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The Protocol: Bitcoin Bridged Trustlessly to L2; Ethereum’s Blob Mob

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Welcome to The Protocol, CoinDesk’s weekly wrap-up of the most important stories in cryptocurrency tech development. I’m <a href=»https://www.coindesk.com/author/marc-hochstein/» target=»_blank»>Marc Hochstein</a>, CoinDesk’s deputy editor-in-chief for features, opinion and standards.

IN THIS ISSUE:

Ethereum’s blob mob

Staking on Starknet

Avalanche’s big upgrade

L2 teams beam over Beam Chain

Sui suffers a brief outage

Bitcoin bridged, trustlessly

This article is featured in the latest issue of <a href=»https://www.coindesk.com/newsletters/the-protocol/» target=»_blank»>The Protocol</a>, our weekly newsletter exploring the tech behind crypto, one block at a time. <a href=»https://www.coindesk.com/newsletters/the-protocol/» target=»_blank»>Sign up here</a> to get it in your inbox every Wednesday. Also please check out our weekly <a href=»https://www.coindesk.com/podcasts/the-protocol/» target=»_blank»>The Protocol</a> podcast.

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BEAMING OVER THE BEAM CHAIN: What’s good for the L1 is good for the L2s. That’s the assessment the teams behind zkSync and Polygon, two of the leading layer-2 networks running on top of Ethereum, gave of Justin Drake’s proposal to overhaul the $400 billion blockchain, dismissing suggestions it would make their auxiliary networks redundant. “That’s really a misconception,” said Alex Gluchowski, the CEO of Matter Labs, the developer firm behind zkSync. “The changes that Justin announced are focused on the consensus layer, not on the execution layer. It’s not going to affect the execution layer.” In addition to incorporating ZK, Drake’s proposal seeks to shorten block times, which could cut transaction costs for L2s settling on Ethereum. Drake also said he wants to introduce single-slot finality, meaning blocks with transaction data could be finalized immediately, and that information would become permanent right away. “All of those things are great because we depend on Ethereum as the global settlement layer,” Gluchowski said. Brendan Farmer, a co-founder at Polygon, also told CoinDesk he doesn’t think the Beam Chain would obsolesce layer-2s. Instead, he said, the upgrade would “make rollups work better.” However, others in the crypto community were underwhelmed by the whole plan, lamenting in particular that Drake’s five-year timeline wasn’t ambitious enough, leaving ample room for centrally-developed chains like Solana to eat Ethereum’s lunch.” <a href=»https://www.coindesk.com/tech/2024/11/21/ethereum-layer-2-teams-welcome-proposal-to-overhaul-blockchain» target=»_blank»>Read more</a>

SUI OUTAGE: Sui Network (SUI), a relatively new blockchain, experienced an unexpected two-hour outage on Thursday. The downtime was caused by a bug in its transaction scheduling logic, which led to its validator network crashing. The issue was resolved, the network said. Blockchain outages can take place for a plethora of reasons, ranging from a 51% attack to technical errors. A common error is that of nodes — or individual entities that process transactions — being unable to sync with each other, causing the blockchain to go offline. Software bugs may be another error vector, where outdated code can render the network’s processes inoperable. <a href=»https://www.coindesk.com/tech/2024/11/21/sui-network-back-up-after-scheduling-bug-leads-to-two-hour-downtime-sui-recovers» target=»_blank»>Read more</a>

STAKING ON STARKNET: Starknet has become the first major rollup blockchain running on top of Ethereum to let users earn money by staking their tokens and validating transactions. (Metis was the first layer-2 to do so but is far smaller and is an «optimium,» a different kind of L2.) Now, anyone who has at least 20,000 STRK tokens (roughly $12,000 at recent prices) can pledge the asset as collateral and earn rewards for validating transactions. Users with less than 20,000 STRK can delegate their tokens to validators to stake on their behalf. (Validators that behave maliciously or neglect their duties stand to forfeit staked tokens.) Validators and delegators that want to withdraw staked tokens must wait 21 days to receive them as well as any rewards earned from staking. Implementing staking on Starknet is part of a multiphase plan. During this first phase, StarkWare, the company developing Starknet will study staking habits on the network, and from there will assess whether and how its validators can be given the additional responsibilities of creating and «attesting,» or confirming, blocks in the protocol. <a href=»https://www.coindesk.com/tech/2024/11/26/crypto-staking-goes-live-on-starknet-in-first-for-ethereum-l2-blockchains» target=»_blank»>Read more</a>

AVALANCHE’S BIG UPGRADE: Avalanche, the eighth-largest blockchain by total value locked (TVL), is moving ahead with a major technical makeover. The Avalanche9000 upgrade went live in a test network environment Monday, bringing the changes one step closer to the main network. Avalanche9000 will be the largest upgrade that Avalanche has seen. It is designed to cut the costs of sending transactions, operating validators and building apps on the network, whose native token (AVAX) is the 11th-largest cryptocurrency, with a $16 billion market cap. The foundation is trying to attract developers to Avalanche and encourage users to create customized blockchains using its technology, known as subnets. Somewhat confusingly, subnets are now officially referred to in the Avalanche community as «L1s,» even though they are roughly analogous to the layer-2, or L2, networks that augment Ethereum and other blockchains. (Avalanche’s «primary network,» the equivalent of a layer-1 in other ecosystems, is considered a subnet.) The team is hoping to bring Avalanche9000 to mainnet by yearend. Among other changes, 9000 would allow for a new type of validator with which anyone can launch their own subnets. <a href=»https://www.coindesk.com/tech/2024/11/25/avalanche-blockchains-largest-ever-upgrade-goes-live-on-testnet?_gl=1*1ycxzn7*_up*MQ..*_ga*MTExNTkwOTY0Ny4xNzMyNjM1NDE3*_ga_VM3STRYVN8*MTczMjYzNTQxNi4xLjEuMTczMjYzNTQyNS4wLjAuNzc0MTY1MjQy» target=»_blank»>Read more</a>

ONE-WAY TICKET: BitcoinOS, a smart contract project led by crypto O.G. <a href=»https://www.coindesk.com/policy/2024/10/26/from-smuggling-gold-out-of-africa-to-bridging-bitcoin-and-cardano» target=»_blank»>Edan Yago</a>, has executed what it bills as the first trustless bridge transaction for any blockchain. Using zero-knowledge cryptography, a nominal amount of bitcoin (0.0002 BTC, about $19 and change) was locked up on the main blockchain’s testnet, and a proof was generated minting tokens on the testnet for Merlin Chain, a layer-2 network. No oracle or custodian was involved, according to BitcoinOS. For now, however, Merlin Chain is like the <a href=»https://genius.com/37517″ target=»_blank»>Hotel California</a> or a <a href=»https://www.youtube.com/watch?v=ZXUQ_4gMoG0″ target=»_blank»>roach motel</a> for the bridged BTC. «This is one half of the bridge showing the ability to bridge assets from Bitcoin to an EVM,» BitcoinOS said in a press release. «Once the other half of the bridge is completed, Merlin Chain users can settle their Bitcoin-pegged assets back to the mainchain by proving that the tokens were burned.»

Ethereum’s Blob Mob

Usage of binary large objects, or blobs, has surged on the Ethereum network, signaling that more users are embracing layer-2 scaling tech for faster and more affordable transactions.

This year, Ethereum’s Dencun upgrade introduced blobs, which allow large chunks of data to be temporarily attached to transactions, and later deleted after the data is verified. (You can think of a blob as a <a href=»https://www.cyfrin.io/blog/what-is-eip-4844-proto-danksharding-and-blob-transactions#what-is-a-blob-transaction» target=»_blank»>sidecar that rides along with a motorcycle</a> for a time but eventually gets detached and discarded.) Layer-2 protocols such as BASE, Arbitrum, and Optimism use blobs to bundle transactions together, process them off-chain and then post them to the Ethereum main chain for verification without permanently gumming up the works.

The number of blobs posted to the network consistently averaged more than 21,000 this month, matching the record activity seen in March, according to pseudonymous data analyst Hildobby’s <a href=»https://dune.com/hildobby/blobs» target=»_blank»>Dune Analytics dashboard</a>.

Posting blobs costs a fee, which fluctuates depending on network conditions. The fees are paid in Ethereum’s native token ether, and are burned just like regular transaction fees, taking supply of ETH off the market, a positive for the coin’s price.

In this way, blobs mitigate the much-discussed cannibalization of the main chain by L2.

The blob base submission fee spiked as high as $80 on Monday, the highest since March, and the average number of blobs posted in each Ethereum block rose to 4.3. More importantly, blob fees have burned over 214 ETH worth $723,000 over the last seven days, the sixth largest source of fee burns on the network over that period, according to data from ultrasound.money.

<a href=»https://www.coindesk.com/markets/2024/11/26/ethereum-blob-usage-explodes-as-traders-rush-to-layer-2-solutions» target=»_blank»>CLICK HERE FOR THE FULL ANALYSIS BY COINDESK’S OMKAR GODBOLE</a>

Money Center

Vibe shift

<a href=»https://www.coindesk.com/business/2024/11/22/coinbase-app-gets-left-behind-as-memecoin-craze-drives-traders-on-chain?_gl=1*12vt1du*_up*MQ..*_ga*MTExNTkwOTY0Ny4xNzMyNjM1NDE3*_ga_VM3STRYVN8*MTczMjYzNTQxNi4xLjEuMTczMjYzNTQyNS4wLjAuNzc0MTY1MjQy» target=»_blank»>Coinbase App Gets Left Behind as Memecoin Craze Drives Traders On-Chain</a>

Not just fun and games?

<a href=»https://www.coindesk.com/opinion/2024/11/25/why-memecoins-matter» target=»_blank»>Why Memecoins Matter</a>

Bringing in the big Sun

<a href=»https://www.coindesk.com/business/2024/11/25/trumps-sluggish-de-fi-project-gets-a-big-boost-from-justin-suns-30-m-token-purchase?_gl=1*lnsg8n*_up*MQ..*_ga*MTExNTkwOTY0Ny4xNzMyNjM1NDE3*_ga_VM3STRYVN8*MTczMjYzNTQxNi4xLjEuMTczMjYzNTQyNS4wLjAuNzc0MTY1MjQy» target=»_blank»>Trump’s Sluggish DeFi Project Gets a Big Boost From Justin Sun’s $30M Token Purchase</a>

<a href=»https://www.coindesk.com/business/2024/11/26/justin-sun-joins-donald-trumps-world-liberty-financial-as-adviser?_gl=1*lnsg8n*_up*MQ..*_ga*MTExNTkwOTY0Ny4xNzMyNjM1NDE3*_ga_VM3STRYVN8*MTczMjYzNTQxNi4xLjEuMTczMjYzNTQyNS4wLjAuNzc0MTY1MjQy» target=»_blank»>Justin Sun Joins Donald Trump’s World Liberty Financial as Adviser</a>

«Reports are greatly exaggerated»

<a href=»https://www.coindesk.com/markets/2024/11/27/think-ethereum-s-eth-is-dead-surging-metrics-show-otherwise» target=»_blank»>Think Ethereum’s ETH is Dead? Surging Metrics Show Otherwise</a>

Calendar

Dec. 4-5: <a href=»https://indiablockchainweek.com/» target=»_blank»>India Blockchain Week</a>, Bangalore

Dec. 5-6: <a href=»https://www.theblock.co/post/283406/the-block-launches-emergence-a-premier-conference-for-the-digital-assets-industry» target=»_blank»>Emergence</a>, Prague

Dec. 9-12: <a href=»https://adfw.com/» target=»_blank»>Abu Dhabi Finance Week</a>

Dec. 11-12: <a href=»https://newyork.theaisummit.com/» target=»_blank»>AI Summit NYC</a>

Dec. 11-14: <a href=»https://www.taipeiblockchainweek.com/» target=»_blank»>Taipei Blockchain Week</a>

Jan 9-12, 2025: <a href=»https://www.ces.tech/» target=»_blank»>CES</a>, Las Vegas

Jan. 15-19: <a href=»https://www.weforum.org/events/world-economic-forum-annual-meeting-2024″ target=»_blank»>World Economic Forum</a>, Davos, Switzerland

January 21-25: <a href=»https://329b0589.isolation.zscaler.com/profile/2332cf23-bc6a-418b-a941-f595d0e3ea25/zia-session/?controls_id=22337358-9ef1-4c14-8042-bae40f505928&region=pdx&tenant=cac35314c425&user=065ae33aa0b7fd8bb4e9ae9286b2fcf7c62d677db428d6cd9b6e4d01e6ffa098&original_url=https%3A%2F%2Fwagmi.miami%2F&key=sh-1&hmac=5349b2cbc41b5242c21267747a0dc197c5cb3cc3c860fe73f8de2f049e1adea8″ target=»_blank»>WAGMI conference</a>, Miami.

Jan. 24-25: <a href=»https://adoptingbitcoin.org/capetown-2024/» target=»_blank»>Adopting Bitcoin</a>, Cape Town, South Africa.

Jan. 30-31: <a href=»https://planb.sv/» target=»_blank»>PLAN B Forum</a>, San Salvador, El Salvador.

Feb. 1-6: <a href=»https://satoshiroundtable.org/» target=»_blank»>Satoshi Roundtable</a>, Dubai

Feb. 19-20, 2025: <a href=»https://consensus-hongkong2025.coindesk.com/» target=»_blank»>ConsensusHK</a>, Hong Kong.

Feb. 23-24: <a href=»https://www.nftparis.xyz/» target=»_blank»>NFT Paris</a>

Feb 23-March 2: <a href=»https://www.ethdenver.com/» target=»_blank»>ETHDenver</a>

May 14-16: <a href=»https://consensus2025.coindesk.com/» target=»_blank»>Consensus</a>, Toronto.

May 27-29: <a href=»https://x.com/LasVegasLocally/status/1817280637457551831″ target=»_blank»>Bitcoin 2025</a>, Las Vegas.

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Amalgam Founder Charged With Running ‘Sham Blockchain’, Taking $1M From Investors

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Prosecutors have charged Jeremy Jordan-Jones, the self-styled founder of a now-defunct crypto startup called Amalgam, with fraud, alleging that he swindled investors in his “sham blockchain” of more than $1 million, using the money to fund a lavish lifestyle.

According to prosecutors, Jordan-Jones painted Amalgam as a tech company that created blockchain-based point-of-sale payment systems, which he claimed had multi-million-dollar partnerships with sports teams including the Golden State Warriors and a professional soccer team in England’s Premier League, as well as a big restaurant conglomerate with more than 500 restaurants. None of these partnerships existed, prosecutors said. Jordan-Jones also allegedly solicited investments from would-be investors by telling them the money would be used to facilitate the listing of Amalgam’s non-existent crypto token on a crypto exchange.

While allegedly spinning stories for investors — including a venture capital firm, identified in a 2022 Forbes article as Brown Venture Group — prosecutors say Jordan-Jones was blowing their money on a luxurious lifestyle for himself, including “hotels and restaurants in Miami,” car payments, and designer clothing.

“Jordan-Jones, capitalizing on the publicity around blockchain technology, perpetrated a brazen scheme to defraud investors,” said U.S. Attorney Jay Clayton in a Tuesday press announcement. “He touted his company as a groundbreaking blockchain startup, backed by high-profile partnerships. In reality, Jordan-Jones’s company was a sham, and investors’ funds were siphoned off to bankroll his lavish lifestyle. This should be an example to would-be financial fraudsters that the women and men of the Southern District and the FBI are watching and to the investing public that fraudsters often use the promise of new technology to cloak their schemes.”

Additionally, prosecutors have accused Jordan-Jones of providing falsified documents to a financial institution, which he used to fraudulently obtain a corporate credit card, running up a $350,000 balance before the bank closed his account.

Jordan-Jones has been charged with one count each of wire fraud, securities fraud, making false statements to a financial institution and aggravated identity theft — charges which carry a combined maximum sentence of 82 years in prison. The aggravated identity theft charge carries a mandatory minimum sentence of two years.

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NY Prosecutors: FinCEN Opinion on Samourai Wallet ‘Irrelevant’ in Roman Storm Case

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Prosecutors in the case against Tornado Cash developer Roman Storm are attempting to to sidestep the possibility that a New York judge forces them to hand over additional evidence that could help Storm’s case.

In a Wednesday letter to the court, prosecutors pushed back against Storm’s lawyers’ assertions that they’d failed to meet their so-called Brady obligations — a constitutional requirement for prosecutors to turn over any potentially helpful evidence to the defense before trial.

At the heart of the debate is a recent production of evidence in another case in the Southern District of New York (SDNY): the legal pursuit of Samourai Wallet co-founders Keonne Rodriguez and William Lonergan Hill. Both cases involve a crypto mixing service that prosecutors allege was knowingly used to launder crime proceeds,

In the Samourai Wallet case, however, prosecutors recently admitted to having a conversation with two Financial Crimes Enforcement Network (FinCEN) officials in 2023 — before pressing charges — in which the government employees said they didn’t believe the mixing service would qualify as a money transmitting business under their guidelines and didn’t need a license to operate. Lawyers for Rodriguez and Hill accused prosecutors of suppressing critical evidence and violating their right to due process. Last week, the judge overseeing the case denied their motion for a hearing on the matter, telling them instead to include their concerns in their pre-trial motion due at the end of the month.

Though the cases are separate, lawyers for Roman Storm expressed concern that the prosecution’s failure to inform them of their communications with FinCEN regarding Samourai Wallet’s status as a money transmitting business also potentially constituted a Brady violation in Storm’s case.

In their Wednesday response, prosecutors said that the FinCEN conversation wasn’t evidence.t was an opinion, not a fact, they stated, and therefore not required to be turned over to the defense. Prosecutors also claimed that their discussion with FinCEN was irrelevant to Storm’s case, because it wasn’t specifically about Tornado Cash.

“Tornado Cash simply was not part of the conversation,” prosecutors wrote. “While Samourai Wallet and the Tornado Cash service may share some superficial similarities, they operated quite differently.”

Prosecutors said that they didn’t have similar conversations with FinCEN about Tornado Cash, claiming that there were “no such interactions comparable to those described in the Rodriguez Disclosures.”

“As the government has repeatedly explained to the defense in this case, the government has neither sought nor obtained an opinion from any employee at FinCEN — or any other government agency — regarding whether the Tornado Cash service is subject to registration obligations,” prosecutors wrote. “Such an opinion — especially an informal opinion offered by employees who expressly disclaim to be speaking for the agency — would not be legally admissible and would not constitute Brady material.”

The case against Storm is expected to begin on July 14 in New York.

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Stablecoins Are About to Hit ‘Critical Mass’ While 2027 Seen as Pivotal Year

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The race to define the future of money is speeding up—and according to industry leaders, stablecoins are right at the center.

“It’s clear that the most important item on our roadmap is understanding how quickly we can move, and it’s obvious that the next three years are the fastest we will ever see in the development of digital assets,” said Sergio Mello, head of stablecoins at Anchorage Digital during Paxos’ Global Dollar Network event in New York City.

“2025 will have clarity here, 2026 will have clarity elsewhere, and 2027 is when it’s all going to happen.”

Mello wasn’t speaking in hypotheticals. From his vantage point inside one of the first federally chartered crypto banks in the U.S., he sees stablecoins not as niche financial instruments but as a foundational upgrade to the global monetary system.

“Stablecoins are a better representation of fiat, a better way to transfer fiat, but it’s really just money that you’re moving,” he said. “We’re merging the transport layer and the value layer into the same instrument.”

This evolution of money is far from theoretical.

According to Mello, industry players across payment networks, custodians, and financial service providers are laying the groundwork for what he called a “critical mass” of institutional adoption — something he predicted will hit within the next 12 to 24 months, especially in payments. “That’s where the money is going,” he said.

From experiment to infrastructure

Stablecoins were once seen as tools for crypto speculators or offshore arbitrageurs. However, according to Raj Dhamodharan, EVP at Mastercard, that perception is shifting fast.

Stablecoins now function as the “money movement layer” across increasingly mainstream use cases, he said, adding that cross-border remittances, B2B payments, and even retail spending are already seeing traction.

For example, Mastercard is enabling cards where users can choose which currency — fiat or stablecoin — they want to spend, while merchants can choose what they want to receive. “We’ve started doing that with cards. We’ve started doing that with remittances,” Dhamodharan said.

Ahmed Zifzaf of Worldpay echoed this, describing how their customers use stablecoins for real-time treasury management. “You can start to see how you accelerate all of these payment and financial flows,” he said, noting that Worldpay is focused on working with “battle-tested” blockchains like Solana to scale those efforts.

The bankers’ dilemma

Still, not every financial institution is rushing in.

“What constraints do you have because you are a bank?” asked Luca Cosentino of Cross River. The barriers are real, he said — legacy tech stacks, compliance risk, and cultural resistance all slow the pace of innovation. But the split in strategy is becoming clear.

“Certain banks are not going to touch crypto […] some others will focus on custody […] some others are going to be focused on money movements,” he said. “But I have very little doubt that a huge portion of the banks […] is going to go into crypto one way or another.”

Sunil Sachdev from Fiserv noted the same divide. “We had about 12 banks ready to go,” he said, describing how new rules under SAB 121 effectively froze many of those plans. “Then everything, in just one day, kind of closed shop.” But the interest hasn’t gone away, particularly among smaller banks.

“The bigger guys seem to be cautious,” he said. “The smaller banks are much more aggressive because they’re looking to use this as an opportunity to bring in low-cost deposits. They’re looking at this as an opportunity to differentiate themselves.”

He painted a vivid picture of how a small-town bank might evolve: three branches, deep community ties, and now a road map to become a “trusted node” in a global blockchain network, offering tokenized financial products not available elsewhere.

Better than Fiat

While many in the industry assume institutions will lead adoption, Kraken’s Mark Greenberg isn’t so sure. “Americans might be actually some of the last groups to adopt a global dollar,” he said. But outside the U.S., demand is strong.

“I do believe a global dollar is better than holding fiat, and we’re going to see it,” he said, adding that this is more important in countries where inflation erodes value and yield is scarce.

And it won’t just be used for savings. “You save your money there; you use a card there. At some point, you transfer to your friends, you pay your bills,” he said. “And maybe you buy a meme coin or a stock.”

Mike Dudas of 6th Man Ventures suggested the app layer will drive consumer behavior. Stablecoins “is the fundamental thing that people need to be able to store value in,” he said. “And now, because of Visa, Mastercard, and off-ramp providers, I can actually spend those dollars I get.”

Sheraz Shere of the Solana Foundation added that the infrastructure now exists to support those ambitions. “There’s this assumption that TradFi infrastructure is good,” Greenberg said. “There are outages there [TradFi institutions] too.” Instead of talking up performance, he said the best strategy is to let results speak for themselves. “The less we talk about it, the better it is.”

A play to bolster the U.S. dollar’s dominance

While stablecoins are often discussed through the lens of innovation and financial inclusion, policymakers may be thinking about something more immediate: demand for U.S. debt, according to former CFTC chair Chris Giancarlo.

“95% of the driving force behind stablecoin legislation is to create more demand for U.S. Treasuries,” he said. “The remaining 5% is simply working out which regulator gets oversight.”

It’s not a crypto-driven narrative, Giancarlo argued. Stablecoins are now being viewed as a way to bolster the U.S. dollar’s global role by digitizing and distributing it at scale. “Stablecoins have demonstrated that the global demand for dollars far outstrips the supply in an analog world, and the beauty of stablecoins is meeting that demand,” he said.

Jonathan Levin, CEO of Chainalysis, said banks are entering the space cautiously, with more focus on asset stability and market contagion than most crypto-native firms. “When it comes to banks, they look at it and they’re saying: I need to not just understand the stability of my asset, I need to understand the stability of everyone else’s assets.”

According to Levin, data will be key. Issuers need to track performance across thousands of currency pairs and venues, while also managing risks without compromising decentralization. “That’s a data challenge that is going to be vital,” he said.

The Years Ahead

As legislative efforts advance in Washington, many panelists agreed that durable rules—on reserves, on-ramps, disclosures — are overdue. But the opportunity ahead is bigger than compliance.

“The bottom line is, even if the politicians are focused on demand for treasuries, it’s in the American interest to have the dollar continue to serve as the world’s reserve currency,” Giancarlo said.

By the end of the day, one theme cut across all four panels: stablecoins are no longer an experiment. Whether small banks are searching for relevance, corporations are chasing faster settlements, or regulators are responding to Treasury market pressure, the stablecoin ecosystem is moving fast—and the road to 2027 could decide how global finance is wired for the next generation.

Read more: Stablecoins Will Expand Beyond Crypto Trading, Become Part of Mainstream Economy, Citi Predicts

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