Morgan Stanley believes the potential stablecoin adoption is positive for the bank.
Crypto-focused Silvergate Bank (NYSE: SI) rose 7.6% after Morgan Stanley formulated an optimistic message for the bank based on the potential for further stablecoin adoption.
“As the stablecoin market continues to evolve with more formalized rules regarding governance, risk management and structure, it could provide significant upside potential for our estimates of Silvergate’s earnings per share, especially if Silvergate can monetize its relationship with stablecoin issuers.” said Morgan Stanley analyst Ken Zerbe.
The assessment cites a new report from the Bank for International Settlements, which could serve as a roadmap for regulating fiat-pegged cryptoassets.
“While these requirements are likely to increase the regulatory and administrative burden on stablecoin issuers, they should ultimately lead to a more robust structure for faster and wider adoption of stablecoins as a form of payment,” Zerbe wrote.
Stabelcoin regulation has been a hot topic in the US lately.
This week, the Biden administration came up with a proposal for issuers of stablecoins to comply with banking rules.
Meanwhile, USDC’s issuer Circle said the Securities and Exchange Commission (SEC) sent the company a subpoena for investigation in July.
Morgan Stanley’s Zerbe also took Fed Chairman Jerome Powell’s announcement that the Fed was “not going to ban” stablecoins, and CoinDesk’s report on the FDIC as “gradually” positive news for the potential widespread adoption of the stablecoin market.
Morgan Stanley initiated Silvergate last month with an overweight rating and a target price of $ 158. The stock is trading at $ 163 at time of publication.
While Silvergate is currently generating a ‘nonessential’ amount of revenue related to its relationship with four stablecoin issuers in the US, “the adoption of stablecoins for day to day trading is arguably the biggest factor supporting a bullish case for owning Silvergate.
#Cryptofriendly #bank #Silvergate #grows #AcryptoInvest