Stablecoins
What is a stablecoin?
Stablecoin can theoretically be a basket of the following assets:
- Legal tender: mainly US dollar, euro, yen, renminbi and other foreign exchange reserves accepted by various countries.
- High-priced physical commodities: such as gold, platinum, silver, etc. are often used as precious metals for reserves of various countries.
- Other cryptocurrencies: mainly Bitcoin and Ethereum.
That is, a cryptocurrency that is a mixture of the above assets in different proportions and is directly linked to the value of the constituent assets.
Taking Tether, the largest stablecoin in the market, as an example, among the assets anchored by Tether, 66% are U.S. Treasury bonds and 10.1% are overnight reverse repurchase agreements.
Stablecoins are almost all USD stablecoins
However, the main stablecoins on the market are almost all US dollar stablecoins that are directly pegged to the US dollar; the main reason is that the risks of cryptocurrencies that are not legal currencies of various countries are too high, the exchange rate of the US dollar is relatively stable, and there is no doubt about the acceptance and recognition of the US dollar around the world.
Federal Reserve Chairman Waller once pointed out: “Most transactions in decentralized finance (DeFi) involve the use of stablecoins, which peg their value one-to-one to the U.S. dollar.”
Currently, about 83% of the stablecoin market value is pegged to the US dollar, which means it is actually traded in US dollars.
Central Bank Digital Currency
Central bank digital currency (CBDC) is basically still the official currency of a single country and has the status of a sovereign state’s legal tender, but it exists and is traded in the form of cryptocurrency.
Current Development of Stablecoins
Market size
The total stablecoin market size has surged from $20 billion in 2020 to $246 billion in May 2025, with Tether (USDT) alone growing from $67 billion in June 2022 to $1.3 trillion in May 2025.
Common stablecoins
The more well-known and common stablecoins on the market are:
Tether (USDT), TrueUSD (TUSD), USD Coin (USDC), Binance USD (BUSD), TerraUSD (UST) and Diem, as well as StraitsX (XSGD) pegged to the Singapore dollar.
Among them, Tether and Circle coin ranked first and second. As of January 2018, the global circulation of stablecoins was about 210 billion US dollars, Tether US dollars (USDT) was about 155 billion , and Circle’s USD Coin (USDC) was about 57 billion US dollars.
Tether remains the absolute leader in the industry, with its stablecoin being used in three-quarters of all cryptocurrency transactions worldwide.
Stablecoin transaction volume surges
Stablecoins are entering the mainstream payment system at an astonishing rate, with stablecoin transaction volume increasing by 598% since 2020. In 2024, stablecoins processed $27.6 trillion in transactions, surpassing Visa and Mastercard. Active stablecoin wallet accounts increase 53% from 22.8 million in February 2024 to over 35 million in February 2025.
Stablecoins edge is irreplaceable
The key uses of stablecoins
US dollar stablecoins are expanding their influence in cross-border payments, international trade, and personal finance at an astonishing rate. Currently, there is more than $200 billion worth of stablecoins in circulation worldwide, with monthly trading volumes reaching hundreds of billions of dollars. Providing a digital alternative to traditional currencies.
Benefits of using stablecoins
According to Visa’s survey, the reasons why users prefer stablecoins over banks include higher yields (45%), greater efficiency (41%), and lower risk of intervention (39%).
Stablecoins are programmable and globally accessible, making them attractive during times of geopolitical uncertainty. A survey conducted by Visa showed that 38% of users in Nigeria, Indonesia, Turkey, Brazil and India used stablecoins instead of the US dollar to hedge against inflation. Stablecoins are also seen as a hedge against geopolitical turmoil. The Russian government has begun considering cryptocurrencies as an alternative international payment tool to circumvent sanctions.
The world cannot ignore its importance
Stablecoins become strategic assets
And stablecoins are more than just financial instruments, they are quickly becoming strategic assets. Stablecoins not only represent the rise of a new asset class, but also imply the consolidation and expansion of the US dollar hegemony through digital means.
Payment providers are betting big
Traditional payment giants are also beginning to accept this trend. Visa recently announced a partnership with stablecoin company Bridge to enable cross-border payments to connect Latin America, and invested in startup BVNK to further develop its stablecoin payment capabilities.
Some well-known companies have also begun to adopt stablecoins. For example, Shopify’s customers can pay with USDC through Solana Pay; Gucci has accepted cryptocurrencies including stablecoins in certain stores since 2022; PayPal announced in April that customers can earn 3.7% through its PYUSD stablecoin.
Countries that allow stablecoin issuance
As far as I know, at least the regulatory authorities in the United States, the European Union, the United Kingdom, Japan, Hong Kong, South Korea, Singapore, Australia, and Switzerland allow the issuance of stablecoins.
The EU is aware of the threat of stablecoins
ECB concerns
The widespread adoption of USD stablecoins across Europe would constitute a form of digital dollarization, which would have serious implications for European sovereignty and the economy. Weakening the ECB’s ability to manage the euro area economy, as a significant portion of transactions would bypass the Eurosystem, reducing the effectiveness of interest rate adjustments and other monetary policy tools.
If the euro depreciates, European businesses and households that earn income in euros but pay in dollar stablecoins will face a dangerous currency mismatch. Furthermore, the ECB’s inability to act as a lender of last resort for dollar-denominated instruments limits its ability to manage a crisis involving these stablecoins. Ultimately, the proliferation of foreign digital currencies would erode Europe’s monetary sovereignty, weaken the ECB’s control over its payments systems, and increase dependence on U.S. financial infrastructure.
Euro stablecoins are insignificant
Euro-denominated stablecoins have only a negligible share of the global market – the top ten euro-denominated stablecoins have a total market value of approximately 600 million euros, accounting for only 0.24% of the entire stablecoin market.
EU legislative control
The EU’s Markets in Crypto-Assets (MiCA) regulation attempts to impose strict controls on stablecoins, requiring all issuers wishing to sell stablecoins in the EU to register locally and follow strict regulations. In contrast, the United States has yet to introduce similar comprehensive legislation.
US is optimistic on stablecoins
The unexpected savior of the dollar hegemony
As the Trump administration attacks outside confidence in U.S. sovereignty and rhetoric of global de-dollarization grows, stablecoins are becoming an unexpected force supporting the dollar’s hegemony.
U.S. Treasury Secretary Scott Bessant made it clear at the first White House Digital Asset Summit: “As directed by President Trump, we will maintain the dollar’s position as the world’s dominant reserve currency, and we will use stablecoins to achieve this goal.”
Why can the US dollar hegemony be strengthened?
- Reserve asset demand: According to Deutsche Bank research, Tether (USDT)’s reserve holdings will grow from nearly $0 in 2020 to approximately $98 billion (81% of its reserve composition) in U.S. Treasuries in 2025. Circle (USDC) now holds approximately $24 billion in U.S. Treasuries, up from approximately $12 billion in December 2022. Ripple held about $70 million in U.S. Treasuries as of March 31.
- Strengthening demand for the US dollar: 83% of fiat-pegged stablecoins are pegged to the US dollar, and stablecoins hold over $120 billion in US dollar reserves.
- Accelerating informal dollarization: USDT is widely used in emerging markets as a tool to hedge against inflation and capital controls, accelerating the process of informal dollarization.
- Political Support: Trump and Republican lawmakers have publicly supported stablecoins over central bank digital currencies (CBDCs), positioning them as private sector solutions to digital currencies.
US government and legislative support
Stablecoin bill assists
The terms of stablecoin legislation “GENIUS Act” passed on June 3, 2025 to include stricter restrictions on money laundering, foreign issuers and technology companies, and enhanced consumer protection, while also ensuring that the same rules apply to domestic and foreign issuers. On the other hand, the increasing demand for Michael Saylor’s Strategy Company and the increasing number of investors holding cryptocurrencies are also the reasons for the sharp rise in Bitcoin prices.
GENIUS Act
The main contents of the “GENIUS Act” are as follows: First, it requires that each stablecoin issued must be backed by an equivalent amount of U.S. dollar cash or U.S. Treasury bonds; Second, stablecoin issuers must register with the U.S. federal government and disclose their reserves on a monthly basis to ensure the safety of funds and comply with anti-money laundering and anti-crime regulations; Third, if the issuing company goes bankrupt, stablecoin holders will have priority in redemption.
If the stablecoin bill is signed into law, it will require that tokens must be backed by liquid assets such as the U.S. dollar and short-term Treasury bills, and issuers must disclose the composition of their reserves on a monthly basis. This means that if stablecoins are expected to grow, issuers will have to buy more Treasury bills to back their assets.
Legislative support
Standard Chartered Bank’s latest research report predicts that once the US Congress passes the GENIUS Act, the supply of stablecoins will grow nearly 10 times in the next four years, from the current US$230 billion to approximately US$2 trillion by the end of 2028, absorbing US$400 billion in Treasury bonds each year. At that time, stable currency exchange
Trump administration embraces cryptocurrency
The prices of Bitcoin and other cryptocurrencies continued to rise, reflecting a series of regulatory positives, one of which was the progress of a stablecoin bill in the U.S. Senate. From Gensler (former chairman of the U.S. Securities and Exchange Commission) and the then SEC to the Trump administration, the U.S. attitude has changed, and the Trump administration’s acceptance of the cryptocurrency industry has released momentum at home and abroad.
Trump previously promised to become the “cryptocurrency president” and promote cryptocurrency to become mainstream in the United States. He has expressed support for cryptocurrencies because they would help improve the banking system and strengthen the dominance of the U.S. dollar.
Trump removes restrictions on retirement funds
On May 28, 2025, the Trump administration announced its intention to revoke guidance issued by the U.S. Department of Labor in 2022 that opposed including cryptocurrencies as an investment option in corporate 401(k) retirement plans. In the future, the U.S. Department of Labor will no longer support or oppose specific investment options.
SEC withdraws lawsuit against two crypto giants
The SEC withdrew its lawsuit against Coinbase, the largest cryptocurrency exchange in the United States, in February this year. On May 29, 2025, it took the initiative to withdraw its civil lawsuit against Binance, the world’s largest cryptocurrency exchange, and its founder Zhao Changpeng, marking a major change in the attitude of US regulators towards the cryptocurrency industry since Trump returned to the White House.
Market reaction
Cryptocurrency prices hit record highs
The price of Bitcoin rose 3.3% to $111,878 during trading on May 22, 2025, setting a new historical high. Prices of smaller cryptocurrencies also rose across the board, with the second-largest cryptocurrency, Ethereum, rising by more than 7% at one point. This highlights the growing demand from institutional investors and the support for cryptocurrencies from the administration of US President Trump, making the market increasingly optimistic about the prospects of Bitcoin.
Big positives to the bond market
The legislation of the GENIUS Act and its implications for the financial market are that if stablecoins are expected to grow, issuers will have to buy more Treasury bonds to support their assets. According to a report by Bain & Company’s financial services business, these companies hold a total of $166 billion in U.S. Treasury bonds.
According to data from cryptocurrency data provider CoinGecko, the current stablecoin market size is about $247 billion. Standard Chartered Bank estimates that if the bill is passed, the stablecoin market size could grow to $2 trillion by 2028. U.S. Treasury Secretary Bessant encouraged Congress to pass legislation to codify federal rules for stablecoins, which he believes could lead to a surge in demand for U.S. government debt.
There is currently about $29 trillion in outstanding U.S. Treasuries, of which $6 trillion is short-term. In an April research note, JPMorgan analysts estimated that stablecoin issuers could become the third-largest buyer of U.S. Treasuries in the next few years.
Big banks plan to issue joint stablecoin
JPMorgan Chase, Bank of America (BofA), Citigroup, Wells Fargo and other large commercial banks plan to invest in a jointly owned company to issue a joint stablecoin.
The initial idea is that the plan is to adopt a model that allows other banks to use stablecoins in addition to banks jointly held by the Clearing House and Early Warning Services.
Not only the big banks on Wall Street, but also some regional and community banks are considering whether to seek to form another stablecoin alliance.
Societe Generale has also confirmed that it will launch a stablecoin called “USD CoinVertible” backed by the US dollar through its cryptocurrency subsidiary SG-FORGE, becoming the first large European bank to issue a cryptocurrency pegged to the US dollar. According to data from Societe Generale’s official website, its cryptocurrency department launched a euro-based stablecoin in 2023, but it has not yet been widely adopted, and the current value of tokens in circulation is only 41.8 million euros.
First Stablecoin company IPO
According to data from cryptocurrency market tracker CoinGecko, Circle was founded in 2013 and is the main operator of the stablecoin USDC. Circle is the world’s second largest stablecoin issuer of USDC. As of the end of March, USDC had a market share of 29% and a circulation of approximately US$61 billion.
Circle (ticker: CRCL) held its initial public offering (IPO) in New York on June 5. Its stock price once soared by 235% during the trading session and closed up 174% on the first day. The stock price quadrupled in three days after listing! This set a new record for US stocks since 2020.
Companies to use stablecoin for trading
After Bitcoin was held as a corporate asset by many companies, Uber CEO Dara Khosrowshahi said on June 5 that the company was considering using stablecoins as a global funds transfer tool. He said stablecoins appear to have “practical benefits that go beyond the historical value of cryptocurrencies.” He added that the technology is “quite promising for global companies” because it can help reduce the cost of transferring funds between different countries.
The potential advantages of stablecoins include faster transaction processing times, lower fees, and less reliance on the traditional banking system. These features are particularly attractive to multinational companies that need to frequently transfer funds internationally, and Uber operates in more than 70 countries around the world.
Apple, Google, Airbnb, and Elon Musk’s X are allegedly in preliminary talks with companies in the cryptocurrency space to assess transitioning to stablecoins. These companies are considering the use of stablecoins as a cost-saving measure for payment processing and achieving high-level efficiencies in international transactions.
After the Wall Street Journal reported on June 12, 2025 that major retailers were considering stablecoin options to bypass traditional card payment fees, Visa (ticker: V) shares fell4.99%, Mastercard (ticker: MA) fell 4.62%, and American Express (ticker: AXP) fell 3.42% the next day. Other payment processors were also affected, with Capital One (ticker: COF) falling 2.45%, PayPal (ticker: PYPL) falling 5.32%, and Block (ticker: XYZ) falling 3.57%.
According to the report, retail giants including Walmart (ticker: WMT) and Amazon (ticker: AMZN) have recently explored issuing their own stablecoins in the United States, a move that could save them billions of dollars in transaction fees by moving payment processing outside the traditional financial system. Expedia (ticker: EXPE) and several major airlines have also reportedly been involved in similar discussions.
I am the author of the original text, the essence of this story was originally featured on Smart Magazine, Issue of July 2025
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