A discussion of the Stable-coin status and summary/discussion of certain Regulatory acts in the U.S. 1st and 2nd Q 2025

I.       Introduction/ Stable-Coins Defined

1. What is the status of Stable-coins currently across the globe? The EU and the U.S.A.
2. Outlining the utilization of Stable-coin
3. Effect/or is it Affect of the Stable-coin Act? /And the GENIUS Act
4. Summary/conclusion/Current global trends

I.                 Introduction-

The current situation with regards to regulating Stable-Coins in the United States is moving extremely rapidly (whether you agree with it/and believe the updated/new regulations will help or not? In this article, I will make a case for updated U.S. and global regulations/policies for some clarity (?) once and for all!

A quiet revolution is unfolding in the cryptocurrency world, and it's not about Bitcoin or Ethereum, but all one hears about these days and the focus currently is on stable-coins, (as we all know by now is a type of cryptocurrency pegged to a specific reserve asset, often the U.S. dollar, which allows them to maintain a steadier value), or so was originally thought.

According to the World Economic Forum, stable-coins are essentially digital dollars designed to stay steady, unlike cryptocurrencies that spike or plummet in value like Bitcoin or Dogecoin.

For example last year, stable-coins facilitated $15.6 trillion in transactions, and the U.S. Securities and Exchange Commission (SEC) has stated that covered stable-coins, as long as they meet certain criteria, are not considered securities.

Although the previous administration’s hostility toward crypto and refusal to provide clear regulatory guidelines has severely stifled stable-coin innovation, the new administration (Trump 2.0) has taken up the charge to provide clarity in the next few years.

•        Stable-coins are defined as crypto assets whose price and value are (in theory) stabilized to address the infamous volatility of crypto.

As per an article I read/reviewed/referenced via the “Block Chain Council”, “the STABLE Act, short for (Stable-coin Transparency and Accountability for a Better Ledger Economy), is a bill that could reshape stable-coin regulation in the U.S.”

It was introduced in March 2025 by Representatives Bryan Steil and French Hill, and the proposal focuses on how digital tokens tied to real-world money, especially the U.S. dollar-backed stable-coins, should be issued and controlled.”

Of course (my words here folks) “this bill has already sparked strong conversations about how the STABLE Act will impact stable-coins and change the way the crypto market operates”

OK so what’s the big fuss folks? What does the STABLE Act actually do and what is it supposed to accomplish you might ask? Well the bill’s goal is to bring clear oversight to the growing stable-coin market, and supporters say it’s time for stable-coin issuers to follow similar rules as traditional financial companies.(I would agree with this point!), which includes being upfront with users and keeping enough real assets in reserve.

Continuing my point from the previous paragraph above, (I would agree with this point!), which includes being upfront with users and keeping enough real assets in reserve.

In my view (and many others in the Crypto space), that includes being upfront with users and keeping enough real assets in reserve. Additionally, Stable-coin Issuers must follow specific guidelines outlined as follows:

Under the Act, only certain institutions can issue these digital tokens, and these are:

·        Federal banks

·        Non-bank firms approved by the OCC

·        State-licensed companies under a strict state regime

Which signifies that anyone issuing a payment utilizing stable-coin in the U.S. must meet government standards or face penalties.

Some other facets of the bill include the below:

Stable-coin reserve requirements will be stricter, and as an example the STABLE Act requires issuers to hold reserves on a one-to-one basis. For example if someone issues 10 million tokens, there must be 10 million dollars’ worth of safe, liquid assets behind them. (sounds like a SAFE bet, folks, maybe/maybe not) (*) This could directly affect the way stable-coins are backed and secured, making it harder for bad actors to fake support.  

II.               As of May 1st, 2025, the EU's Markets in Crypto-Assets Regulation (MiCA) governs stable-coins within the EU. MiCA classifies stable-coins into two types: Electronic Money Tokens (EMTs) and Asset-Referenced Tokens (ARTs). EMTs, which are fiat-backed, are treated as electronic money and require issuers to either have or obtain authorization as electronic money institutions (EMIs) or credit institutions (banks).

ARTs also require authorization from competent authorities, unless they fall under certain thresholds or are restricted to qualified investors. MiCA also imposes requirements on stable-coin issuers, including those related to asset reserves, governance, conflict of interest, and marketing.

Turning to the U.S., the GENIUS Act as of May 26th, 2025 it has passed the Senate. The bill establishes a federal regulatory framework for payment stable-coins. It passed the Senate with a vote of 66-32. While the Senate has voted to advance the bill, it still needs to be voted on by the House of Representatives and signed by the President to become law. The bill had faced increasing resistance from Democrats, particularly over concerns about potential conflicts of interest involving the Trump family's business ventures in cryptocurrency.

Additional details follow:

Genius Act Purpose:

The GENIUS Act, or “Guiding and Establishing National Innovation for U.S. Stable-coins Act”, seeks to establish a federal regulatory framework for stable-coins, a type of cryptocurrency pegged to the value of a stable asset like the U.S. dollar.

Democratic Concerns - Democrats have voiced concerns about the bill, particularly after news of a deal involving a Trump family-linked crypto firm, World Liberty Financial, and an Abu Dhabi-backed investment.

III.              Outlining the utilization of Stable-coin

Per an article I read as a reference “This is great for speculators and scammers who benefit from booms and busts but make most crypto assets a terrible substitute for actual money, because, unlike the dollar, the token price might collapse or skyrocket overnight.’

Money is used in transactions because we have a common understanding of its value. If a loaf of bread at the store was priced in an unfamiliar or inconsistent way (say, three gumdrops one day, two gold coins the next), it would be impossible to determine the market value of the loaf of bread.

Stable-coins purport to address this massive crypto shortcoming by pegging their price to something else (most often the U.S. dollar) and by having them backed (or collateralized) by some reserve that allows a customer to rapidly convert stable-coins into money.

Pegging the stable-coin price to a less volatile instrument (dollars or government bonds primarily) would theoretically help stabilize the price, and the firms that issue stable-coins collateralize these holdings with enough assets (cash, government securities, precious metals, or sometimes a pool of other crypto assets) so that customers can cash out their stable-coins for money.

Right now, stable-coins are almost entirely used to invest in speculative and highly volatile crypto assets. They are used on crypto exchanges because it is often easier, faster, and cheaper to buy crypto with stable-coins than with cash (because of conversion fees and transaction lags).

The blog article further explains that in countries with highly volatile currencies and fragmented payment architecture, some people use stable-coins for purchases and cross-border transactions, but in the U.S., the dollar is stable and convenient, and payment networks are ubiquitous and robust, meaning most people here don’t need to use stable-coins to buy groceries or pay utility bills.

So, for practical purposes, the main use case for stable-coins in the United States is enabling gambling on crypto, is one opinion that is without stable-coins, speculative investment in crypto would be much more difficult for investors large and small.

Stable-coins resemble two similar financial vehicles people use to make investments: Money market mutual funds and bank deposits, Money market mutual funds (regulated by the SEC and state securities regulators) are investment accounts backed by stable assets that people use as reserves to purchase stocks or bonds and as an account to deposit their returns when they sell these assets, sometimes earning modest interest on their holdings in the meantime.

IV.              Effect/or is it Affect of the Stable-coin Act?

Some other rules/changes of note, starting with “No Yield-Bearing Stable-coins to be allowed

Specifically, the Act blocks issuers from offering interest-earning stable-coins, which means NO more returns from holding stable-coins that profit from reserve investments.

Apparently many in the crypto space see this as a hit to innovation, especially those who rely on yield-bearing models for their business.

So, how might this Change the Stable-coin Market?

People wondering how the STABLE Act affects stable-coins are watching closely, and if passed, the bill will bring strict oversight, which could have both good and bad outcomes.

What Stable-coin Issuers MUST do

Issuers will face higher costs due to auditing and reserve maintenance, in addition to the need to adapt their business strategies.

“But all is NOT lost since some firms may possibly see this as a chance to gain credibility. Being regulated could give them access to broader financial markets.” (Another important point I most definitely concur with!)

Although companies built around interest-earning coins may possibly struggle under these new rules.

Bank Secrecy Act Reporting. Issuers must monitor and report “any suspicious transaction relevant to a possible violation of law or regulation,” expanding prior requirements to report “suspicious activity.” See Section 4.

Stable-coin Certification Review Committee. Replaces the Treasury secretary with a new committee responsible for certifying whether a state regulatory regime meets federal standards.

If certification is denied, states are entitled to an explanation and a 180-day cure period, with the ability to appeal to the D.C. Circuit. See Section 4.

Anti-Money Laundering Compliance. Permitted issuers must certify to their primary regulator that they have implemented anti-money laundering programs reasonably designed to prevent facilitation of money laundering by cartels or terrorist organizations.

V.               Summary/conclusion/Current global trends

Global Trends:

Stable-coin usage is growing, with market capitalization reaching around $235 billion, up from $152 billion a year ago, according to a Time Magazine article read recently. 

 Further the focus is on ensuring stable-coins maintain their peg to a fiat currency, protecting users, and facilitating reliable payments, according to the Bank of England.

Some key Developments and Proposed Legislation, that requires mentioning is as follows:

GENIUS Act: This bill, introduced in the Senate, aims to establish a clear federal regulatory framework for stable-coins, including licensing procedures and reserve requirements.  

 It also clarifies that payment stable-coins are not securities, exempting them from SEC regulation.

STABLE Act: The House version of the legislation, passed by the Financial Services Committee, also focuses on regulatory clarity for stable-coins, emphasizing consumer protection and reserve requirements.  

SEC Guidance: The SEC has issued guidance clarifying that certain stable-coins, known as "covered stable-coins," are not securities under existing law. This guidance aims to provide some clarity while comprehensive legislation is developed.

 From an article in a local New York Newspaper where I live called the New York Post (for those unaware it is owned by the “Fox and Friends” family the Murdoch’s who also own the WSJ), from an article by journalist Alex Tapscott (author of “Web 3: Charting the Internet’s Next Economic an Cultural Frontier” & Managing Director of the Digital Asset Group, a division of Nine-point Partners LP) (*) https://www.ninepoint.com/funds/ “https://nypost.com/2025/04/26/opinion/how-cryptocurrencies-are-solving-americas-stocks-and-bonds-problem/  

“Our Mission/Nine point Partners manages innovative investment solutions that offer investors the benefits of better diversification. We target investment strategies that are uncorrelated to traditional asset classes, such as equities and bonds, with the goal of lowering overall portfolio risk.”  

The article is entitled “ Monetary Exchange” Despite Trump’s demand to “buy American”, allies in Europe and Asia are selling U.S. stocks (I typed “socks” initially lol  (not certain how that would affect the Economy lol?, and Bonds. Cryptocurrencies are helping to fill the gap”

 What follows are some important excerpts from the article:  

As the Trump administration is pressuring trading partners to “Buy American” — American energy, defense and agricultural products, that is, and as the Wall Street Journal reports, many anxious global leaders, eager to placate the commander in chief and avoid a prolonged trade war, have voiced support for the idea”  

However, just as foreign leaders are saying they’ll buy American goods and services, foreign investors, from Japanese pensioners to European mutual funds, to state actors are actually selling American — specifically American stocks, corporate debt and, worryingly, the treasury bonds America relies on to finance trillions in government spending. (Oh that ole “Chestnut” If China didn’t purchase U.S. bonds the economy would tank?? (But is that really TRUE??)  

Ross Perot, (remember him folks?), gained political fame (or infamy, depending on who you ask) in the 1990s by arguing that the flow of factory jobs from the Midwest to Mexico from NAFTA (**) would cause a “giant sucking sound going south.”  

“But today we’re hearing a new sucking sound, but this time it’s capital, rather than jobs, that’s whooshing out of our national doors.”  

Since the beginning of the year, the US dollar has weakened against nearly every major currency, falling more than 10% against the Euro and Japanese Yen, and more than 8% against the British pound, and while US stock markets are reeling under pressure from Trump’s tariffs, European and British markets are up.  

Dire predictions that current policy will lead America down the road to ruin may be overblown, according to the author of the article, but this dollar angst raises a pressing and real concern that the US could run out of buyers for its government debt as traditional investors shun treasuries along with other US assets.  

But (wait for it) There’s GOOD news gang, the US needs to fund key government spending at reasonable rates of interest, but legacy buyers may not line up as eagerly in the future to buy the debt. Now what, you might enquire?  

The good news is that a new buyer of US treasuries is emerging, made possible by the technology behind cryptocurrencies like Bitcoin, and Block-chain-based stable-coins are now the seventh largest buyer of US government debt, exceeding Germany, Australia and other big countries, and they’re growing quickly — surpassing $200 billion in size this year and nearly $250 billion today.  

Because stable-coins are fully backed 1:1 by dollar reserves, (typically US government debt), they are a persistent and growing buyer of new treasury issuances. So the result has been increasingly, government leaders see their potential.  

To make a point from a June 2024 opinion piece in The Wall Street Journal, former Speaker of the House Paul Ryan said, “Dollar-backed stable-coins are becoming an important net purchaser of US government debt.”

The article continues that to be sure, stable-coins are still a small piece of the enormous treasury market. But the trend suggests that stable-coins will continue to grow, perhaps capturing as much as 5%-10% share of the global money supply, or $5-$10 trillion, over the next decade.

Even Jeremy Allaire, CEO of Circle, the largest American stable-coin issuer, has opined that the stable-coin market could reach $3 trillion by 2030;to put that into context folks, a $3 trillion stable-coin market would soak up more US debt than China, Japan or the UK, the three largest current owners of US government debt, combined.

 The overall truth remains that the US has benefited enormously from the USD  being the global reserve currency, and despite accounting for about 25% of the world’s GDP, the greenback remains at the top of most of global trade and at a recent White House Crypto Summit in February, Scott Bessent (said, “We are going to keep the US [dollar] the dominant reserve currency in the world, and we will use stable-coins to do that.”

China and the rest of the world may be closing a door on America’s dollar and on an old regime where the US relied on foreign governments to buy its debt. Stable-coins could be opening a window to its future.

References

Tron defined- /https://ourfinancialsecurity.org/2025/02/blog-the-weird-the-bad-and-the-ugly-behind-un-stablecoins/- With a nod/reference to the Clint Eastwood Spaghetti Western “The Good, the Bad, and the Ugly?” https://www.imdb.com/title/tt0060196/- Directed by Sergio Leone, Writers, Luciano Vincenzoni, Sergio Leone, Agenore Incrocci,Starring- Clint Eastwood, Eli Wallach and Lee Van Cleef

https://docsend.com/view/hmhfiijznct6p9gg AML BOT Stable-Coin and USDC/USDT Illicit activity study 2024

(*) Since 2022, the crypto market has seen notable stable-coin crashes, most famously the collapse of Terra/USD (UST) and its sister coin LUNA in May 2022, which wiped out billions in market capitalization and raised concerns about the stability of algorithmic stable-coins.

Here's a more detailed breakdown:

Terra/USD (UST) and LUNA Crash/In May 2022, the algorithmic stable-coin Terra/USD (UST) and its sister coin LUNA experienced a dramatic collapse, losing their peg to the US dollar and wiping out billions in market capitalization.

Algorithmic Stable-coin Design/UST's algorithmic design, which aimed to maintain a constant dollar value through arbitrage, proved to be a weakness, as it relied on market anticipation and demand for both LUNA and UST/Tether (USDT)/The Terra/USD collapse triggered a wave of redemptions for Tether (USDT), the largest stable-coin by market capitalization, causing its price to fall temporarily below $1.

Impact on the Crypto Market/The Terra/USD/LUNA crash had far-reaching implications, sending shockwaves through the broader cryptocurrency sector and raising concerns about the stability of stable-coins.

Regulatory Scrutiny:/The Terra/USD collapse has led to increased scrutiny and calls for robust regulation of stable-coins by lawmakers and officials in various countries. /Other Notable Events/In addition to the Terra/USD/LUNA crash, other events, such as the collapse of Silicon Valley Bank (which led to a brief USDC ‘depegging” ), have highlighted the risks associated with stable-coins and their reliance on traditional financial institutions.

Credit – AP wire services-https://www.chathamhouse.org/2025/04/us-dollars-role-international-monetary-system-now-dangerously-flux /https://www.chapman.com/publication-sec-staff-issues-statement-that-stablecoins-are-not-securities#:~:text=of%20Covered%20Stablecoins-,Characteristics%20of%20Covered%20Stablecoins,the%20Covered%20Stablecoin%20in%20circulation.