The Breakdown - The Fed’s Big Stablecoin Shift

Episode Date: September 5, 2025

The Federal Reserve will host a payments innovation conference next month with stablecoins at the center—a major change for an institution that long kept crypto at arm’s length. At the same time, the Trump family’s American Bitcoin IPO turned into a frenzy on day one, and prediction market Polymarket is officially cleared to launch in the US. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, September 4th, and today we are talking about a Fed Innovation Conference. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it. Give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Well, friends, the big theme of right now, at least the one that I'm most interested in watching closely, is if and how all of the excited talking is turning into real meaningful action when it comes to this administration and its promises around crypto.

Along those lines, next month, the Federal Reserve will hold a conference to discuss stablecoins. Officially the topic is payments innovation, and the discussion will include defy, tokenization, stablecoin use cases, and business models. Fed Governor for Payments, Chris Waller said in a statement, innovation has been a constant in payments to meet the changing needs of consumers and businesses. I look forward to examining the opportunities and challenges of new technologies, bringing together ideas on how to improve the safety and efficiency of payments, and hearing from those helping to shape the future of payments. Similar to the SEC's crypto roundtables earlier in the conference will be live streamed so all stakeholders can tune in. Now, this is undeniably a big

step for the Fed. Less than a year ago, the Fed was playing a major role in keeping stable coins in the crypto industry out of the banking system. Now, they're dedicating an event to exploring how the integration of crypto and tradfai ecosystem should play out. And of course, while this is a shift, the signs were already there that the Fed was starting to take stable coins in crypto more seriously. During an appearance at the Wyoming Blockchain Symposium last month, for example, Governor Waller discussed stable coins at length. Now, he has been a stable coin proponent for a year or two, largely viewing them as a private sector alternative to a CBDC. That speech really went in depth into why he believes that stablecoins are important and why the Fed has a role to play in

their adoption. Waller essentially flagged that Fed infrastructure should be re-architected to ensure it is compatible with crypto rails. While Waller is just one governor and while there are other crypto proponents on the Fed board, it's obviously something different when the entire organization gets activated in a particular direction. There will be dozens of staff attending the conference and attempting to figure out what their next step should be. It is yet another example of us getting to watch in real time, the global monetary institutions recognize that stable coins in Crypto Rails are just an inescapable part of the future of money. Speaking of which on Wednesday, the IMF tweeted, stable coins are reshaping the future of money. How will tech, data, and new values,

redefine finance and its risks? The tweet was promoting the September issue of finance and development magazine, where the cover is emblazoned with the title, Stable Coins and the Future of Finance. Now, based on the way that I set up this episode, this is interesting as sort of an example of both talking and action. It's talking in the sense that, yes, it is just another conference. Conferences in general don't produce some specific rules or changes in policy, but it's action in the sense that a federal reserve that really didn't want to bother could give lip service when the administration ordered them to and mostly just ignore it. I think that there is clear interest in actual deep engagement here, and the reason that people are excited about the conference is that it feels reflective

of that. Moving on to our next topic, the Trump family has fired off another crypto project with the American Bitcoin company having its first day of trading on the NASDAQ going public via SPAC. The company was a spinoff from Hutt 8 who remained majority shareholders. It is nominally a mining business with a digital assets holding company attached, but the main attraction is, of course, another Trump-related security. In his role as chief strategy officer and part owner, Eric Trump told Bloomberg on Wednesday, at its core, we have a great mining business.

Right now, we're mining Bitcoin at roughly 50 cents on the dollar to the actual price of Bitcoin. We've got hundreds of millions of dollars of hard assets, data centers behind us, while everybody has to accumulate at par, for us we're able to mine at a substantial discount to par. First day of trading was wild. The stock soared more than 17% on the day to close around $8 per share. It hit an intraday high, 75% higher at $14 a share. Along the way, trading was halted five times for excessive volatility. Even more than some of the other crypto-ipos, this one really felt like crypto trading being brought to the stock market. Some reports suggested that Hutt 8 alongside Eric and Don Jr. still own around 98% of the shares. That doesn't seem to be the case anymore, but based on what

we've seen, it wouldn't be all that surprising if there was still an extremely low float. And of course, while this is supposed to be a mining company, the big attraction was American Bitcoin positioning themselves as the next big crypto treasury play. Heading into their first day of trading, the company owned around 270 million worth of Bitcoin on their balance sheet. At the open, they filed paperwork to raise $2.1 billion through stock sales to fund additional purchases. Eric Trump told the Wall Street Journal, We've become the obvious name in crypto. American Bitcoin is going to be the greatest treasury company ever built.

Now, of course, the big narrative from the day was that the Trump family has added another billion to their paper net worth through crypto. The token unlock for World Liberty Financial earlier in the week had added $5 billion to the family's wealth, according to the reporting. When it comes to American Bitcoin, numbers varied. Reuters valued Eric Trump's stake at $1.5 billion, while NBC reported a value around 600 million. Either way, it represents a significant jump in the family's wealth, at least on paper. Obviously, it wouldn't be possible to realize anywhere near that sort of amount

without crashing the stock, but the headline will still inevitably add to the chatter in Washington. This week has absolutely cemented that the future of the Trump family is as crypto-mogals rather than property moguls. Now, it is difficult to know what this launch says about the state of the market. Fundamentally, the company looks like it's set up to run through the early stages of a Bitcoin Treasury company life cycle over the coming months, i.e. selling shares, buying Bitcoin and watching the stock soar. However, they're already extremely richly valued, and many Treasury companies have seen that flywheel fall apart over the summer. The stock price is certainly not plummeting so far, but it did come back to Earth after just a few hours

of trading. I think what's safe to say is that whatever amount of froth remains in the market, a treasury company led by the Trump brothers hit exactly the right note for that particular energy. Next up today, Polymarket is set to return to the U.S. after receiving a no-action letter from the CFTC. Prediction Market was informed that the regulator would not pursue enforcement action for failure to comply with assorted regulations. Cutting through the jargon, CEO Shane Copland tweeted, Polymarket has been given the green light to go live in the U.S. by the CFTC. Credit to the commission and staff for their impressive work. This process has been accomplished in record timing. Now, Polymarket has existed in a very strange place in the market for the past few years.

In 2022, they settled with the CFTC, agreeing to wind down non-compliant contracts, geoblock U.S. users, and pay a $1.4 million penalty. At the time, they were a tiny company of very little consequence. However, prediction markets took off in 2024, especially in the lead-up to the presidential election, and Polly Market became a household name. Its odds were quoted on mainstream news to evidence the shifting polls, and throughout that period, the platform was officially unavailable to U.S. citizens. In the month before the election, rival prediction market Kalshi won a court battle against

the CFTC, receiving a ruling that political prediction markets were legal and could be offered in the U.S. by regulated platforms. Kalshi had elected to go the legitimate route as a fully registered derivatives venue. Polymarket, on the other hand, was still playing in the gray areas. Prediction markets saw a huge volume on election day, and they were even used by the Trump team to identify the result much earlier than mainstream forecasters. The day after the election, Copland had his house raided by the FBI, and it seemed entirely possible that Polymarket would see a crackdown. Nothing overcame a bit, but Polymarket continued to operate as a gray market. Now, with all of that history behind them, it looks like Polymarket is now cleared to officially launch in the U.S.

While Calchia has been putting up a strong performance this year, leaning heavily on sports betting, the competition is about to get far more intense. Polymarket has better brand recognition, a larger user base who may or may not live in the U.S., and significant backing. Donald Trump Jr. joined the advisory board last month, and in June, Elon Musk said that X was joining forces with Polymarket as well. This, my friends, is going to be one hell of a fight and a fun one to watch. It also seems that crypto's return to the U.S. more broadly is in full swing as dollar-based exchanges saw a boost in volume last month. Platforms that offer dollar pair saw a continued upswing in August reaching $279 billion in volume.

They're still down from their local peak of around $500 billion last winter, but the statistics suggest that domestic exchanges are seeing a comeback. By comparison, the major offshore exchanges, Binance, and Bybit process a combined $850 billion in August. DFI-Purps Exchange Hyperliquid has also continued to carve out a large market share, demonstrating that there's still plenty of demand for offshore exchanges that offer trading not possible under current regulations. Recent CFTC guidance presents even more headwinds for domestic exchanges, after a clarification suggested that Americans could freely access offshore venues in the near future. Again, the market seems set up for fierce competition over the next year,

with U.S. exchanges getting much better regulatory clarity, but offshore exchanges still able to offer a larger range of derivatives products. ultimately we'll have to see how much domestic traders value the protection of U.S. regulators in a relatively free market. And that's the story in crypto right now. One of the places that we're going to head for the rest of the week is some interesting conversations around macro. K33, for example, have warned that neglected macro catalysts could come back to Biden in September,

and Ray Dalio has been outwarning that mounting government debt is bad news for the dollar and will fuel demand for gold and Bitcoin. We'll be coming back to those topics later in the week, but for now, that is going to do it for today's breakdown. I appreciate you listening as always, and until next time, be safe and take care of each other. Peace.