Clearinghouse: What is the future development direction of stablecoins?

Author: John deVadoss, Source: Coindesk, Translated by: Shaw Jinse Finance

Summary

• The "GENIUS Act" will regulate the $260 billion stablecoin market and bring it into the U.S. financial system.
• People are considering establishing a clearinghouse for stablecoins to manage redemption risks and provide regulatory oversight.
• Major financial institutions are exploring the issuance of stablecoins, leveraging their clearing expertise as a competitive advantage.

With the anticipated passage of the GENIUS Act, the $260 billion stablecoin market is set to become an officially regulated part of the U.S. financial system.

The next step is institutionalization, bringing the time-tested clearinghouse model into the world of tokenized currency.

Why Liquidation is Crucial

Traditional clearinghouses, formally known as central counterparties, are situated between buyers and sellers to hedge risk exposure, collect margins, and share losses in the event of member defaults. This infrastructure is usually unremarkable under normal circumstances, but when issues arise, it becomes a firewall that prevents localized shocks from evolving into systemic risks. Given that these institutions are characterized by being 'too central to fail,' the Financial Stability Board has established new global standards in 2024 to ensure their orderly resolution.

Globally, stablecoins have emerged. They promise a one-to-one redemption, but transactions occur on a borderless blockchain where liquidity can vanish in an instant. Today, each issuer is the first and last line of defense against their own risks; meanwhile, the demand for redemption accumulates precisely when the asset market is at its most ruthless. The stablecoin clearinghouse will aggregate this redemption risk, enforce a real-time margin system, and provide regulators with a data control panel and a crisis intervention toolbox.

It is certain that many people will think that a clearinghouse is incompatible with a decentralized financial system, but through the "GENIUS Act", Washington D.C. and Wall Street are signaling to the stablecoin industry to follow suit.

Congress has pushed for this.

There is an implicit support for central clearing in Article 104 of the GENIUS Act: if stablecoin reserves are to include short-term Treasury repurchases, those repurchases must be centrally cleared (or the counterparties must pass stress tests similar to those of the Federal Reserve).

This small clause sows a seed. Once the issuer must manage its collateral through a clearing house, extending that model to the tokens themselves is just a small mental leap—especially when the intraday settlement window shrinks from several hours to just a few seconds.

Wall Street Sees Opportunity

The U.S. Depository Trust & Clearing Corporation (DTCC), which processes $37 trillion in securities annually, confirmed in June that it is "evaluating" a plan to issue its own stablecoin. Meanwhile, an alliance of several of the largest U.S. banks—supporters of the Real-Time Payments Network—is also exploring the joint issuance of a bank-backed stablecoin and has stated that its clearing expertise is its competitive advantage.

Whether it is either of these two institutions or others that have not yet been publicly announced, as their relevant businesses advance, the risk management frameworks they push to the market are likely to become the dominant blueprint. (Both Bank of America and Citibank have recently stated that they hope to issue their own stablecoins.)

A new governance model is taking shape

The Bank for International Settlements stated this month that stablecoins have not yet passed the test of sound money, and without strong safeguards, there could be a "fire sale" of reserve assets. If a large institution encounters problems after joining the clearinghouse, the scale of its default may exceed the margin funding scale, leading to a "too big to save" issue for taxpayers. The governance model might form a customized framework; designing a charter that satisfies international regulatory bodies concerned about cross-border spillover effects requires multilateral bargaining similar to that of the Basel Committee.

How Stablecoin Clearinghouses Operate

1. Membership and Capital - The issuer (and possibly the main exchanges) will become clearing members, providing high-quality collateral and paying default fund assessment fees, just like today's futures brokers.
2. Net Settlement - The clearing house will maintain a comprehensive on-chain account, settling bilateral net amounts for a single multilateral net settlement position for each block, and then conducting final settlement by transferring stablecoins (or tokens representing reserve assets) among members.
3. Redemption Window - If the redemption queue exceeds the preset threshold, the facility can proportionally pay or auction off collateral to slow down the outflow of funds, allowing for an orderly sale of assets.
4. Transparency and Data - As each token transfer touches the clearinghouse's smart contracts, regulators will gain real-time systemic risk exposure comprehensive ledgers - something that is not achievable in today's decentralized pools of funds.

The U.S. Congress is codifying reserve and disclosure rules into law. Wall Street is preparing the weight of its balance sheets. Meanwhile, global standard setters are drafting solutions.

In the early stages, it is expected that cryptocurrencies will mainly be applied to specific institutional sub-scenarios—collateral liquidity, overnight financing—thus saving intraday liquidity for institutions and providing public product risk protection for the Federal Reserve. If the cryptocurrency alliance does not intervene, traditional financial (TradFi)-style clearing institutions will dominate.