Bank of America has released an in-depth research report analyzing the potential transformative impact of stablecoins within the financial system. Despite facing regulatory controversies, these digital assets have demonstrated unique advantages in cross-border transactions and retail settlements.

The report identifies cross-border peer-to-peer (P2P) payments as the most disruptive application for stablecoins, offering significant advantages in settlement efficiency and cost compared to traditional banking systems. This positions stablecoins as a crucial channel for capital flows in emerging markets.

Notable developments include Shopify's decision to allow merchants to accept USDC stablecoins, marking a significant milestone in retail adoption. Additionally, recent on-chain repurchase transactions of UST tokenized bonds highlight institutional investors' growing recognition of stablecoin settlement capabilities.

Regarding market demand, Bank of America estimates that stablecoins could generate potential demand for US Treasuries ranging from $25 billion to $75 billion over the next 12 months. However, this volume is insufficient to fundamentally alter the Treasury market's supply-demand dynamics in the short term.

More significantly, the report highlights the impact on money market funds (MMF). Some MMF clients have explicitly indicated plans to accelerate tokenization processes, utilizing on-chain systems to provide real-time interest payments as a competitive response.

Using Circle Internet Corp. (CRCL.US) issued stablecoins as an example, Coinbase (COIN.US) has circumvented the GENIUS Act's prohibition on interest payments through reward mechanisms, reflecting the market's innovative approaches to regulatory compliance.

The banking and retail sectors show markedly different attitudes toward stablecoins. Citigroup CEO Jane Fraser has stated that client unpreparedness for on-chain technology operations remains the primary obstacle, reflecting traditional financial institutions' cautious stance. In contrast, retail giants like Amazon (AMZN.US) and Walmart (WMT.US) are leveraging their extensive supply chain networks to explore incentive programs encouraging merchant adoption of stablecoin settlements, aiming to create closed-loop ecosystems.

This divergence reinforces the report's core thesis: stablecoin adoption requires both improved technical infrastructure and precise alignment with use cases.

From a regulatory perspective, loopholes in the GENIUS Act have become an industry focal point. While the Act prohibits stablecoin issuers from directly paying interest, actual reward mechanisms can still provide user returns through partnerships with exchanges and other channels. The Bank Policy Institute (BPI) warns that allowing such "proxy interest" models could lead to massive deposit outflows from banks to on-chain systems, threatening credit supply and economic stability. This controversy underscores policymakers' challenge in balancing financial innovation with risk management.

Looking ahead, Bank of America presents a long-term vision for "on-chain financial asset trading." As public blockchain interoperability improves and digital wallets become more widespread, certain financial assets may achieve full on-chain circulation, significantly reducing fiat currency exchange requirements. However, this transformation will require years of development and hundreds of billions in infrastructure investment, presenting equal opportunities for traditional financial institutions and digital-native platforms.

The report emphasizes that the development of stablecoins and tokenized assets represents a gradual revolution. While the ultimate form may exceed current market expectations, it clearly points toward a more efficient and inclusive global financial system.