILL UNIQUELY PERFORM?

Banks face a real dilemma when it comes to the impact of digital money. In countries where a CBDC is being implemented, or might be implemented, they need to undertake significant investment to act as an intermediary to the Central Bank, at the same time as having a disintermediation risk to their balance sheets.

Likewise, many central banks are encouraging commercial banks to focus on what they see as lower risk tokenized deposits rather than stablecoins, so continuing to work within the traditional fractional reserve system. But this brings with it the significant cost and time to build a regulated interbank settlement network – be it based on the Regulated Liability Network or an implementation of BIS’s Project Agora.

And this is all in parallel with the post-GENIUS stablecoin explosion with the huge returns being made by Tether and Circle, as well as the rapid transformation of payment rails by the likes of Stripe (acquiring of Bridge and Privvy), Circle (e.g. the Circle Payments Network) and Coinbase (Partnering with Shopify, their Base app supporting payments). Some banks have already issued stablecoins (e.g. SocGen’s Euro and USD coins, Standard Chartered’s HKD coin), and others in the pipeline, such as a consortium of Korean banks, as well as reports of Citi, Wells Fargo, JP Morgan and BoA also collaborating on this kind of model.

Another point to consider is the FX opportunity for banks to act as off-ramps for stablecoin international currency transfers. With the increase in stablecoin usage for international payments, especially to and from developing economies, this may be a significant revenue opportunity.

As a result, forming a point of view on the evolution of digital money, and the role banks wish to play, is a core question for bank executives today, and the jury is still out for many.

 

IF YOU WERE BUILDING A FINTECH-ORIENTED VENTURE PORTFOLIO TODAY, HOW WOULD YOU ALLOCATE ACROSS (I) FIAT-BACKED STABLECOIN INFRASTRUCTURE, (II) REAL-WORLD ASSET TOKENIZATION PLATFORMS, (III) COMPLIANCE AND RISK-ANALYSIS PROVIDERS, (IV) EMBEDDED-FINANCE APPLICATIONS, AND (V) OTHER THEMES HIGHLIGHTED BY YOUR RESEARCH?

We only need to look at recent examples such as Circle’s IPO (a 522% increase over the IPO price at the time of writing) and the valuations of some of the acquisitions (eg Stripe/Bridge) to see the perceived value in the evolving industry landscape. Certainly, infrastructure has been a key focus – be it wallets, tokenization platforms data providers or analytics providers. Likewise, there is an increasing investor focus on Web3 propositions, and in particular the cross-over between AI and digital money, with stablecoins seen by many as the “Internet Money” that AI agents will use for the commercial transactions they undertake on our behalf. As the industry matures there is likely to be a level of consolidation where network effects and acquisitions solidify the industry landscape – which we can already see happening in some segments.

It can also be noted that regulation is continuing to develop globally which will continue to create new opportunities for risk management, compliance and analytics companies in areas such as DeFi and staking for instance. At the end of the day, it may be a choice between backing potentially headline industry transforming plays vs the picks and shovels opportunities.