What Is Crypto Stablecoins? The Core Objectives Behind the U.S. Stablecoin Bill

On May 29, 2025, at the Bitcoin Conference in Las Vegas, USA, Vice President Vance announced to 50 million American Bitcoin holders: “Stablecoins pegged to the dollar, especially after the enactment of the GENIUS Act, will only benefit the American economy and the dollar.”

At this time, the U.S. Congress is vigorously advancing two groundbreaking stablecoin regulatory bills: the House’s “STABLE Act” and the Senate’s “GENIUS Act.” The core goal of these two bills is to establish a federal regulatory framework for the dollar stablecoins, which have soared in market value to nearly $250 billion.

What is a stablecoin?

A stablecoin is a special type of cryptocurrency whose core design goal is to maintain a stable value. Unlike volatile crypto assets such as Bitcoin, stablecoins are typically pegged to the value of fiat currencies like the US dollar or physical assets like gold, maintaining a 1:1 exchange ratio through specific mechanisms.

According to the collateral mechanism, stablecoins are mainly divided into three categories:

• Fiat stablecoins: such as USDT, USDC, are backed 1:1 by cash or equivalents in US dollars from bank accounts.
• Product stablecoin: such as PAX Gold (PAXG), each token represents ownership of one ounce of physical gold.
• Cryptocurrency-backed stablecoins: such as DAI by MakerDAO, generated through over-collateralization of cryptocurrencies like Ethereum.

The operation of stablecoins relies on three main anchoring mechanisms: collateralized debt positions (users lock collateral to generate stablecoins), arbitrage mechanisms (market participants buy and sell price differences to maintain the peg), and elastic supply (algorithms adjust the total supply of tokens to influence price).

Due to their stability, stablecoins have become the cornerstone of cryptocurrency trading—supporting more than two-thirds of cryptocurrency transactions, with a trading volume of up to $28 trillion in 2024, surpassing the total transactions of Visa and Mastercard.

The core framework of the STABLE and GENIUS bills

On May 19, 2025, the U.S. Senate passed the procedural legislation of the “GENIUS Act” with a vote of 66 to 32, paving the way for a final vote. The House of Representatives’ “STABLE Act” is also progressing simultaneously.

Although there are differences in details between the two bills, they jointly construct the core framework for stablecoin regulation:

Issuer restrictions

Only three types of entities can issue stablecoins: subsidiaries of insured deposit institutions, OCC-approved non-bank entities, and qualified state-chartered entities.

1:1 reserve asset requirement

All stablecoins must be 100% backed by highly liquid assets such as cash in USD, notice deposits, and short-term US Treasury bonds maturing within 93 days, and a monthly public report on reserve composition must be certified by the CEO and CFO.

Prohibition of interest payments

To prevent stablecoins from evolving into substitutes for bank deposits, both bills prohibit paying interest to holders.

Dual-layer regulatory framework

Federal and state regulations coexist: State regulatory frameworks must be “substantially equivalent to” (GENIUS) or “meet or exceed” (STABLE) federal standards, and the Treasury has the authority to veto state certifications.

Clarify legal attributes

The bill amends the Securities Law to clarify that compliant stablecoins are not classified as “securities,” thus excluding them from SEC jurisdiction; the GENIUS Act further excludes them from the definition of “commodities,” avoiding CFTC intervention.

The dual engines of dollar hegemony and the digestion of U.S. debt

The U.S. push for stablecoin regulation is no coincidence. Behind the bill lie two core strategic goals:

Reshaping the digital dollar hegemony

The proportion of the US dollar in global foreign exchange reserves has fallen to its lowest level since 1995 (57.8% by the end of 2024), and many countries are seeking to bypass US dollar settlements in bilateral trade.

The US dollar stablecoin has become a powerful tool for low-cost expansion of influence: the global circulation of each compliant stablecoin is expanding the usage scenarios of the dollar. Treasury Secretary Basent candidly stated, “We will use stablecoins to maintain the dollar’s position as the world’s primary reserve currency.”

Absorb a massive issuance of US Treasury bonds

Standard Chartered Bank report predicts: By 2028, the issuance of stablecoins will reach $2 trillion, resulting in an additional $1.6 trillion demand for U.S. short-term Treasury purchases—“enough to absorb all new short-term Treasury issuance during Trump’s second term.”

By 2024, stablecoin issuers have become the third largest buyers of US short-term Treasury bonds. USDT alone holds 98 billion USD in US bonds. Republican Senator Bill Hagerty further predicts that by 2030, stablecoin issuers will become the largest holders of US Treasury bonds worldwide.

Potential Risk

$6.6 trillion deposit outflow in the banking industry

According to a report by Bank of America Securities: the efficient payment functions of stablecoins and the lending capabilities of DeFi may lead to a $6.6 trillion outflow of deposits from the traditional banking system, with small and medium-sized banks being the most affected.

The American Independent Community Bankers Association warns: The outflow of funds from community banks will impact key economic sectors—they provide 60% of small business loans and 80% of agricultural loans nationwide.

“Digital run” threatens financial stability

Bank for International Settlements warns: Stablecoin runs could directly impact the U.S. Treasury market—A $3.5 billion Treasury sell-off is enough to cause yields to rise by 6 to 8 basis points, triggering a chain reaction.

The USDC de-pegging event in March 2023 was a precursor: when Circle announced that its $3.3 billion reserves were held at Silicon Valley Bank, it immediately triggered a wave of redemption panic.

Reconstruction of the value of the payment system

The traditional “five-party payment model” (Visa, MasterCard, etc.) is facing disruption. Supporters of blockchain technology claim that stablecoin transaction costs can be less than $0.01 per transaction, which is almost negligible compared to the 300 basis points fee rate of credit cards.

Future Outlook

As the Trump administration has made “signing the stablecoin bill before August” a priority, Wall Street has begun to reposition itself. Berkshire Hathaway, led by Buffett, significantly reduced its holdings in U.S. bank stocks in the first quarter, completely exiting its position in Citigroup.

Deutsche Bank predicts that the legislation will give rise to a regulated dollar stablecoin ecosystem before August, pushing stablecoins into the mainstream currency. When stablecoin issuers hold $2 trillion in reserve assets and $6.6 trillion in bank deposits face migration, the power structure of the financial system is quietly being restructured on the blockchain.

The US dollar stablecoin is both a tool for the US to consolidate its financial hegemony and a sword of Damocles hanging over traditional banks — and all of this will set the tone in the final game of legislation in the coming months.