Stablecoins, digital currencies tied to real-world assets like the dollar or gold, are rapidly gaining popularity across the globe. But as their use spreads, financial experts and lawmakers in the United States are pushing for new laws to protect users and ensure financial stability.
Unlike cryptocurrencies like Bitcoin or Ethereum that swing wildly in value, stablecoins are designed to be steady.
They are backed by assets like the US dollar, making them more reliable for everyday use.
Popular stablecoins like Tether and USDC have become vital tools in global markets.
“They enable fast, low-cost cross-border payments,” said Dessislava Aubert, an analyst at Kaiko. “This is especially valuable in emerging markets where access to hard currency and traditional banking services is often limited.”
Countries like Argentina, Nigeria, and Turkey are already seeing a surge in stablecoin use.
The total market value of stablecoins reached $246 billion in May 2024, up from $20 billion in 2020.
Incredibly, the total number of stablecoin transactions in 2024 exceeded those made using Visa and Mastercard.
Circle, the company behind USDC, was recently listed on the New York Stock Exchange.
Push for Stablecoin Regulation in the US
The US Senate will vote Tuesday on a bill to regulate stablecoin issuers.
The proposed law would require companies to hold enough low-risk assets—like cash or US Treasury bills—to cover the value of the coins they issue.
The move comes after the 2022 collapse of the Terra stablecoin, which lost its value overnight and caused panic in crypto markets.
“There’s a risk that an organisation may not be trustworthy or could be hacked,” said Murat Kantarcioglu, a professor at Virginia Tech. “Audits and checks are vital.”
If passed, the bill would make audits mandatory and set higher standards before new tokens can be launched.
It’s also expected to increase demand for US Treasury debt and strengthen the dollar’s global role.
Market Dominance and Risks
Some experts worry the bill could create an uneven playing field.
“The new rules could make it harder for start-ups to issue stablecoins,” Aubert explained. “A few big companies, like tech giants, could dominate the market.”
Reports suggest that Amazon and Walmart may be developing their own stablecoins for use in retail transactions.
Democrats have raised concerns that the bill does not fully tackle money laundering, speculation, or conflicts of interest.
They also worry about the link between politics and digital currency, pointing to the Trump family’s involvement in launching a stablecoin called USD1 with an Emirati investment firm.
Global Regulation of Stablecoins
While the US works on its stablecoin laws, other countries are moving ahead.
The European Union’s MiCA law, now in force, sets out clear rules for issuing stablecoins.
The UK, Brazil, and South Korea are developing similar frameworks.
China banned all cryptocurrencies in 2021 and is building its own central digital currency, the e-yuan.
Russia is exploring a stablecoin tied to the rouble or other friendly currencies like the Chinese yuan.
Despite the push for regulation, there are still major concerns.
“Stablecoin losses are not explicitly covered by government insurance programs,” Aubert noted. “Bank deposits are insured up to $250,000, but stablecoins are not.”
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