ProShares’ stablecoin-ready ETF posts ‘insane’ $17B trading debut

A money market fund targeting issuers regulated under the U.S stablecoin law, GENIUS Act, has made a new record for debut trading volume. 

The ProShares GENIUS Money Market ETF (NYSE: IQMM) saw a whopping $17 billion in trading volume.

For context, BlackRock’s iShares Bitcoin ETF (IBIT) saw $1 billion in day-one volume, while its other product, the BlackRock ESG ETF, saw $2 billion. 

This was eight times the previous record, noted Bloomberg ETF analyst Eric Balchunas.

He added, 

“Insane: That $17B is going to show up as flows/assets tonight. Where is $ coming from? Either way, I was wrong about this ETF.”

Source: Bloomberg 

Is Circle behind the record debut?

Responding to Balchunas, another ETF expert, Nate Geraci, speculated, 

“Would assume ProShares cut a deal with one of the major U.S.-based stablecoin issuers…Looking at assets, believe that would only leave Circle.”

But Ben Johnson, head of client solutions at Morningstar, clarified that the product was funded by other ProShares funds for easier cash management purposes. 

So, why GENIUS Act-inspired? The U.S stablecoin law has several instruments that can be used as reserve assets for issued stablecoin tokens. Some of the permitted reserves include cash and cash equivalents, short-dated U.S. Treasury bills, and money market funds focused on cash management. 

This makes it easier to redeem and to cater to rising demand if users cash out en masse from stablecoins into fiat without triggering a bank run or risking broader financial markets. 

And that’s where the ProShares ETF falls: an MMF focused on stablecoin reserves, likely in the hope that issuers may opt for it for easier cash management, too. It’s unclear whether it will attract these potential issuers. 

Why the SEC’s 2% ‘haircut’ is good for stablecoins

Meanwhile, the stablecoin sector got another win after a recent SEC guideline. The regulator said payment stablecoin will now have 2% haircut, similar to money market funds.

In the past, stablecoins had a 100% ‘haircut’, meaning holding them had no capital benefit. If you had $100 million, it would be seen as $0 for capital purposes. Now, it can be valued at $98 million. 

The change means stablecoin holders can have more trading inventory, loan capacity, and overall financial activity. 

For his part, Jeremy Allaire, CEO of Circle, hailed the move as positive for stablecoin adoption. 

“This is a big win for USDC adoption in capital markets. Great progress.”

Final Summary 

• ProShares’ GENIUS Act-inspired ETF set a new record, hitting $17 billion in day-one trading volume. 
• Circle CEO hailed the SEC’s 2% haircut for stablecoin as a likely catalyst for USDC adoption.