With Congress recently passing the federal budget, lawmakers have the opportunity to address long-term financial challenges beyond crisis situations. A significant challenge, and concurrently an opportunity, concerns the increase in stablecoins—privately issued digital tokens pegged to fiat currencies such as the U.S. dollar. The stablecoin market has quickly escalated to a worth of hundreds of billions, facilitating billions in transactions without a comprehensive regulatory framework in the U.S. Nevertheless, the government in Washington is indicating a new openness to digital assets, as demonstrated by President Trump’s announcement regarding the establishment of a strategic digital asset reserve for the country. The creation of necessary clarity could unlock a new era of competition and innovation among banks.
Stablecoins represent a strategic extension of U.S. monetary influence. Approximately 99% of stablecoin volume today is tied to the U.S. dollar, thereby exporting dollar utility onto international, decentralized blockchain networks. A stablecoin market established with proper guardrails could bolster the U.S. dollar’s prominence in global finance. If individuals worldwide can easily hold and transact using tokenized dollars, the dollar continues to be the primary currency in an increasingly digital economy. Recent congressional hearings have highlighted that up to $5 trillion in assets could transition to stablecoins and digital money by 2030, a notable rise from about $200 billion currently. Should the U.S. not act, it risks “becoming the rust belt of the financial industry,” as warned by a fintech CEO.
Other regions are not idle: Europe, the U.K., Japan, Singapore, and the UAE are developing frameworks for stablecoins. Some of these frameworks could permit new dollar-pegged tokens issued offshore, potentially undermining U.S. oversight. Thus, it is imperative for the U.S. to lead on stablecoins or face pressure from Europe’s Digital Euro and other central bank digital currencies (CBDCs) that pose threats to both the private banking ecosystem and individual sovereignty in their strictest forms. Research indicates that CBDCs have not positively impacted GDP growth or inflation reduction but have adversely affected individual financial well-being.
Ideally, various regulated institutions—such as banks, trust companies, and fintech startups—could issue “tokenized dollars” under a unified set of rules. Before the 1900s, state governments held primary banking authority. This led to fragmentation and issues, but with the appropriate federal structure, blockchain enables banks to offer diverse products akin to what existed pre-1900—personal types of stablecoin distinguished by security, yield, and other features—while still pegging their value to the dollar. There is comprehensive academic research showcasing how stablecoins decrease transaction costs, accelerate settlement times, and broaden financial inclusion through novel services.
The lack of federal action brings the risk of a state-by-state regulatory patchwork or even regulation through enforcement, creating uncertainty for entrepreneurs and consumers. The Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, introduced in the House in 2020, requires any company issuing a stablecoin to obtain a bank charter and comply with bank regulations, including approvals from the Federal Reserve and FDIC before launch, and to hold FDIC insurance or Federal Reserve deposits as reserves, thereby regulating stablecoin issuers like banks to safeguard consumers and the monetary system.
However, as noted by House Financial Services Committee Chairman French Hill, the objective should be to modernize payments and promote financial access without excessive government intervention. Hill notably compared private-sector stablecoin innovation with a “competing vision” of a government-operated digital dollar (central bank digital currency) that could hinder private innovation. The STABLE Act may be viewed as overly stringent, penalizing non-bank entities. Consequently, the recent bipartisan effort in the Senate—the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act)—is gaining momentum.
In execution, the GENIUS Act could allow a regulated fintech or trust company to issue dollar stablecoins under state supervision, provided it meets stringent requirements resembling federal bank-like rules on liquidity and risk. This flexibility, combined with robust standards, can prevent market fragmentation by encompassing all credible stablecoin issuers under a regulatory “big tent.” It would also mitigate any single point of failure, allowing other issuers operating within the same framework to step in if one falters, thereby maintaining system stability.
Critics often express concerns that digital currencies could enable illicit activities. However, blockchain technology, when properly harnessed, offers greater transparency, not less. Every transaction on a public blockchain is recorded on an immutable ledger, enabling law enforcement to trace and dismantle criminal networks by following the on-chain trail, a feat more challenging with physical cash. Indeed, blockchain’s decentralized ledger offers potential for enhanced transparency, security, and efficiency.
Following momentum from the White House, Congress has a promising start on crafting rules that bring stability and clarity to this market now that the budget has passed. Lawmakers should refine and pass comprehensive stablecoin legislation that blends the best elements of both the bank-centric prudential rigor model and the innovation-centric, flexible dual-license system. If executed correctly, stablecoin legislation will solidify the dollar’s status as the cornerstone of global finance in the digital age, spur new fintech innovation and competition domestically, and enhance financial integrity.
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Additional related content includes discussions on Elon Musk’s interest in integrating blockchain technology within the U.S. Treasury and reactions to Trump’s crypto reserve initiative. This story was initially published on Fortune.com.
