View full transcript
JIM ARMSTRONG: Are stablecoins changing cryptocurrency, and what would that even look like? Hey, everyone. Welcome to the Covering Crypto Livestream. I’m Jim Armstrong with Fidelity. Thank you for joining us today.
Stablecoins have been a big part of the crypto conversation for a long time, but especially over the past year, they’ve really moved into the spotlight. We’ve seen the passage of the GENIUS Act, individual states exploring their own stablecoins, and major retailers looking at accepting stablecoins as payments. And of course, here at Fidelity, we’ve added to the conversation as well with the launch of our own stablecoin, the Fidelity Digital DollarSM. We sometimes call it FIDDSM, F-I-D-D, issued by Fidelity Digital Assets, National Association.
So today, we’re going to dig into the basics—what stablecoins are, how they’re being used, and how they may well be changing the crypto ecosystem. And we’ll talk about what all of that could mean to us as investors. To answer your questions today, thrilled to have a couple of excellent guests join us.
Thank you for making time out of your work at Fidelity Digital Assets®. We just start with you both briefly introducing yourselves. That would be great. And Ben, we’ll start with you.
BEN SCHULER: Sure. Thank you very much for having us here. So my name is Ben Schuler. I work in Fidelity Digital Assets® in the product strategy team, and I’m joined Fidelity Digital Assets three years ago really to work on this project and imagine how we could bring a stablecoin branded by Fidelity to market.
I spent the previous years in the asset management side working in the money market funds. And so there’s a synergy there that I can get into later in terms of how a stablecoin is similar to a money fund, but really excited to be here. Thank you.
JIM: Awesome. All right, and Matt.
MATT HOGAN: Yeah, it’s great to be here, Jim. Thank you for having me.
JIM: Sure.
MATT: My name is Matt Hogan. I’m a research analyst for the Fidelity Digital Assets research team. We provide an array of both market and on-chain educational research, looking at data and insights in both of those categories across an array of assets and networks, including Bitcoin, Ethereum, Solana, and Litecoin. And recently, we expanded that research library to include stablecoins. So, very timely. Very excited to be here today and really looking forward to the conversation.
JIM: Great. We have tons of questions that came in from viewers. So we’ll start with a couple of them right now. Moyra wants to know what stablecoins are, and Dorothy asks what the difference between crypto and stablecoins is.
We’ll get there in a second. But first, just for folks watching, we’re going to move through the basics of this conversation fairly quickly. So if you feel like you are looking for a refresher on crypto terms, we’ve built out a truly, truly robust library of resources at Fidelity.com/LearnCrypto,
So you can bookmark that page. You’ll find tons of articles, videos, infographics in case anything we’re discussing today, you want a little bit more clarity on. But Matt, I’ll turn it over to you just for a high level, what are stablecoins?
MATT: Yeah, it’s a great place to start. A stablecoin is really just a type of cryptocurrency who is pegged to another asset, most commonly the US dollar. It can be other types of fiat or government-issued currencies, but the whole goal is price stability.
And so if we take the US dollar–pegged stablecoins, for example, each stablecoin should be worth $1 in value. You want them to be at that one-to-one parity so that they are both equivalent to each other. The whole goal is that price stability.
And so what stablecoins really aim to do is bring dollars on chain to make crypto more usable as a form of money. So when you think about things like payments, trading, even savings or wealth preservation, you need a stable asset to be able to facilitate that. Bitcoin, ethereum, other forms of more volatile cryptocurrencies aren’t exactly usable for that use case in their current state. So, therefore, you have stablecoins with that stability component.
JIM: And so then the short answer to Dorothy’s question was stablecoins are cryptocurrency, but there’s a bunch of nuance there. And you’ve built a great chart that can help walk through exactly what those nuances are.
MATT: Yeah, absolutely. I think if we take a look at this chart right now, it will really help differentiate some of those high-level differences. And for the first and foremost, we’ll start again with the volatility component. When you look at stablecoins, you want volatility to be low or near zero.
That is what they are purposely built for compared to other types of cryptocurrencies. Again, bitcoin, ether, solana, they might be a little more volatile in nature, and that’s more of a feature for those assets. They are used for a whole range of different use cases like potential investments, speculation. Maybe they power the networks they are associated with.
Whereas with stablecoins, you want that stable asset for different use cases, including payments, savings, things of that nature. So fundamentally, the volatility component is a very big differentiator there. Another big differentiator is how they are backed. Stablecoins are backed by reserves, and dollar-pegged and dollar-collateralized stablecoins are backed by cash, US Treasurys, other short-term debt or money market–type instruments, whereas traditional cryptos aren’t really backed by any real assets in that same vein.
So with stablecoins, again, you want that one-to-one backing, but they are collateralized by those reserves to give them that security behind them. Another big difference there is their centralization. Now, centralization, decentralization, it’s a bit of a spectrum. It’s not necessarily an on/off switch.
Perhaps it’s more of a dial. And when you look at assets or networks like Bitcoin or Ethereum, they aim to be more decentralized by nature, whereas stablecoins usually have a central issuer behind them by design because they are there to manage those reserves and really help manage the risk in the issuance behind how those reserves are managed.
JIM: Got it. Ben, a question for you that came in during registration as well—someone looking for the distinction between stablecoins and meme coins. There’s a big distinction there, but how would you explain it?
BEN: Let’s clear that up right now. Stablecoins and meme coins are really on opposite poles of the crypto world. Meme coin is something it’s fun. It’s tradable.
Values fluctuate depending on demand. People want to collect things. The Dogecoin is probably the most famous meme coin.
There’s nothing backing it other than people want to have it. They like it. And then the next day, people decide not to have it.
A stablecoin is fundamentally different. A stablecoin is issued by an issuer. As Matt said, it’s pegged very carefully to a fiat currency, and the way it’s pegged is by being carefully backed and managed.
The investments backing a stablecoin are held, segregated, custodied in very, very safe liquid assets. So you’ve got a one-to-one backing because of the dollar asset’s backing—a stablecoin, based on the dollar. And a meme coin, again, it’s something that’s fun, tradable. Values fluctuate based on just whether people want it or don’t want it at any point in time.
JIM: A great deal more risk potentially involved with a meme coin than with a stablecoin. By definition, is—
BEN: Yeah, it’s a collectible. I think of them as collectibles, which are meaningful to people. But, a stablecoin is not a collectible. I mean, I guess if you want to collect as many as you possibly can, that’s great. But the value of a stablecoin is they’re transferable into dollars, and they can be traded and used like a dollar to pay for things.
JIM: Got it. That is a great introduction. OK, so we’ll move from the general to the slightly more specific now and talk about the Fidelity Digital DollarSM. We do get questions about that, including one that came in from Thomas during registration, who wants to, frankly, “What’s the new Fidelity stablecoin about?” So FIDDSM, F-I-D-D, offered by Fidelity Digital Assets, Thomas and other folks are curious. What’s it for, what’s it do?
BEN: Sure, yeah. So Fidelity has a long tradition and a lot of skill and expertise in investment management. But in particular, we’ve got a great expertise in cash management.
JIM: Sure.
BEN: Our money market funds are—a lot of people trust them and invest in them. And they invest because they’re stable and dependable. They obviously earn a nice yield. We’re taking that expertise of money management, cash management, and we’re marrying it with Fidelity’s expertise in blockchain.
We’ve developed an enormously secure and capable operation system around managing private keys that run on the blockchain, that manage blockchain assets. And so bringing those two together is really what a stablecoin is. What Fidelity Digital Dollar is, takes that cash management expertise of Fidelity and marries it with the blockchain, giving people the ability to think about a digital dollar as a dollar that you have in your pocket.
I can pay Matt by handing it to him right now, but I can pay someone in California instantly or anywhere around the world with the Fidelity Digital Dollar. Fidelity Digital Dollar is available to any Fidelity client who wants to open an FDA account. You can fund it with your brokerage account and buy Fidelity Digital Dollars.
You can take those digital dollars and transfer them to an exchange where Fidelity Digital Dollar is listed. You can open an account there. You can trade with those dollars on that exchange for other crypto assets, and you can bring those dollars back and turn them back into banking dollars in your brokerage account.
So that’s the principal use case right now. We’re working on a number of additional use cases. We’re working with external partners, but we see a great future for stablecoins. But getting it out the door was an important first step for us, and we want our clients to ask questions, come with ideas, and start using it.
JIM: What backs the Fidelity Digital Dollar? What keeps it, in theory, 1 to 1 to the US dollar?
BEN: So when you buy Fidelity Digital Dollar in your account or if you buy it on an exchange, when you buy it in your account, we take that dollar. We send it to our money market group, effectively the same people who manage those funds. And they buy a Treasury bill or a money market instrument that’s eligible or keep it in cash at the bank.
It’s backed by real dollars. And it’s important that we check that repeatedly through the day. At the end of every day, we’re always looking at the value of those assets versus the tokens that are issued on the chain.
Also, we’ve got independent verification of those assets. We publish monthly reports. Every business day, we prove that out. So it’s backed by the safest, most liquid assets, US Treasury bills and cash, that are available.
JIM: Got it. OK, we’re going to zoom out now and talk a little bit more about how stablecoins behave or how they tend to behave within the broader crypto market. We had a couple of those related questions come in, including this one from Richard, asking, “How does the current price situation of crypto markets”—in general, I guess he’s asking—”affect stabelcoins?”
And then Anup is asking, Stablecoins are also termed as the digital equivalent of a dollar. Is this always the case?” And just to clarify upfront, that’s a great question.
But as a reminder, “Stablecoins are not always backed by the US dollar. We’re talking about some here that are, but that’s not always the case. And they’re always also still cryptocurrencies, not actual dollars.
So they do still come with particular risks that are and can be different than using cash. And I’ll say you can also learn more about the basics of stablecoins by bookmarking an infographic that you can find at Fidelity.com/StablecoinsExplained, another great resource for you there. But Matt, I’ll turn the larger question over to you. Price volatility, which is almost a defining feature of cryptocurrencies in general—how does it impact, or not, stablecoins?
MATT: Yeah, it’s another great question. I think there’s a lot of nuance to the answer—
JIM: For sure.
MATT: —starting with supply. So when we look at stablecoin supply broadly or market capitalization of the entire stablecoin market, that can often be seen as a liquidity signal for the broader digital asset market. So when we see that supply expanding, oftentimes, that can be a sign that there is capital entering the digital asset ecosystem for various use cases.
Maybe they’re looking to deploy it in different DeFi. Maybe they’re just looking to hold it. Maybe they’re looking for it for different payment purposes.
But when you take that supply and you look at other metrics on top of it, like transfer counts, transfer volumes, velocity, it gives you a better sense of how the stablecoins are actually being used and moved. So when we see that supply expanding and you have a market that is very optimistic, perhaps a little bit bullish or there’s a lot of activity happening, that supply expanding can be a leading indicator that there’s a lot of activity that is going to happen there.
But that doesn’t necessarily mean that if you see a supply or an expansion in the supply that you’re necessarily going to see that reflected in the prices. They are fundamentally different in that nature. But it can be seen as a kind of broader indicator of market liquidity there.
However, on the other side, if you see a contraction—and this is increasingly changing as stablecoins permeate into more real world payment type use cases. That might not be a sign that—if the market is down, doesn’t necessarily mean you’re going to see stablecoin supply shrinking because people might be holding them for those various savings purposes. They might be getting out of other digital assets, but want to stay in the ecosystem.
So they could still be holding them as well. So this is to say that they kind of have two different use cases, again, the digital asset native ecosystem side and then outside of that. So while there is correlation there, you might see that supply expanding before a lot of entry into the broader digital asset market. It doesn’t necessarily correlate one to one in either direction.
JIM: And you can respect how someone maybe net new to crypto in general struggles a little bit wrapping their brain around the fact that you’re describing a cryptocurrency that doesn’t have fundamental volatility the way probably they’re learning all other cryptocurrencies do or might.
MATT: Sure, yeah. I think that’s definitely a fundamental difference there. And while stablecoins are a core component of liquidity in that ecosystem, they can help with price discovery, things of that nature. They don’t really set the prices. The other—bitcoin, ether—that’s all based off of market demand.
So it’s who’s buying it, who’s selling it. That’s kind of setting the prices there. Whereas stablecoins can help facilitate those transactions, they aren’t necessarily completely connected or disconnected from the volatility in those assets.
JIM: Got it. A couple more viewer questions I wanted to hit. And I know, Matt, you touched on this earlier, but I’m going to send these over to Ben. Scott is asking if there are any risk advantages to stablecoins versus other coins. And then Lucien wants to know if it matters what type of stablecoin you buy. So, Ben, we’ll start with that first question. Scott’s looking for potential advantages to stablecoins.
BEN: Sure. I mean, the risk advantage of investing in a stablecoin versus other coins—and I’m assuming the question gets to crypto coins—is the backing, the stability, and the management by some issuer. And that’s, I think, what matters in terms of what kind of a stablecoin you buy.
If you’re buying a dollar-backed stablecoin, you want to make sure that you’re buying a stablecoin that’s issued by a reputable institution that has either its own or hired appropriate money management, cash management backing services, that has highly reputable blockchain security protocols. And that’s what you’re looking at is this joint capability that some stablecoin issuers farm out to other third parties. And at Fidelity, we’re unique in that we do it all in-house, both the money management and the blockchain management.
I think there’s a point in time when stablecoins will not be called cryptocurrencies. It is a cryptocurrency in the sense that it is a currency and it’s transferable on the blockchain. But there’s a point in time when stablecoins, in particular dollars and the Fidelity Digital Dollar, people will, we think, be using them to pay for things, to receive payments in ways that—the fact that the transfer occurs on the blockchain is something that will be abstracted away from people.
JIM: We might not even notice it anymore.
BEN: And it will be more—it’s just a currency. It’s a dollar, and people will think of it that way. It’s a freely transferable, holdable dollar.
JIM: Now, Scott mentioned the word “investment,” and that was in your answer too. But we want to reframe that, I think, a little bit. If I purchase $1,000 worth of FIDD, the Fidelity Digital Dollar, today, my expectation should be it’ll be worth $1,000 tomorrow, and it’ll be worth $1,000 in a month and in a year. And so it’s not an investment.
BEN: That’s right. Yeah, that’s a good correction. It’s not an investment. But you’re not going to lose—you should not lose money if it’s properly managed by a firm that can manage it correctly.
JIM: Now, to Lucien’s question, and you nodded to it there. There are different firms operating in this space. And Lucien was asking, does it matter which stablecoin I buy if it’s pegged to the US dollar?
BEN: Yeah, I think it needs to be issued by someone that you’ve looked into, that you understand who’s managing those assets that are backing it, where those assets [are] held, who regulates that issuer, and are they capable of the things that they’re purporting to do. That’s an important consideration.
JIM: Excellent. Kevin, when he registered, asks, “What industries have been successful so far in partnering with stablecoins to assist with and represent their business services?” So we have a use case, an adoption question, Matt. What are you seeing in this space?
MATT: I like this question. This is a fun one. I think that it depends on what industries or businesses have that natural product to market fit. And so we’re kind of seeing that a little bit anecdotally and in the data for certain companies like money transmitter companies, payment processorss, cross-border payroll providers, various e-commerce platforms, especially the ones that operate on a global scale because again, you’re bringing a stable unit of account and medium of exchange on chain to have that 24/7 near instant settlements capacity in a way that gives you access to dollars in almost an instantaneous way in ways that are faster and cheaper than some of the other existing financial capabilities.
So again, I think it goes hand in hand again with you have the non-digital asset use cases, which, our company is like that. And then you have the digital asset native ones that have stablecoins built into the core underlying infrastructure already. So that’s things like crypto exchanges and trading venues that will use stablecoins as trading pairs, as collateral for derivatives, as this internal settlement currency. It’s already natively built into their systems because it’s already kind of that core underlying part of the infrastructure there powering those systems as well. So you’re increasingly seeing them used as payments and value transfer on these operational rails. And I think more and more businesses will seek to use them for reasons of operational efficiencies and cost effectiveness.
JIM: I think—so what you’re describing sounds to me like foundational. And a quick internet search will show you a lot of companies that are, again, as we nodded to off the top of the show, contemplating their own stablecoins that maybe they could use for their own customers. I did see a couple of big chains that are already in the space. But it feels like we’re not super close to a place where you could go into your local coffee shop or your dry cleaner and pay for your good or service with stablecoins. Not quite there yet, obviously.
MATT: I would say that’s accurate, which is interesting because you see a lot of that anecdotal stuff. But in your daily life you might not come across it per se.
JIM: Yeah, right. Yeah.
MATT: So it is encouraging when we look at other forms of data that we do see a lot of that, those metrics increasing. So we’re getting close to that. But it’s one of those things that doesn’t necessarily happen overnight.
JIM: Sure.
MATT: Just kind of slowly integrates into these various industries and businesses.
JIM: Ben, what’s your sense of the broader adoption question?
BEN: Yeah, I think, I mean, there are large payment processors. If you have a credit card, there are large credit card networks. They are investing in stablecoins.
They are figuring out how their technology can integrate with stablecoins to facilitate payments in coins instead of dollars processed by banks. It’s a big change to do that. But those entities that help us pay for things are making this change in the background to be prepared.
And that’s very similar to why Fidelity did this too. We see this as a future. So it’s a high potential future to have faster, immediate global payment capabilities that people haven’t had when using the banking system.
JIM: We’re going to ask you to look forward a little bit in just a moment. Mark is asking for the overall outlook for stablecoins in 2026. I’d love to have you both weigh in on that. But Matt, we’ll start with you.
MATT: Yeah, I think that, again, when we start with supply, perhaps, we see that that number is continuously expanding regardless of what the broader crypto market is doing. So even in down markets or when you see a lot of volatility, that stablecoin supply has continued to expand. So I think today, it’s around $320 billion in—
JIM: On, this is the chart you brought.
MATT: Yeah, well, we can look at this chart, which is the one-year transfer value of stablecoins on Ethereum.
JIM: And what does that mean—
MATT: So that really is looking at the total nominal amount of stablecoin settlement on just Ethereum over the last year. So how much was sent and transferred on the Ethereum network for stablecoins over the last year? And it’s over $18 trillion.
JIM: Trillion with a T.
MATT: Trillion with a T. Quite—
JIM: So I have to imagine people watching right now are saying, all right, I’ve never touched a stablecoin. I’ve never bought or sold anything with it. How is the number that gigantic?
MATT: Yeah, I think it’s just, again, those broader global use case capacities when you think it’s not just siloed to one particular company, not one particular business. You have obviously different types of payment processors, banks, what have you. This is a global decentralized network, Ethereum, that is using it as transactional rails to bring dollars on chain.
And then when you think about the fact that the dollar is involved in the majority of international settlement in some capacity, there’s a huge demand for bringing those dollars on chain. And so you might not see it or feel it perhaps in an everyday capacity. Again, you don’t walk into your local coffee shop and necessarily pay with stablecoins right now.
But on a global scale, particularly in specific jurisdictions where they might not have adequate banking infrastructure—they might be subject to corrupt governments. They might have hyperinflated currencies. Stablecoins are really highly valued there because they can get easier access to dollars on the blockchain.
They can store them. They can send them faster and cheaper. It’s really an efficient way of them getting access to dollars.
And so I think that’s a trend in a particular area that will continue to probably expand going forward. And then I also think probably more institutional involvement—so that can be business-to-business type payments, again, especially on a global scale, much easier than some of the traditional financial rails that we have today. And I also think it could be institutions adopting for their own operational efficiencies, cost savings reasons. And then institutional involvement in terms of building and involving themselves in the infrastructure space and that side as well.
So I think we’ll continue to see that as well. But I think it’s really important too to leave maybe with the fact that stablecoins aren’t just a crypto product. They’re a real core part of the global financial plumbing, and they’re continuing to permeate that way, as we kind of saw with that transfer value.
JIM: Yeah.
MATT: Again, that’s just Ethereum. That’s just one blockchain. And while there are a lot of stablecoin activity happening on that blockchain, that’s still a significant number. So I think stablecoins will continue to integrate alongside the existing financial rails as opposed to directly competing against them.
JIM: And what would you add to that, the future question?
BEN: Yeah, so I agree. Global, outside of the US use predominates now.
JIM: Yeah.
BEN: The GENIUS Act was passed a year ago by Congress. The federal regulators in the past month proposed their final rules which will take effect early next year. And that is really going to pave the way for US institutions, US banks and corporations to enter the space and begin to use stablecoins more and put them more into their payment systems. I cannot emphasize enough how important it is to have that regulatory clarity—
JIM: Sure.
BEN: —we have now, and that’s really what’s making firms, traditional firms like Fidelity and banks comfortable entering the space. So I think ‘26 is going to be probably a number of announcements, a lot of growth in the outstanding amount of stablecoins. But it’s going to be a continued time frame for people to begin to make plans and build into this future.
JIM: One more future-looking question that came in during registration I want you both to weigh in on before we move over to live Q&A. But this question asks, “Who will be the beneficiaries of the proliferation of stablecoins?” So you’re painting a picture where if not ‘26, maybe at some point in years future, stablecoins are more readily available. Who wins? Who’s that good for? Ben?
BEN: The people. I think stablecoins are going to offer a greater capability for people generally to be able to earn over their lifetime, have assets, and spend them more freely, own them more freely at their time frame, when they want, and to do so instantly and more cheaply. I think people generally will benefit from stablecoin proliferation.
JIM: Excellent, and Matt.
MATT: Yeah, I would probably piggyback off that response but perhaps make it a little more nuanced to specific geographies or jurisdictions.
JIM: OK.
MATT: So I think right now, that’s where we’re starting to see a lot of the adoption take place. When you consider that dollars are in such high demand globally for various different reasons, I think people, especially in those specific jurisdictions where, again, they don’t have that adequate banking infrastructure, they might not be able to even save in a bank account—they might be subject to currency debasement or hyperinflation.
It’s really, really a useful tool for them to be able to use and save and send payments through stablecoins. So I think people in areas like we’ve seen in our research, anecdotally, Latin America, Africa, places like that, where they’ve really struggled to otherwise get access to an intermittent or even shorter-term savings vehicle, stablecoins provide that opportunity. So I think that is something that will continue to expand going forward.
JIM: To get us started with live Q&A, we grabbed a bunch of questions that came in during registration, and we’re going to have Matt and Ben answer whichever one you tell us is most interesting to you. And 61%, 60% of folks, so a clear majority, want you to answer Alicia’s question, which is, “What are the benefits or rewards of having stablecoins in my portfolio?” How would you answer that?
BEN: Yeah, it’s a good part of your portfolio in the same way that you would hold cash. It’s dry powder. It’s what you will use to go make an investment.
Why would you want to hold a stablecoin in your portfolio if you are investing in digital assets? It’s what you can use to trade more freely on other exchanges and ultimately someday on our platform with as well. Because of that 24/7 capability, if you want to buy bitcoin on Saturday night, you would use a stablecoin to trade it. That’s the advantage.
JIM: Same question to you.
MATT: Yeah, I don’t have a lot to add there. I think Ben nailed that. Yeah, I think just the ability to stay in the market, even if you are, quote, “out of the market,” perhaps. You have that dry powder, as Ben mentioned. You have that capital still allocated to the digital asset ecosystem, ready to be deployed if you want to use it in various ways, whether it’s buying an asset or if you want to facilitate some more sophisticated decentralized finance activity, lend that stablecoin in some capacity, use it as collateral, provide liquidity in some way, and try to generate a yield off of it, make it otherwise productive instead of idle. That’s a bit more nuanced and takes a little bit more complexity to pull that off, but it is a capability of having a stablecoin.
JIM: And in your portfolio, though, it’s not something you would think of a meaningful allotment to a stablecoin as part of your strategy to save for college or plan for retirement. No, it’s, as you said, dry powder, something that’s going to facilitate a future move or investment. But to that end, a lot of questions coming up about whether or not stablecoins earn interest.
BEN: They do not earn interest right now. I mean, there are some arrangements with platforms with other stablecoins where the platform and the issuer arrange for payments of interest. But currently, generally speaking, the issuer of a stablecoin cannot pay interest under the GENIUS Act, which takes effect next year.
So there may be issuers who are paying interest now. But in the US, that will likely stop next year. And it’s possible that some arrangements could be maintained into next year in terms of an exchange where you hold it might be able to pay you interest on your stablecoin, but the issuer likely will not be able to.
JIM: So that’s a fantastic question but a great example of how the space is very much evolving legislation, regulation, very much. I mean, it evolves—I was going to say day to day. It is almost day to day. You have to really keep up to see what’s evolving.
Robert is asking why he was so—”Why would I invest in a stablecoin?” But I think what he’s asking is, why would I buy a stablecoin? Why would I have a stablecoin? Why can’t I just use US dollars?
MATT: Yeah, I think it depends on your use cases, where you are, what you are trying to do with that stablecoin. I think—
JIM: Well, timing matters too. I’m thinking, you’ve got US dollars and you want to do something on the blockchain, you’ve got to get the dollars onto the blockchain, which is running 24/7. So if you’ve got something you want to do at 6 o’clock on a Saturday morning, the markets are closed. Or Christmas Day, you want to do something, you need dollars on chain to do that. Is that too oversimplified?
MATT: No, I don’t think so at all. I think that’s a good example of why you would want stablecoins as part of your portfolio or to hold them. Again, if you were to use different DeFi applications, again, it’s a little bit more sophisticated in how you’re deploying or using that capital.
But they facilitate all those operations. So if you’re trading on a decentralized exchange, you can also generate yield by making them productive, by lending your stablecoin, and basically providing liquidity to the market. And you can generate a yield that way by doing that. But the important distinction there at the risk of providing more confusion to Ben’s prior answer is that it’s not a native yield to the stablecoin itself. You’re providing it across DeFi to a different protocol or platform that is inherent to that specific use case.
JIM: Oh, sorry. Go ahead.
BEN: Just if you have a Fidelity brokerage account and a Fidelity Digital Assets account and it is Saturday night and you can fund—you funded your account with cash in your Fidelity Digital Assets account. You can use that banking cash. You can buy the Fidelity Digital Dollar.
You can transfer the Fidelity Digital Dollar carefully using our transfer of asset capability to an account that you’ve precleared at an exchange where FIDD is listed, and you can use it, and you can trade it on Saturday night. So that’s the principal use case right now is that dry powder that you can use in crypto markets.
FIDD is what you can use 24/7 to take it off of Fidelity’s platform and bring it back to Fidelity’s platform. And on our platform, it is always worth $1 to you. We will redeem that for $1.
JIM: Sean is asking, if you try to use a stablecoin outside the US, are you still at risk of exchange rate fluctuations? How does that work?
BEN: If you pay in dollars for something outside of the US—
JIM: Yeah.
BEN: —for a good or a service outside of the US, if it’s priced in dollars, no. If you’re exchanging that dollar-backed stablecoin for either another currency on the blockchain, yes. The exchange rate between a digital dollar and a digital euro should be pretty commensurate with the exchange rate that you’re offered through financial institutions.
JIM: OK, got it. Matt, a question—well, it’s from Matt. So either one of you can answer it. Matt is asking, “Are stablecoin supply changes a leading indicator for crypto market momentum?” So it feels like an echo of that other question about how watching prices interact. How would you answer that?
MATT: Yeah, I think historically, when we see a lot of market optimism and excitement, they do generally coincide where you see an expansion in supply because of issuance when there’s more issuance in supply of real-world demand for tokenized digital dollars. And so when you see that expanding, it can say, oh, maybe I want to have that dry powder on hand because the market’s getting pretty exciting. There’s a lot of activity going on here.
So you often do see that. But I think as stablecoins have matured and the market has matured and they’ve become more part of the global financial infrastructure, that’s not necessarily as correlated as it used to be where even in, again, those down markets, maybe the market isn’t as optimistic or exciting or there’s not as much activity going on because of price volatility to the downside. You might still see that stablecoin issuance and supply expanding because people want to use it for different use cases outside of those more core digital asset native use cases—savings, payments, what have you.
JIM: John is asking, for you, Ben, “How does Fidelity foresee the use of FIDD?” So what are some future use cases? And I don’t want to pre-answer for you, but it strikes me, if you had family or friends overseas or someone to whom you wanted to make remittance payments, those can take a really long time, and fees could eat away at a ton of what you’re trying to send to other people.
So just reminds me of use cases that might not be apparent to us, because as you’ve both mentioned, the infrastructure here, the banking infrastructure is fairly robust and fairly stable and safe. So it’s harder maybe to see some of these foreign use cases. But how else would you answer John’s question about future use?
BEN: Yeah, so remittances is one—it’s a lot of, as Matt mentioned, generally stablecoins are used right now. If you want to send FIDD to relatives who’s in another country, you can do that. Absolutely.
How they can use it there is really the future case. Right now, stablecoins aren’t really used in the general economy. They’re not redeemable for dollars in other countries. And so how you use it, there’s a lot of infrastructure and use that has to be built around before you can pay for something with FIDD in a store.
We do think that that is a viable use someday for stablecoins, that people could have a stablecoin debit card and you swipe it. The merchant who doesn’t pay as many bank fees as they do with the banking system can share some of those benefits with their customers who they know best. So we think stablecoins will certainly be used in that way.
And if real-world assets are truly tokenized, enabling potentially stocks or bonds to be tradable on weekends whenever you want and instantly with lower fees, the way those securities in a tokenized way will settle is likely with the tokenized dollar, which is a stablecoin. So that’s the real future that we see is a lot of economic payments that are generally made right now with banking dollars and settlement of securities when tokenized with stablecoins. That’s a lot of growth that we see.
JIM: Excellent. OK, so that also answered another question that came in about how widely usable are stablecoins. I want to hit you with another pair of questions that came together generally asking about the impact that recent legislation, the GENIUS Act, CLARITY Act, existing and pending legislation has had on crypto in general, stablecoins specifically, and what could be the impacts of states like Wyoming launching their own stablecoins.
BEN: I think I’ve said it. The GENIUS Act and the regulations that have been proposed and will be finalized next year have had a tremendous impact on stablecoin in general in terms of a lot of institutions now seeing the rules of the road and entering into the industry. So I think it’ll only bring participants in.
In terms of the state of Wyoming, I think they’ve been working on that as long as we’ve been working on our stablecoin, and I think it’s great. I mean, I think it’s an interesting—a state issuing a stablecoin needs to probably hire out the expertise to manage the money and to manage the blockchain, smart contract that controls the stablecoin. And I’m sure they will do a really good job of it. Again, the reason that Fidelity, we decided to do this, is we already have those native capabilities here proven over a long time.
JIM: And one last question that came in. I think it’s a good way to wrap things up. Someone asking, I don’t have the name. Sorry for that.
“What are some smart things to research about stablecoin first?” So if someone’s interest was piqued today, what one or two things would you tell them they need to be thinking about before they buy some stablecoins? And Matt, we’ll start with you.
MATT: Yeah, I think try to define what you want to do with it. Maybe you don’t know. Maybe that’s exactly why you’re asking that question and why you’re trying to get involved in the space.
I think try to research what some of those different use cases are that we talked about today. If you’re native and you want to mess around in the DeFi space and the crypto space—maybe you just want to buy and hold it, have that capital set aside in the ecosystem. I think looking at some higher level metrics, perhaps, and data around it can help give you a better understanding. And that can be things like issuance and supply, transfer volumes, transfer counts, velocity because that gives you a greater understanding of how they are actually being used, how quickly they are changing hands.
Gives you a good understanding of really how stablecoins are being used in kind of a real-world capacity, especially if you can try to draw a comparison of that to other existing financial payment mechanisms or financial rails as well. So I think try to decide what you actually want to do with it, and maybe a good way of starting is just try to buy one and allocate to just get it out there.
JIM: Learn by doing.
MATT: Exactly. Experiment.
JIM: What would you say is smart research?
BEN: I think first, look into who’s issuing stablecoins. Know a little bit about those institutions. Make sure you understand their reputations, their competencies, their background.
What are they good at? Make sure that they’ve got that money management and blockchain management capability, either in-house or externally sourced with reputable parties. And yeah, it is early.
I do think that in a decade, people will be using stablecoins to buy and sell goods and services and securities, often without even knowing they’re using a stablecoin. That’s sort of, I think, the best future case. But right now, I would say experiment.
JIM: Awesome. All right, thank you both for taking time out of your day. Really appreciate it for answering all the questions. If you do have some immediate questions that you want help with right now, we would also invite you to join the ongoing conversation on Reddit at r/FidelityCrypto. There’s a great and super helpful team there, always eager to take and answer your questions, a great community there to interact with.
On behalf of everybody behind the scenes here, thank you again for taking time to be with us, and we hope to see you again very soon.
