Crypto-focused bank Silvergate’s (NYSE: SI) stock climbed 7.6% after Morgan Stanley outlined a bullish thesis for the bank based on the potential for further stablecoin adoption.

“As the stablecoin market continues to develop, with more formalized rules around governance, risk management and structure, it could provide sizable upside potential to our Silvergate earnings per share (EPS) estimates, particularly if Silvergate is able to monetize their relationships with the stablecoin issuers,” Morgan Stanley analyst Ken Zerbe wrote in a note.

The assessment cites a new report from the Bank for International Settlements that could serve as a roadmap for regulating fiat-pegged crypto assets.

“While these requirements would likely increase the regulatory and administrative burden on stablecoin issuers, they should ultimately lead to a more robust framework for faster and more widespread adoption of stablecoins as a form of payment,” Zerbe wrote.

Stabelcoin regulation has been a hot topic in the U.S. recently.

This week the Biden administration floated a proposal that would subject stablecoin issuers to bank-like regulations.

Meanwhile, Circle, the issuer of the USDC stablecoin, disclosed that the U.S. Securities and Exchange Commission (SEC) sent the company an investigative subpoena in July.

Morgan Stanley’s Zerbe also saw Federal Reserve Chairman Jerome Powell’s statement that the Fed has “no intention to ban” stablecoins as well as a CoinDesk report on the Federal Deposit Insurance Corp. (FDIC) as “incrementally” positive news for the potential widespread adoption of the stablecoin market.

Morgan Stanley initiated Silvergate last month with an “overweight” rating and $158 price target. The stock is trading at $163 as of press time.

While Silvergate currently gets an “immaterial” amount of earnings related to its relationship with the four U.S. stablecoin issuers, “the adoption of stablecoins for day-to-day commerce is perhaps the single biggest driver supporting the bull case for owning Silvergate,” according to Zerbe.