Summary/TL;DR
A stablecoin is a cryptocurrency that maintains a stable value relative to another asset, commonly the US dollar. Since they operate on a blockchain, they have a ton of practical use cases that can transform the global payments system, a fact which can be seen in their widespread adoption in developing countries. Because of the dollar’s dominance amongst stablecoins, their proliferation will only serve to make the dollar stronger than it already is. US commitment to being the global leader in digital assets has paved the way for clear regulation, spearheaded by the recently passed Genius Act, which will create a clear runway for stablecoins to take off and flourish.
Introduction
Stablecoins have been making headlines this year with the Trump administration’s push to make America the world’s leader in digital assets.
Today’s post is dedicated to understanding the basics of stablecoins, as well as their potential for making an impact on the global financial system.
Stablecoin Basics
A stablecoin is a cryptocurrency that maintains a stable value relative to another asset (or assets), commonly fiat currencies. They have all of the advantages of being on a blockchain without any of the accompanying disadvantages of wildly fluctuating in value relative to the assets they’re pegged to (assuming the issuer is trustworthy and is managing their treasury prudently). While there are technically multiple types of stablecoins, today’s piece will focus on the asset class in general instead of discussing the technical nuances that split them into sub-classifications.
It’s important to clarify that stablecoins are not synonymous with the appropriately feared Central Bank Digital Currencies (CBDCs). CBDCs are issued by a centralized entity such as a government or central bank and are programmable with no checks or balances. Stablecoins, however, are issued by private companies who are more likely to only take extreme action in severe circumstances, such as someone having their funds stolen. Tether (USDT), for example, has coordinated with global law enforcement to freeze USDT wallets connected to theft, money laundering, or other illicit activities. This isn’t to say that stablecoins don’t have their risks or can’t be abused, but control, surveillance, and privacy invasion are not inherent to them like they are in CBDCs.
Tether, a stablecoin that has its value pegged to the US Dollar, is by far the most popular stablecoin with a market capitalization of over $150B. USDC is the second largest stablecoin pegged to the dollar and has a market capitalization of over $60B. The market capitalization for stablecoins currently exceeds $250B, which is a bit of a miracle considering that it was close to $0 in 2020.
What Can Stablecoins Be Used For?
Stablecoins have tons of use cases which are already being recognized around the world. Their tremendous practicality is what’s behind their explosion in popularity, with 2 billion stablecoin transactions estimated to take place in 2025.
Perhaps the most practical application of stablecoins is in payments, remittances, and provision of low-cost and secure access to basic banking services for the “unbanked”. Billions is transacted in cross-border payments which are currently costly, long, and rife with fraud. By using stablecoins, however, remittances can take place within a day (often instantly), more securely, and for a fraction of the cost that can be achieved in the traditional financial system.
Also consider that those who live in countries with unstable currencies currently have an incredibly difficult time obtaining dollars. With stablecoins, anyone with an internet connection can safely, securely, and instantly hold their savings in a stablecoin pegged to a much stronger currency (likely the dollar) to hedge against inflation. In Venezuela, for example, USDT is already widely used for everyday transactions.
The GENIUS Act And Stablecoins In American Policy
In July 2025, President Trump signed the GENIUS Act into law with the express aim of making “America the undisputed leader in digital assets”. The GENIUS Act is the first piece of legislation that addresses stablecoins and creates an essential regulatory framework for the future of their development. The law does a number of important things such as subjecting stablecoin issuers to the Bank Secrecy Act to combat illicit activities, forcing them to comply with marketing rules to protect consumers from deceptive practices, and provides a backstop for stablecoin holders in the event of issuer insolvency.
Arguably, the most important part of the GENIUS Act requires that stablecoin issuers maintain a 100% reserve backing with US dollars or Treasuries. Treasury Secretary Scott Bessent believes that stablecoins could become a $3.7 TRILLION market by the end of the decade. This requirement therefore creates a symbiotic relationship between stablecoins and the US Dollar – stablecoin growth is fostered by their being backed by US Treasuries, which subsequently become stronger as demand for them grows. This, in turn, makes Treasuries even better reserve assets, which fosters more stablecoin growth, etc.
At this point, it’s hard to see a future that stablecoins are not a part of, and America is leading the way with no close second in sight. This should provide investors with tremendous confidence in the future of American growth and global economic leadership.
