Four major trends are enabling cryptocurrency to integrate into the traditional financial system with unprecedented depth and breadth: stablecoin legislation, the surge of emerging stablecoins, the IPO boom of crypto companies, and traditional corporations' massive acquisition of crypto assets. While creating billions of dollars in profits for the industry, these developments also present new risks for investors and regulators.

In July this year, President Trump signed the first cryptocurrency legislation passed by the U.S. Congress, providing a legal framework for stablecoins. Subsequently, banks, fintech companies, and payment giants have entered the market, exploring stablecoins' potential to reduce transaction costs and improve efficiency.

Simultaneously, crypto companies have launched an IPO wave and gained popularity in public markets. More notably, some publicly traded companies have begun allocating significant portions of their corporate treasuries to Bitcoin and other crypto assets, tying their stock prices closely to cryptocurrency volatility.

However, this rapid convergence also brings new challenges. Stablecoin expansion could affect banks' deposit bases and lending capacity while harboring systemic risks. The high volatility behind crypto company IPOs and the actual losses brought to secondary market investors by public companies' "crypto treasury" strategies all indicate that this cryptocurrency-driven financial transformation is far from settled.

**Legislative Breakthrough Legitimizes Stablecoins**

In July this year, President Trump signed legislation regarding stablecoins, marking the first time the cryptocurrency sector received national-level legal recognition.

Stablecoins are blockchain tokens pegged one-to-one with fiat currencies like the U.S. dollar, maintaining their value by holding liquid assets such as cash and short-term U.S. Treasuries, functionally similar to money market funds.

This legislative breakthrough significantly enhanced stablecoins' legitimacy, opening doors for broader applications.

Banks, fintech, and payment companies began paying close attention, exploring the use of stablecoins to achieve faster and cheaper transactions than traditional wire transfers.

In some emerging markets, dollar-denominated stablecoins are already being used to hedge against inflation and avoid local currency volatility. This move could also boost demand for U.S. Treasury bills, which serve as primary reserve assets for stablecoins. However, stablecoin proliferation could also divert traditional bank deposits, affecting banks' lending capacity.

Moving forward, U.S. regulators will negotiate regulatory details under intense lobbying from both the crypto industry and traditional financial sector.

One contentious issue is whether crypto platforms can pay interest to stablecoin holders. Banking groups oppose this, citing threats to their deposit base, while crypto groups seek to offer competitive products.

**New and Old Forces Compete in the Stablecoin Market**

Under the legislative tailwind, the stablecoin market is rapidly expanding, no longer dominated solely by Tether's USDT ($171 billion in circulation) and Circle Internet Corp.'s USDC ($74 billion in circulation).

Startups, banks, and fintech giants are entering the market, either launching their own dollar-denominated stablecoins or integrating with existing ones:

- Payment giant Stripe announced plans to launch a blockchain called Tempo, focusing on stablecoin transactions for payroll and remittances. - Banks like BNY and Goldman Sachs began offering management services for stablecoin reserve assets. - JPMorgan Chase launched "deposit tokens" representing users' bank deposits.

This growing acceptance paves the way for stablecoin applications in merchant payments, multinational corporate treasury management, and interbank settlements.

However, the influx of new participants has intensified competition.

Emerging crypto exchange Hyperliquid recently selected stablecoin issuers through bidding and user voting, triggering competition that could compress issuers' profit margins.

More importantly, stablecoin proliferation increases the risk of crypto market volatility spilling over into the traditional financial system. The collapse of any single stablecoin could trigger an investor confidence crisis, leading to runs on other stablecoins and ultimately causing sell-offs in U.S. Treasuries, the cornerstone of global financial markets.

**IPO Boom Brings Crypto Companies to Public Markets**

As the regulatory environment becomes more favorable, crypto companies are experiencing an IPO wave.

Stablecoin issuer Circle Internet Corp., blockchain lending company Figure, and crypto platforms Gemini and Bullish all recorded significant stock price gains on their listing debuts. Legal professionals note that the Securities and Exchange Commission (SEC), which has become crypto-friendly under Trump, is green-lighting these companies' IPO applications.

Public market enthusiasm for these companies has exceeded industry expectations, with Circle Internet Corp.'s stock price surging 358% since its June IPO.

However, this phenomenon means crypto industry risks are being transferred to stock exchanges. These companies' valuations are often tied to highly volatile cryptocurrency trading volumes, and investors seem to have forgotten the lessons from crypto exchange FTX's collapse less than three years ago.

The IPO wave continues. Crypto exchanges Kraken and OKX, custody firm BitGo, and asset management company Grayscale are preparing to go public, with some expected to complete listings within the year.

Meanwhile, the crypto industry is pushing toward its next goal: tokenizing stocks for trading on crypto exchanges.

Companies like Robinhood, Kraken, and Galaxy Digital have begun preliminary attempts, promoting tokenized securities representing exposure to stocks like Tesla and Nvidia to overseas users who may not have access to U.S. markets.

**From "Treasury" to "Crypto Treasury": Public Companies Embrace Crypto Assets**

One of this year's most surprising market trends has been the convergence of "meme stocks" with speculative cryptocurrencies.

Software manufacturer Strategy (formerly MicroStrategy) pioneered this model, transforming itself into Bitcoin's proxy in the stock market by purchasing $75 billion worth of Bitcoin.

Now, this strategy is being replicated by numerous smaller public companies.

According to crypto consulting firm Architect Partners, over 130 U.S. public companies have announced plans this year to raise more than $137 billion for purchasing various crypto assets, including Ethereum, Solana, Dogecoin, and even World Liberty tokens issued by the Trump family.

However, this strategy has not delivered good returns for secondary market investors. Architect Partners' tracking of 35 related stocks shows:

- From the date of announcing crypto purchase plans, the median return rate for these stocks was -2.9%. - After the first trading day following announcements, the median return rate dropped further to -20.6%.

As hype cools down, these companies' market capitalizations have begun declining relative to their crypto asset values, weakening their ability to continue raising funds for crypto purchases.

Meanwhile, Nasdaq is strengthening scrutiny of such financing, requiring shareholder approval in certain cases. Factors that once drove up stock prices may now begin working in reverse.