- The recently passed Genius Act has created a stampede of developments with stablecoins.
- For monetary authorities and financial sector regulators, a wide range of challenges await.
- Money entails three key properties—singleness, elasticity, integrity.
- Stablecoins create complications along all of those three aspects.
- Concerns notwithstanding, stablecoins likely stand at an inflection point.
Commentary: Age of stablecoins
In line with the pledges made during his 2024 election campaign, US president Donald Trump has taken a series of landmark steps to add substantial energy and regulatory clarity to the digital ecosystem. The major boost in support from the US authorities is causing ripples around the world, as regulators shift from consultation to execution.
Starting with the launch of a Bitcoin Strategic Reserve, the US has unleashed a torrent of digital asset-friendly measures this year. The recently passed Genius Act has created a stampede of developments with stablecoins. In late July, a US Presidential Working Group issued over a hundred recommendations to deepen the digital asset ecosystem.
As regulatory nudges and clarifications materialise, banks and nonbanks are jumping into the fray with products and tech solutions. For monetary authorities and financial sector regulators, a wide range of challenges await. Can stablecoins proliferate while upholding key properties like singleness (all stablecoins should be equal), elasticity (responsive liquidity and settlement), and integrity (central authority with power to regulate)? The answers are not yet fully clear.
Stablecoins share some features with Central Bank Digital Currencies (CBDCs), but differ in governance, issuance, and risk profile. CBDCs are sovereign-backed, carry lower credit risk, and function as legal tender. In monetary parlance, they are considered base money or M0. They aim to modernize payment systems, enhance monetary policy transmission, and improve financial inclusion. Stablecoins, by contrast, are privately issued, backed by fiat reserves or assets, and are subjected to issuer’s credit profile. CBDCs offer regulatory certainty; stablecoins provide faster innovation cycles.
The stablecoin market has grown rapidly alongside the crypto market boom. Its market capitalization has grown by 4.5 times in the last five years, reaching USD253bn as of June 2025. BIS projects that the stablecoin market valuation could expand 10-fold by 2028 to USD2trln. Annual transaction volume reached USD36.8trln as of June 2025, exceeding Visa/Mastercard combined. Monthly transactions hit USD800bn in June. Around 80% of stablecoin usage is linked to crypto trading.
Real transaction volume could rise as stablecoins have the potential to integrate into tradition banking services as settlement and cross-border transactions. From trade finance to remittance payments, stablecoins and the tech stack around it have the potential to reduce the cost of transactions substantially. For capital markets, stablecoins present opportunities in tokenizing asset, loans, and fund management. These could potentially enhance market efficiency through time and cost savings. It could also disrupt banking and central banking profoundly.
Safety and security concerns and regulatory oversight will likely expand in the coming months and years, but digital assets’ momentum may be unstoppable. We could very well be standing at an inflection point.
Our later report: Digital Assets Update 3Q25: Embracing tokenization and stablecoins
Taimur Baig, Chang Wei Liang, Nathan Chow, Samuel Tse
To read the full report, click here to Download the PDF.
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