Treasury Secretary Scott Bessent Just Called the Genius Act a "Watershed Moment in American Finance." Here's What's Next for Stablecoins.

On Oct. 21, Treasury Secretary Scott Bessent said that the Genius Act, which regulates stablecoins in the U.S., was "a watershed moment in American finance." His comments come right as regulators finalized their rules for the stablecoin market, which is valued at $298 billion.

In a questionable rhetorical flourish, Bessent likened the law to President Lincoln's National Currency Act of 1863, which created the Office of the Comptroller of the Currency (OCC). Given that monumental framing, what's going to be the next big development in stablecoins, and how can investors profit from it?

Image source: The White House.

AI agents have made 138 million stablecoin payments already

The next big thing for stablecoins is probably their steady integration into the backend of ordinary financial products.

The most straightforward way to gain from that process is by owning the stocks of the biggest stablecoin issuers and distributors, like Circle Internet Group (NYSE: CRCL) and Coinbase Global (NASDAQ: COIN), which we'll get to a bit later. A second trend, AI agents paying for things on their own, could eventually add far more payment activity than those mundane applications, though for now it's more promise than revenue.

AI agents, which is to say software that's capable of paying for goods and services without a human's direct permission for every transaction, are the most-hyped driver for stablecoin adoption. And there's already some substance behind the hype, so don't assume this trend is about to peter out when it's just picking up.

In an October report, the Chainalysis crypto research group identified more than 138 million agent-made payments processed through x402, a Coinbase-built protocol that's used for paying in stablecoins. Separately, in August of this year, Circle said that 99.3% of x402 agent-payment dollars settled in its stablecoin, USDC, the second-largest stablecoin by market value after Tether's USDT.

The catch is that the individual payments by agents, at least for now, are almost exclusively made in minuscule amounts. In July, x402 handled about 75 million payments, but that sum was worth just $24 million, meaning an average of about $0.32 each.

Was any of that actually enabled by the Genius Act? Probably not, because the infrastructure for automated payments with stablecoins existed well before its passage last year.

Who gets paid as stablecoins ramp up?

Holding stablecoins won't earn you anything from their adoption. The Genius Act bans issuers from paying holders any interest.

Stablecoin issuers themselves can still earn interest on the reserves that back the coins people hold, but that's not something that scales per payment, and agents spending pennies have little need to hold much of a balance in their wallets anyway. That leaves a handful of crypto stocks as the best way to get some upside here.

Circle is the purest stablecoin play because it issues USDC, but it also needs to share the pie. In Q2, it paid $410.4 million in distribution and transaction costs, 58.5% of its $701.3 million in revenue, per its earnings release. Much of those distribution fees go to Coinbase, which racked up $292 million in stablecoin revenue in Q2.

Base, Coinbase's own blockchain where many of its USDC are hosted, takes transaction fees, including for stablecoin payments. So Coinbase may actually be better positioned than Circle, as it gets paid distribution fees first, and then transaction fees from the users it distributes to.

Interest rates are the biggest risk to stablecoin reserve income, so they pose a threat both Circle and Coinbase. Reserve income made up 95.2% of Circle's Q2 revenue, so rate cuts by the Federal Reserve would hit Circle Internet Group stock hardest.

Coinbase is the better buy for most investors to get exposure to the future of stablecoins, since stablecoins are a quarter of its revenue. If agent payments grow into real dollar amounts, Base fees could add modestly to Coinbase's revenue.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.