US stablecoin regulation: Which stablecoins could benefit — and which ones pose risks?

Stablecoins are tremendously popular in the crypto industry, with assets like Tether (USDT), USD Coin (USDC), Sky Dollar (USDS) and numerous others used for on-ramping, off-ramping, value storage and transfers to ensure stability and rate predictability. For instance, the USDT stablecoin usually features higher trading volumes than even Bitcoin (BTC) or any other cryptocurrency on the market. As of the time of this writing (Apr 8, 2025), three out of the top seven crypto assets by daily trading volumes are stablecoins — USDT, USDC and First Digital USD (FDUSD).

Given the popularity and active use of stablecoins, regulatory bodies around the world have taken measures to control the operation of these assets. The European Union (EU), UK and key crypto hubs in Asia (such as Hong Kong and Singapore) have passed laws providing varying levels of regulatory oversight for stablecoin cryptocurrencies. Unlike these jurisdictions, the US has yet to implement comprehensive federal-level laws regarding stablecoin issuance, trading and other operations.

However, 2025 might finally see the first US legal framework addressing stablecoin regulation. It’s expected that a couple of legislative acts concerning stablecoins — the STABLE Act and GENIUS Act — will be considered by the US House of Representatives and the Senate in the coming months, and may be enacted later this year. If implemented, these laws will bring significant clarity to the regulation of stablecoins in the US market. 

As a result of these regulatory changes, some stablecoin assets are widely expected to benefit, while others might find themselves in a more challenging situation.

In this article, we’ll examine the current and expected stablecoin regulatory landscape in the US, compare it with frameworks used in other countries worldwide and discuss which stablecoins may see their standing and popularity boosted by the changes — and which ones are likely to face difficult choices.

Key Takeaways:

• Stablecoin regulation in the US is actively shaping up, with two critical legislative acts — the GENIUS Act and STABLE Act — being considered by the US Congress.

• It's widely expected that a new comprehensive regulatory regime for stablecoins will be implemented in the US later in 2025, underpinned by either or both acts.

• The new regulatory framework will likely benefit stablecoins with fiat reserves and transparent audit procedures, while algorithmic stablecoins or those with opaque reserve audit mechanisms may struggle.

Why stablecoin regulation matters

Stablecoins are a cornerstone of the modern crypto trade. Collectively, stablecoin cryptocurrencies typically account for more than half of the daily trading volumes in the crypto market. These assets — many of which are pegged to one of various established fiat currencies — serve as islands of rate stability in a market known for its high volatility. 

As crypto users move their funds between the web3 and traditional banking systems, stablecoins provide the necessary predictability. Their fiat pegs are also a vital magnet for investors who prefer to hold their funds in crypto, but want to maintain their investments’ value without exposure to the market's typical wild fluctuations.

Moreover, individuals and businesses around the world use stablecoins for crypto payments, and for settling transactions that adhere to contractual payment terms. Stablecoins also act as a key bridge between the worlds of crypto and traditional finance, creating potential for the mass adoption of cryptocurrency by the mainstream user community of retailers, investors and consumers.

With so many important use cases, it's no wonder that stablecoin regulation is critical for users, regulatory bodies, asset issuers and all other relevant parties.

Regulation for stablecoins in the US vs. other countries

Yet, as of April 2025, the US still lacks a comprehensive federal-level regulatory framework for stablecoins. There are several laws, both at the federal and state level, that address some aspects of stablecoin operations, but this regulatory environment is patchy and only partially addresses critical stablecoin-related processes.

In contrast to the US, many jurisdictions worldwide have enacted nationwide laws that govern the issuance, management and use of stablecoin cryptocurrencies. For instance, stablecoins have come under regulation in the European Economic Area (EEA) via the Markets in Crypto-Assets Regulation (MiCA), a piece of legislation adopted by the European Parliament in 2023. Similar measures have been implemented in Singapore, the UK, Hong Kong and other jurisdictions known for active adoption of cryptocurrency.

The adoption of a comprehensive regulatory framework for stablecoins in the US is expected to create opportunities for the broader use of crypto in the world's largest economy. Such a framework would help address many of the challenges posed by the current and largely unregulated use of these assets — lack of certainty on the fiat reserves maintained by issuers, insufficient audit procedures, and an unwillingness on the part of many business and individual users to adopt stablecoins due to trust issues — and more.

US-proposed legislation

Legislators in the US are now working toward enacting a federal-level framework to regulate stablecoins. The framework will depend upon two critical pieces of legislation — the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act and the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act. As of early April 2025, both acts have been submitted to relevant chambers of the US Congress and are in the pipeline for consideration by the country’s lawmakers.

GENIUS Act

The GENIUS Act was introduced on Feb 4, 2025, to the US Senate by Republican Senator Bill Hagerty with the support of Democratic Senator Kirsten Gillibrand and fellow Republican Senators Cynthia Lummis and Tim Scott. The Act aims to establish a comprehensive framework to regulate stablecoins. Key points of the Act include the following:

• Classify stablecoins as payment assets pegged to a fixed monetary value that don’t qualify as commodities, securities or investment products

• Mandate that each stablecoin issuer maintain full 100% reserves for their stablecoin in the currency it’s pegged to

• Require that stablecoins must be backed by sufficiently liquid conventional assets, such as US currency, demand deposits, Treasury bills or other approved assets

• Not use the reserves backing a stablecoin for collateral, lending or other operations that might jeopardize the safety of the funds

• Impose licensing requirements on stablecoin issuers to ensure that they obtain relevant licenses and permits before releasing their stablecoins to the public

• Separate regulatory oversight over stablecoin issuers into two levels — federal oversight for stablecoins with a market cap over $10 billion, and state-level regulation for coins under this amount

• Establish consumer protection mechanisms that protect stablecoin holders from fraud and allow them to easily redeem their assets

• Require regular audits and public liquidity reports of issuers’ stablecoin reserves

• Encourage the use of specifically US dollar–pegged stablecoins as a way to promote the greenback’s dominance on the global level

STABLE Act

The STABLE Act was introduced on Mar 26, 2025 to the House of Representatives by Republicans Bryan Steil and French Hill. The Act is similar to GENIUS in many ways, and seeks to provide a comprehensive regulatory framework for stablecoins. The key differences between the two Acts are as follows:

• While GENIUS separates regulatory oversight into federal or state level based on the stablecoin’s market cap, no such provision is specified in STABLE

• Both Acts require the government to prepare a dedicated study of algorithmic stablecoins — assets that aren’t directly backed by dedicated reserves, and whose pegs are maintained based on various market activity–based algorithms. However, unlike the GENIUS Act, the STABLE Act proposes a moratorium on algorithmic stablecoins for two years after the enactment of the Act

• STABLE contains no provision on the promotion of specifically US dollar–pegged stablecoins

• While GENIUS specifies that stablecoin holders have first priority over claims in case of an issuer’s bankruptcy, STABLE contains no such provisions

US vs. global strategies for stablecoin regulation

Europe

In recent years, the EU has been at the forefront of developing and implementing crypto regulation, including provisions concerning stablecoin assets. In May 2023, the European Parliament adopted MiCA, which provides a comprehensive mechanism for overseeing blockchain-based assets. 

Part of MiCA deals with the topic of stablecoins. Under the regulation, the term “stablecoin” isn’t legally defined. Instead, MiCA classifies stablecoins into two asset types — Electronic Money Tokens (EMTs) and Asset-Referenced Tokens (ARTs). The former refers to stablecoins pegged to a single established asset, while the latter is defined as stablecoins that track multiple assets.

MiCA came into effect in December 2024 throughout the EEA, which includes the 27 member states of the EU plus Norway, Iceland and Liechtenstein.

United Kingdom

In the UK, the Financial Services and Markets Bill (FSMB) received Royal Assent in June 2023, officially becoming law as the Financial Services and Markets Act 2023 (FSMA 2023). The Act contains clauses under which stablecoins may be recognized as regulated payment assets. Meanwhile, fiat-backed stablecoins may be considered valid payment instruments, depending upon approval by the country’s financial regulators — the Financial Conduct Authority (FCA) and the Bank of England.

Asia

In Hong Kong, the territory’s central banking institution (the Hong Kong Monetary Authority, or HKMA) proposed a mandatory Regulatory Regime for Stablecoin Issuers in 2023, calling for strict licensing requirements for stablecoin issuers in Hong Kong. In December 2024, the Hong Kong government published a proposed stablecoin bill that will likely become the first comprehensive framework for regulating stablecoins in the local market.

The Monetary Authority of Singapore (MAS) announced the finalization of its regulatory framework for stablecoins in August 2023. It specifies key requirements for Singapore-based issuers of single-currency stablecoins pegged to the Singapore dollar (SGD) or any G10 fiat currency, which includes the world’s most popular national currencies, such as the US dollar, euro, British pound sterling and Swiss franc, among others. Under the Singapore stablecoin framework, these issuers must satisfy stringent requirements for reserve maintenance, redemption procedures and even white paper release.

Japan is another Asian jurisdiction with strict and well-defined regulations on the issuance of stablecoins. In June 2022, the country’s parliament passed a bill that established the role of stablecoins and the rules governing their issuance and use. Under the law, only locally licensed banks, money transfer agents and trust companies can issue stablecoins. The law also defines stablecoins as digital money. Japan’s stablecoin law leaves out (and effectively prohibits) the registration of algorithmic stablecoins and stablecoins issued by financial entities not licensed in Japan itself.

United Arab Emirates (UAE)

In the UAE, issuance and other procedures related to crypto assets are now primarily regulated by the Payment Token Services Regulation released by the country's Central Bank (CBUAE). The regulation came into effect in August 2024, and is focused on a broader spectrum of crypto assets, not just stablecoins. Cryptocurrencies — if they satisfy the licensing requirements set out by the regulator — are classified as payment tokens. Their issuance is only permitted if the Central Bank grants the appropriate license. Stablecoins are specifically addressed in the regulation concerning algorithmic stablecoin assets, whose issuance is explicitly prohibited.

Which stablecoins could gain from regulation?

USDC

USDC is the second-most traded stablecoin in the world. It’s pegged to the US dollar, and is backed by cash and short-term US Treasury bills. USDC was launched by the Centre Consortium, a Boston-based company founded jointly by the Coinbase crypto exchange and the Circle fintech payments provider. On Apr 1, 2025, Circle filed for an initial public offering (IPO), disclosing that it had acquired Coinbase’s share in the Consortium in 2023.

With its US dollar cash and T-bill reserves fully backing USDC and regular audits, Circle has established itself as a reliable and trustworthy stablecoin issuer. Circle itself is a highly regulated payments provider in the US, both at the federal and state levels. These factors have long established USDC as one of the crypto industry's best and most reliable stablecoin assets. Thus, it’s widely expected that the USDC coin is poised to benefit from the upcoming US regulation of stablecoins.

FDUSD (First Digital USD)

FDUSD is another cash and T-bills backed stablecoin. It's issued by the Hong Kong–based First Digital fintech company. Launched in July 2023, FDUSD steadily rose in the rankings, and has become one of the most popular stablecoins on the market, thanks to its cash and cash-equivalent reserves and monthly reserve attestation reports. These reports have been published since the coin’s mid-2023 launch.

On Apr 2, 2025, TRON (TRX) blockchain founder Justin Sun impugned First Digital’s backing of required reserves. This accusation led to a quick depegging event, during which the coin dropped to a value of slightly under 95 cents. However, First Digital moved quickly to dispel the accusation, and the price of FDUSD was back to near-parity with the US dollar within hours. First Digital had confirmed that it would be seeking legal action against Justin Sun for his unfounded allegations.

It remains to be seen how the feud between Sun and First Digital plays out, but so far, the stability of the coin and the quick reaction of the issuer provide assurances that FDUSD is a solidly backed asset that may also benefit from the expected upcoming stablecoin laws.

USD1

USD1 is an upcoming stablecoin introduced by World Liberty Finance, a decentralized finance (DeFi) venture backed by US president Donald Trump and his family. As of early April 2025, the stablecoin is not yet publicly available, though its launch is expected soon. USD1 is pegged to the greenback and backed by Treasury bills, USD cash reserves and other cash equivalents. It’s expected to be launched on Ethereum (ETH) and Binance Chain (BNB).

There’s been a lot of controversy around the coin, mainly related to the potential conflict of interest due to Donald Trump’s presidential position while having a stake in World Liberty Finance. However, few observers would disagree that the influential backing will only benefit the coin, at least probably until the end of Trump’s presidential term.

Wyoming’s WYST stablecoin

The WYST coin is a proposed stablecoin to be launched by the US state of Wyoming. Pegged to the dollar and backed by cash and US Treasury securities, this is likely the first token to be issued by a US government entity. The expected launch date for WYST is around July 2025. Given the stablecoin's state-issued nature, it’s likely to be one of the safest choices on the market, and stands to benefit from any future regulatory framework.

Fidelity's potential stablecoin

State governments aren’t the only influential players considering their own stablecoins. The world’s third-largest asset management firm, Fidelity Investments, is also looking into launching a stablecoin. As of early April 2025, the company has stated that it’s testing the idea, but has provided no specific details. If launched, the Fidelity stablecoin is likely to be among the beneficiaries of any new US regulations, as Fidelity Investments certainly knows how to satisfy the country’s regulatory bodies: the investment world’s giant was founded in 1946, and has nearly $6 trillion in assets under management (AUM).

Which stablecoins could face risks?

Tether (USDT)

Tether (USDT) is the world’s leading stablecoin, based on market cap and trading volumes. Launched in 2014 by Tether Limited Inc., USDT is also among the oldest surviving stablecoins on the market. The coin is backed by US dollar reserves, as stated by its issuer. However, over the years, Tether has come under scrutiny for refusing to conduct full audits, and in 2021 the company was fined $41 million by the US Commodity Futures Trading Commission (CFTC) for misleading the public regarding the levels of its USDT-backing reserves.

Recently, the company has taken some steps to increase its transparency. In March 2025, Tether Limited Inc. appointed a new CFO and announced plans to conduct a full audit. The issuer has also signaled its preparedness to work with regulatory authorities to launch a domestic US-based stablecoin.

These moves, however, point to future intent by the company, and its current transparency level is unlikely to satisfy regulatory bodies. As such, any future US regulations in this area may pose challenges for USDT.

USDe

USDe is a yield-bearing synthetic stablecoin issued on the Ethereum blockchain by the Ethena DeFi protocol. Unlike stablecoins backed by actual fiat reserves or similar assets, USDe is a cryptocurrency whose peg to the US dollar is algorithmically maintained. Both major regulatory bills being considered by US lawmakers (the GENIUS and STABLE Acts) take a cautious view of algorithmic stablecoins. Both bills call for a detailed study of these assets; STABLE proposes to outright ban algorithmic stablecoins for two years. Given the lawmakers' attitudes toward this type of stablecoin, USDe could struggle if the relevant legislation is passed into law.

USDS

USDS is another major algorithmic stablecoin. An upgraded version of DAI, it’s issued by the Sky protocol, formerly known as MakerDAO (MKR). The coin is backed by surplus collateral that Sky users deposit in various cryptocurrencies. While it maintains overcollateralized reserves to ensure its peg, USDS isn’t directly backed by US dollars or other fiat currencies. Therefore, just like Ethena’s USDe, USDS could encounter challenges in the post-regulation period.

Smaller, unregulated stablecoins

According to the CoinGecko crypto data portal, close to 300 stablecoin cryptocurrencies existed as of early April 2025. However, only the top seven have market caps over $1 billion, and the vast majority feature minimal market cap. Many of these coins are pegged to fiat assets via decentralized algorithms, some of which are obscure or not easily verifiable. Once the future US regulatory framework for stablecoins is implemented, these smaller coins will be unlikely to satisfy licensing requirements.

The road ahead for stablecoin regulation in the US

As of early April 2025, the crypto industry awaits the outcome of voting in both chambers of the US Congress on the GENIUS and STABLE Acts. On Apr 3, 2025, the House Financial Services Committee voted in favor of the STABLE Act, and it will now proceed to a full House vote.

These Acts have been carefully prepared to establish a unified stablecoin regulatory framework in the US. If completely adopted, they’ll result in major changes in the way stablecoins are issued and circulated. Any new federal regulatory framework will also provide certainty for financial institutions dealing with stablecoins.

Several governmental entities, including the SEC, the National Credit Union Administration (NCUA) and the Federal Reserve, will play crucial roles in the operation of regulated stablecoins in the US. Federal securities laws may also apply if any stablecoin is designated as having security status.

Under the new regulatory framework, stablecoin issuers would become subject to stringent regulatory oversight. Stablecoins that pass regulatory requirements will likely experience increased use within the traditional finance field. On the other hand, unregulated stablecoins may lose their appeal among investors unless they adapt to the new regulatory environment.

Closing thoughts

The US is still lagging behind Europe and key Asian crypto markets regarding stablecoin regulation. However, the GENIUS and STABLE Acts recently introduced to the Senate and the House of Representatives (respectively) are likely to provide the necessary regulatory environment to provide certainty to all parties involved — issuers, holders, financial institutions and regulatory bodies themselves.

If implemented in full or to a substantial degree, these regulatory laws may benefit stablecoins that are strongly backed by established fiat assets and demonstrate transparency via audits. At the same time, algorithmic stablecoins or assets without transparent reserves and audit procedures may face reduced demand.

As of early April 2025, the exact details of the expected regulatory regime aren't completely settled, and we'll need to wait on the big votes in both chambers of the US Congress.

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