Last Wednesday Congress passed legislation permitting organizations such as Walmart and Amazon to issue their own stablecoins. The implication of this is that large retailers (and others) can in effect create their own exclusive currency. Such currency would only be honored by the issuer in their place of business. So, a stablecoin issued by, say, Walmart cannot be spent at Target or Kohl’s.
While details as to how this will work have not been yet made public, it is assumed that the company-issued stablecoins will be issued at some discount. Say a customer could buy $1,000 worth of Walmart stablecoins for $950. Conversely, retailers could offer dual pricing. An item would cost $40 in their own stablecoin but $50 using regular currency. The idea is to have the customer keep a balance in the company’s stable coin account. As the balance goes down, customers will advance more funds into their stablecoin account. In effect, the collective balances would be a “float” of funds that companies would treat as an interest-free loan. Customers would see the finds earning tax-free interest in the form of lower costs or bonus buying power.
This is really a very old idea. In the 1880s several mining and lumber companies created towns that were in remote areas at the time. Because of the remoteness, companies supplied the town with everything needed to function, including groceries and rental housing. To make their capital go further, companies issued their own currency redeemable only at company-owned establishments. The currency, called scrip, effectively permitted the company to recapture some of their labor costs through profits on goods and services sold.
Scrip also served to keep employees devoted to their place of work. While in theory scrip could be converted to US currency, often only those terminating or retiring were freely permitted to do so. Periodically there were financial panics that would send some firms into bankruptcy. At that point the value of scrip held went to zero. During the Great Depression, the issuance of scrip was outlawed under the Fair Labor Standards Act of 1938. It was felt that, in addition to the potential financial instability, script hindered the ability of workers to leave one job for another.
The proposed use of stablecoins as scrip will not in theory apply to employees. It will instead attempt to channel customer loyalties to a few retailers, one in each category. If stablecoins do catch on, it may lead to further retail consolidation. Keeping track of the stablecoins bought and used will require computer power that only the largest firms can attain.
The biggest losers of stablecoins will be the credit card companies. As retailers bring more transactions in-house, the volume of credit card transactions will decline. This is by design, as the retailers are looking at the elimination of the processing and transaction fees as being the basis of funding their stablecoin launch. While companies like Visa and Mastercard are currently talking up the potential of markets in Africa and Latin America, the loss of volume in the US and other developed countries offset.
Not all stablecoins are issued by companies. Some have already been made available for exchange between consenting parties. Aside from the libertarian dream of a currency that cannot be beholden to any one country, stablecoins without company affiliation do not have a lot going for them. Their presumed inability to be traced has put them in high demand among tax scofflaws, criminal elements and terrorists. Unlike bitcoins, they do not have the appreciation potential of limited-edition currency.
Stablecoins will complicate the role of the Federal Reserve in calculating the nation’s money supply as firms in effect will be creating money themselves. Some have argued that companies will invest the stablecoin proceeds into short-term government debt. Such channeling of funds will be to the government’s benefit. We will see how it goes.
The Economy
Currently the economy is showing moderate growth. While the aggregate numbers look good, there are disturbing trends beneath the surface.
The ability of recent graduates to find work has been slow. In the aftermath of DOGE cuts and government contract cancellations there seems to be a high level of uncertainty among the business community and a corresponding reluctance to commit to hiring new workers. While there have been layoffs announced in a few industries, the number of people retiring is in effect reducing the workforce in many instances.
Inflation
Inflation is not slowing to the level of two percent, which the Federal Reserve sees as the necessary precondition to lower interest rates. Further, labor unrest in farming is causing grocery prices to be higher going forward. Government goals of expelling undocumented workers is at cross-purposes with agricultural output.
Interest Rates
Interest rates have been stable for the past month. The discussion of the President’s tax and spending bill may change that. If not, the need to raise the borrowing ability of the United States, which will come to a head in the next 30-60 days, will focus anew the fact that government spending is not being covered by tax receipts. Look for some turbulence on the interest rate front for the near-term.
The Stock Market
Stocks have continued their recovery from April. Most of the recovery has been in the same seven stocks that powered the indexes for the past half-dozen years. Investors are showing a reluctance to invest in technology given its high valuation.
With higher inflation and international stress which has caused oil prices to spike, it would appear that this is not the time to be a hero in the stock market. Dividend stocks are holding up well, as are some special situations.
Warren M. Banett, CFA
June 30,2025
From The Desk of Warren Barnett
Clay Crumbliss Joins Staff
Barnett & Company welcomes the addition of Clay Crumbliss to our staff as a Portfolio Manager and Research Analyst. Clay holds the Chartered Financial Analyst (CFA) designation. He is a graduate of Baylor School and Auburn University. Previously Clay worked as a research analyst for several Wall Street firms including Guggenheim Securities and Credit Suisse.
Clay and his family live on Signal Mountain where he serves the community as Vice Mayor on the town council.
We are excited to welcome Clay to the firm.
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