There were high expectations for the rapid creation of the Strategic Bitcoin reserve. Nevertheless, the regulation of stablecoins has emerged as a primary focus in prominent crypto conversations. While the government is developing the legal framework, not all members of the crypto community fully grasp how they can leverage stablecoins.
The U.S. will not be pursuing a local Central Bank Digital Currency (CBDC); instead, officials are actively formulating regulations for stablecoins tied to the U.S. dollar. On February 6, 2025, Financial Services Committee Chairman French Hill, alongside Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee Chairman Bryan Steil, presented a discussion draft of a bill aimed at regulating the issuance and operation of USD-pegged stablecoins.
While opinions differ on whether the Strategic Bitcoin reserve will enhance the American dollar’s global standing, Steil argues that well-regulated stablecoins can achieve this. He asserts that clear regulations will “bolster the U.S. dollar’s standing as the world’s reserve currency and safeguard consumers and investors.”
Senate Banking Committee Chairman Tim Scott highlighted another significant advantage of stablecoins—financial inclusion. By proliferating USD-pegged stablecoins, the dollar could reach regions with large unbanked populations or unstable local currencies.
This new bill is not the first initiative to regulate stablecoins in the U.S. A previous attempt, known as the Clarity for Payment Stablecoin Act of 2023, differs from the current discussions.
Additionally, there is a bipartisan proposal from a Senate team that includes Cynthia Lummis, one of the proponents of the Bitcoin reserve proposal. This bill, named the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), targets stablecoins with a market capitalization exceeding $10 billion.
The upcoming legislation, titled the Stablecoin Transparency and Accountability for a Better Ledger Economy Act (STABLE Act), mandates that U.S. stablecoin issuers receive approval from the Office of the Comptroller of the Currency and back their crypto 1:1 with cash, short-term U.S. Treasury bills, or central bank reserves. Furthermore, the bill holds the OCC accountable for overseeing federally qualified non-bank payment stablecoin issuers.
The Situation with Tether
Both proposed bills will influence the future of Tether, the largest USD-pegged stablecoin by market capitalization. Tether has faced a history of legal challenges and scrutiny over its financial solvency, with past audits receiving skepticism.
On February 13, analysts from JPMorgan raised concerns about Tether’s future given the impending regulations, suggesting that Tether may have to liquidate some of its Bitcoin holdings to comply with the new requirements. According to JPMorgan, Tether possesses only 66% to 83% of the necessary backing for its crypto supply, depending on which bill is enacted.
Despite JPMorgan’s concerns, Tether CEO Paolo Ardoino responded with humor, asserting that the company possesses sufficient reserves. The leading stablecoin issuer had to exit the European market after the introduction of new stablecoin regulations, while its main competitor, Circle, has managed to adapt to the new standards.
The proposed legislation not only seeks to address dubious players in the market but also aims to provide secure opportunities for U.S. citizens and businesses while reaffirming the dollar’s dominance in the crypto landscape. This is particularly urgent as de-dollarization has become a prevalent topic among several major nations in the 2020s.
Bitwise portfolio manager and Alpha Strategies head Jeff Park, known for his impactful commentary on the economy and cryptocurrencies, emphasizes the growing significance of stablecoins. Unlike Bitcoin, stablecoins facilitate the USD’s value distribution worldwide with unprecedented ease, benefiting nations whose citizens rely on the dollar yet struggle to access it, allowing them to enjoy the dollar’s advantages while remaining insulated from adverse local economic conditions.
Some Americans question how they will benefit from the proliferation of USD-pegged stablecoins if their value remains static. The answer lies in the broader exposure of the U.S. dollar through stablecoins, which will enhance international demand for the currency, ultimately boosting its value and the U.S.’s position in the global economy. The increasing demand for easily accessible dollars will drive liquidity in stablecoins, positively impacting the overall crypto market. Those seeking quicker returns might explore more sophisticated options, such as investing in the stocks of U.S. stablecoin issuers.
During a speech on February 12 at a San Francisco conference, Fed Governor Christopher Waller echoed similar sentiments, highlighting the potential of stablecoins to extend the reach of the U.S. dollar internationally, though he cautioned against the risks associated with a flawed regulatory framework.
The timing for the new regulations is critical, as stablecoins are gaining traction. Recent developments include Ripple’s launch of its stablecoin, RLUSD, which reached a market cap of $100 million shortly after its debut. Additionally, MasterCard has acknowledged its blockchain transactions, stating that approximately 30% of its transactions were tokenized in 2024, further asserting that stablecoins could disrupt traditional finance.
