Without a robust regulatory framework that incentivizes stablecoin issuers to register in the United States, stablecoin activity will migrate to countries with weaker rules, increasing the likelihood of financial instability. Fortunately, the US can still head off these risks and reap the technology’s benefits.
NEW YORK – The global financial system is on the brink of a transformation. As a recent Bretton Woods Committee paper points out, stablecoins – digital assets usually backed by a fiat currency, commodity, or another cryptocurrency to minimize volatility – have the potential to make payments and money transfers faster, cheaper, and more transparent, while also expanding financial inclusion. That is why many jurisdictions, including the European Union and Japan, have already sought to seize the opportunity by providing regulatory clarity for the industry. But it is the United States that is ultimately best positioned to lead, given that the $200 billion in stablecoins circulating today are predominantly denominated in dollars.
We have already seen early signs of what the US approach might look like. In late January 2025, President Donald Trump issued an executive order directing federal agencies to “promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide.” His AI and crypto czar, David Sacks, then gave a press conference to showcase a bipartisan roadmap for digital-asset legislation.
Recent bipartisan legislative activity does indeed show that Congress understands the stakes. The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, introduced by Senators Bill Hagerty, Tim Scott, Kirsten Gillibrand, and Cynthia Lummis, would establish a federal framework for larger stablecoin issuers, while preserving state-level regulatory authority for smaller ones.
Meanwhile, the House Financial Services Committee is considering the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, which similarly aims to bring oversight and greater transparency to the market. The committee has also released a discussion draft that was previously negotiated between its Republican former chair, Patrick McHenry, and the ranking Democratic member, Maxine Waters.
Congressional action could not be more urgent. Promoting more economic activity on digital ledgers (blockchains) could have profound implications for the efficiency and inclusiveness of the financial system, ultimately bolstering people’s standard of living. For decades, the global financial system has struggled with outdated infrastructure that makes payments slow, expensive, and inefficient. Traditional remittances, for example, take days to settle and still cost an average of 6.62% of the amount sent.
Stablecoins can offer a superior alternative: nearly instantaneous transfers that settle directly, with negligible costs. Nor do the benefits stop there. Stablecoins have already become vital financial tools in emerging markets, where local currencies are often volatile. Around the world, companies are considering how the technology might streamline corporate treasury management (by reducing reliance on costly correspondent banking networks) and fulfill key functions in traditional capital markets (from serving as collateral to expediting settlement). As the world moves toward a tokenized financial future where transactions settle in seconds, costs are minimized, and access to the global economy is broadened, stablecoins can play a pivotal role.
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Importantly, the recent US legislative proposals seek to address the risks that can arise with novel forms of finance. Chief among these are instability and a lack of trust. Strong reserve requirements and banking connectivity are needed to ensure that stablecoins can always be redeemed at par. Moreover, high levels of transparency and attention to operational resiliency are essential to maintain confidence even when the financial system is buffeted by financial and economic shocks. And to address concerns that stablecoins could be used to finance illicit activities, there must be strong guardrails to ensure universal adherence to the Financial Action Task Force’s AML/CFT (anti-money laundering/countering the financing of terrorism) standards.
The consequences of inaction are obvious. Without a robust regulatory framework that incentivizes stablecoin issuers to register and build their businesses in the US, stablecoin activity will migrate to countries with less robust rules, reducing US oversight and increasing the risk of financial instability. Inaction could also jeopardize the dollar’s dominance if non-dollar stablecoins gain traction in global trade and finance. US leadership on regulation of stablecoins is a way of ensuring both stability and strength for the dollar.
America’s allies and adversaries are racing to establish new payment regimes that would set the standard for the rest of the world. Congress and the Trump administration should move swiftly to provide a foundation for the US private sector to lead in these vital technologies – and to do so in a way that ensures stability and trust, and that is aligned with US national and economic security interests.
Digital assets promise a comprehensive upgrade of our twentieth-century financial systems. Integrating stablecoins into traditional financial markets can unleash the next wave of payment innovation. The Trump administration and the current Congress seem to understand that the digital transformation of money and finance is inevitable. Now they must take charge of shaping the future of stablecoins and ensuring their safety, lest the benefits be ceded to others.
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NEW YORK – The global financial system is on the brink of a transformation. As a recent Bretton Woods Committee paper points out, stablecoins – digital assets usually backed by a fiat currency, commodity, or another cryptocurrency to minimize volatility – have the potential to make payments and money transfers faster, cheaper, and more transparent, while also expanding financial inclusion. That is why many jurisdictions, including the European Union and Japan, have already sought to seize the opportunity by providing regulatory clarity for the industry. But it is the United States that is ultimately best positioned to lead, given that the $200 billion in stablecoins circulating today are predominantly denominated in dollars.
We have already seen early signs of what the US approach might look like. In late January 2025, President Donald Trump issued an executive order directing federal agencies to “promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide.” His AI and crypto czar, David Sacks, then gave a press conference to showcase a bipartisan roadmap for digital-asset legislation.
Recent bipartisan legislative activity does indeed show that Congress understands the stakes. The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, introduced by Senators Bill Hagerty, Tim Scott, Kirsten Gillibrand, and Cynthia Lummis, would establish a federal framework for larger stablecoin issuers, while preserving state-level regulatory authority for smaller ones.
Meanwhile, the House Financial Services Committee is considering the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, which similarly aims to bring oversight and greater transparency to the market. The committee has also released a discussion draft that was previously negotiated between its Republican former chair, Patrick McHenry, and the ranking Democratic member, Maxine Waters.
Congressional action could not be more urgent. Promoting more economic activity on digital ledgers (blockchains) could have profound implications for the efficiency and inclusiveness of the financial system, ultimately bolstering people’s standard of living. For decades, the global financial system has struggled with outdated infrastructure that makes payments slow, expensive, and inefficient. Traditional remittances, for example, take days to settle and still cost an average of 6.62% of the amount sent.
Stablecoins can offer a superior alternative: nearly instantaneous transfers that settle directly, with negligible costs. Nor do the benefits stop there. Stablecoins have already become vital financial tools in emerging markets, where local currencies are often volatile. Around the world, companies are considering how the technology might streamline corporate treasury management (by reducing reliance on costly correspondent banking networks) and fulfill key functions in traditional capital markets (from serving as collateral to expediting settlement). As the world moves toward a tokenized financial future where transactions settle in seconds, costs are minimized, and access to the global economy is broadened, stablecoins can play a pivotal role.
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Access every new PS commentary, our entire On Point suite of subscriber-exclusive content – including Longer Reads, Insider Interviews, Big Picture/Big Question, and Say More – and the full PS archive.
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Importantly, the recent US legislative proposals seek to address the risks that can arise with novel forms of finance. Chief among these are instability and a lack of trust. Strong reserve requirements and banking connectivity are needed to ensure that stablecoins can always be redeemed at par. Moreover, high levels of transparency and attention to operational resiliency are essential to maintain confidence even when the financial system is buffeted by financial and economic shocks. And to address concerns that stablecoins could be used to finance illicit activities, there must be strong guardrails to ensure universal adherence to the Financial Action Task Force’s AML/CFT (anti-money laundering/countering the financing of terrorism) standards.
The consequences of inaction are obvious. Without a robust regulatory framework that incentivizes stablecoin issuers to register and build their businesses in the US, stablecoin activity will migrate to countries with less robust rules, reducing US oversight and increasing the risk of financial instability. Inaction could also jeopardize the dollar’s dominance if non-dollar stablecoins gain traction in global trade and finance. US leadership on regulation of stablecoins is a way of ensuring both stability and strength for the dollar.
America’s allies and adversaries are racing to establish new payment regimes that would set the standard for the rest of the world. Congress and the Trump administration should move swiftly to provide a foundation for the US private sector to lead in these vital technologies – and to do so in a way that ensures stability and trust, and that is aligned with US national and economic security interests.
Digital assets promise a comprehensive upgrade of our twentieth-century financial systems. Integrating stablecoins into traditional financial markets can unleash the next wave of payment innovation. The Trump administration and the current Congress seem to understand that the digital transformation of money and finance is inevitable. Now they must take charge of shaping the future of stablecoins and ensuring their safety, lest the benefits be ceded to others.