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The United States has introduced comprehensive legislation to regulate stablecoins, aiming to integrate them into the formal financial system and reinforce the U.S. dollar's dominance in global finance.
Understanding Stablecoins
What are Stablecoins
A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset, such as:
- A fiat currency (like the US dollar),
- A commodity (like gold),
- Or even a basket of assets.
Examples:
- Fiat-Collateralized Stablecoins: USDT (Tether), USDC (USD Coin)
- Crypto-Collateralized Stablecoins: DAI (by MakerDAO)
- Algorithmic Stablecoins: Ampleforth (AMPL)
Purpose
The main goal of stablecoins is to reduce the volatility seen with other cryptocurrencies and offer consistency, making them suitable for transactions, remittances, and as a bridge between traditional finance and decentralized finance (DeFi) platforms.
Advantages of Stablecoins Compared to Traditional Banking
Stablecoins offer multiple advantages over traditional systems like SWIFT for cross-border money transfers — especially for small businesses, entrepreneurs, and tech-savvy users operating internationally.
Here’s a breakdown:
1. Speed
- SWIFT: Transfers typically take 1–5 business days, depending on countries, banks, and intermediaries.
- Stablecoins: Settlements happen in minutes or seconds, 24/7 — even on weekends or holidays.
Example: Sending USDC from Canada to Singapore can take under 5 minutes.
2. Lower Costs
- SWIFT: Often involves multiple intermediary banks, each charging fees (sometimes hidden). Costs can range from $20 to $50+ per transaction.
- Stablecoins: Transaction fees are much lower, especially on efficient blockchains like Solana, Tron, or Polygon. Fees can be cents, not dollars.
3. Global Accessibility
- SWIFT: Requires both sender and recipient to have bank accounts in compatible institutions.
- Stablecoins: Only need a crypto wallet, internet access, and a smartphone. No need for a bank account.
This is especially valuable in emerging markets or for underserved SMEs where banking infrastructure is limited.
4. Transparency & Security
- SWIFT: A closed system; users have limited visibility into the transfer process or delays.
- Stablecoins: Transfers are recorded on the blockchain — real-time tracking is possible, and security is ensured by cryptographic protocols.
5. Currency Stability
While traditional crypto is volatile, stablecoins are pegged to fiat (like USD), so the value stays predictable during the transfer — unlike Bitcoin or Ethereum, which might fluctuate in value during the transaction process.
Background of the GENIUS Act
The U.S. has been moving fast in the direction of building the U.S. the “crypto capital of the world”. As part of the actions, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) was introduced in February 2025 to provide a clear regulatory framework for payment stablecoins in the United States.
For a look at how regulatory pressure built up over time in the U.S., revisit our earlier blog:
[U.S. Crypto Regulation in 2022: Fraud, Lawsuits, and Legislation] — covering the SEC lawsuits, crypto crashes, and the early push for federal clarity.
Status of the GENIUS Act (as of March 2025)
The GENIUS Act is currently a proposed bill in the U.S. Congress. It was introduced in the Senate in February 2025 and passed the Senate Banking Committee in mid-March with bipartisan support (18–6 vote). It is now awaiting debate and a vote by the full Senate.
If passed, the bill would move to the House of Representatives and, upon approval, to the President for signing into law.
While the GENIUS Act is not yet enacted, it is gaining momentum and already shaping how the industry prepares for stablecoin regulation.
The GENIUS Act aims to:
- Integrate the crypto industry into the formal financial system by establishing comprehensive regulations for stablecoin issuers.
- Enhance the U.S. dollar's position in the global financial system by promoting the use of dollar-backed stablecoins in international transactions.
By formalizing the stablecoin market, the U.S. seeks to foster innovation while ensuring financial stability and consumer protection.
Key Provisions of the GENIUS Act
The GENIUS Act introduces several critical measures:
Definition of Payment Stablecoins
The Act defines payment stablecoins as digital assets pegged to a fixed monetary value, primarily used for payments and settlements, distinguishing them from other cryptocurrencies used for investment or speculative purposes.
Reserve Requirements
Issuers must maintain a 1:1 reserve ratio, holding reserves in assets such as U.S. dollars, Treasury bonds, or other low-risk instruments to ensure the stablecoin's value and redeemability.
Regulatory Oversight Based on Issuer Size
- State Regulation: Issuers with market cap below $10 billion can opt for state-level regulation, provided the state's framework aligns with federal standards.
- Federal Oversight: Issuers exceeding the $10 billion threshold must transition to federal regulation within 360 days or cease issuing new stablecoins until compliance is achieved.
Anti-Money Laundering (AML) and Know Your Customer (KYC) Compliance
All issuers are subject to AML and KYC regulations, ensuring adherence to federal standards designed to prevent illicit activities.
Transparency and Reporting
Issuers are required to publicly disclose reserve compositions and redemption policies, with reserve information subjected to examination by registered public accounting firms. False certifications can lead to criminal penalties.
Exclusion from Securities Laws
The Act clarifies that payment stablecoins are not classified as securities, commodities, or investment companies, thereby excluding them from related federal regulatory regimes.
Implications for the Crypto and Fintech Sectors
The GENIUS Act has significant ramifications for the crypto and fintech industries:
- Enhanced Credibility: Establishing a clear regulatory framework lends legitimacy to stablecoin issuers, potentially attracting more institutional investors and fostering public trust.
- Increased Compliance Obligations: Companies must navigate rigorous licensing processes, adhere to strict reserve requirements, and implement robust AML/KYC protocols, necessitating substantial investment in compliance infrastructure.
- Market Consolidation: Smaller issuers may face challenges meeting the stringent requirements, potentially leading to consolidation within the industry as larger, well-capitalized entities dominate the market.
Wondering how recent U.S. court battles shaped today's regulatory approach?
Check out: [Crypto on Trial: What U.S. Legal Cases in 2023 Mean for the Future of Digital Currency] — an analysis of the rulings that influenced how lawmakers drafted the GENIUS Act.
Broader Financial System Implications
The widespread adoption of regulated stablecoins could profoundly impact the global financial landscape:
- Efficiency in Cross-Border Transactions: Stablecoins can streamline international payments, reducing costs and settlement times compared to traditional banking systems.
- Reinforcement of U.S. Dollar Dominance: By promoting dollar-backed stablecoins, the U.S. can maintain and potentially enhance the dollar's role as the primary global reserve currency, countering trends toward de-dollarization.
- Financial Inclusion: Stablecoins offer access to digital financial services for unbanked and underbanked populations worldwide, fostering greater economic participation.
Future Outlook for E-Commerce and International Business
As stablecoins become integrated into the global financial system, e-commerce and international businesses may experience:
- Simplified Transactions: Stablecoins can facilitate seamless, borderless transactions, reducing reliance on intermediaries and lowering transaction fees.
- Currency Stability: Businesses operating in volatile currency environments can benefit from the stability offered by dollar-pegged stablecoins, mitigating exchange rate risks.
- Regulatory Compliance: Companies must stay abreast of evolving regulations surrounding stablecoin usage to ensure compliance in various jurisdictions.
Risk Considerations for E-Commerce and Businesses Operating Internationally Adopting Stablecoins
1. Regulatory Uncertainty
Global regulatory frameworks are still evolving. Many countries have unclear or conflicting rules about the legality and classification of stablecoins (are they money? securities? commodities?).
Business risk: In countries where crypto transaction is illegal, e.g. China, funds may be frozen, wallets blacklisted, or companies could face compliance penalties if using stablecoins.
2. Counterparty (Issuer) Risk
Stablecoins are only as “stable” as the trustworthiness of their issuer and the quality of their reserves. Not all stablecoins are equally reliable.
Business risk: If a stablecoin is poorly backed or mismanaged, it may lose its peg, leading to potential losses for users and businesses holding it.
3. Accounting & Tax Complexity
Many jurisdictions lack clear accounting standards for crypto holdings. Tax authorities may classify stablecoin use as barter (e.g., Canada), foreign currency (e.g., treated like USD or EUR), or capital gains events (e.g., the Philippines), thereby triggering more burdensome bookkeeping and tax reporting obligations.
4. Cybersecurity and Custody Risk
Businesses managing their own wallets risk loss due to hacking, theft, or human error. Unlike traditional bank accounts, most crypto wallets are not insured, and lost funds are typically unrecoverable. Self-custody requires rigorous security protocols, including multi-signature wallets, hardware devices, and secure backup practices.
5. Limited Mainstream Adoption
While adoption of stablecoins and crypto is accelerating globally, they are not yet widely accepted by all suppliers, customers, or service providers. This may limit their immediate use in certain transactions or markets. However, the trend toward broader acceptance—particularly in cross-border payments and digital commerce—is reducing this risk over time.
Therefore, consider stablecoins as a complementary tool for specific international use cases (e.g., paying overseas freelancers, suppliers, or affiliates), rather than replacing traditional methods entirely.
Final Thoughts
The GENIUS Act of 2025 marks a significant move toward integrating stablecoins into the formal U.S. financial system. By combining regulatory clarity with forward-looking policy, the Act aims to promote innovation while safeguarding economic stability and consumer trust. It reflects the broader ambition of positioning the U.S. as a global hub for crypto activity and reinforcing the dominance of the U.S. dollar in international finance.
Interested in how the EU is approaching stablecoin and crypto regulation?
Read our related post: [Europe’s Crypto Law Moment: What MiCAR Means as It Comes Into Force] — a breakdown of the world’s first unified legal framework for crypto-assets, now fully in effect across all 27 EU member states.
For tech startups, fintech companies, and internationally focused businesses, the GENIUS Act signals both opportunity and responsibility. Embracing stablecoins can bring efficiency and new capabilities—but doing so will require careful attention to compliance, risk management, and cross-border legal considerations. As stablecoin regulation continues to evolve, businesses that stay informed and proactive will be best positioned to thrive in the digital financial ecosystem.