The Global Rise of Stablecoins: Legislation, Power Dynamics, and the Future of Finance
The Global Rise of Stablecoins: Legislation, Power Dynamics, and the Future of Finance
By Zion Zhao | ็ฎๅฎถ็คพๅฐ่ตต
In recent years, the global financial landscape has witnessed a seismic shift with the rapid proliferation and adoption of stablecoins. What began as a niche experiment within the cryptocurrency community has now become a central topic for governments, major financial institutions, and technology giants worldwide. From the U.S. Senate’s pivotal progress on the so-called "GENIUS Act" to Hong Kong’s regulatory breakthroughs, and from the European Union to Singapore, stablecoin legislation is arriving in waves. Even central bank leaders, such as China’s Pan Gongsheng, are openly discussing the implications and opportunities. At the same time, major corporations—ranging from Circle (which went public with astonishing market enthusiasm) to PayPal, Stripe, JPMorgan, and even tech titans like Ant Group, JD.com, and Xiaomi—are rushing into the stablecoin arena.
What is driving this global “stablecoin rush”? Is stablecoin the inevitable future of finance, or is it simply another speculative bubble? As a cryptocurrency trader and investor for many years, I aim to unpack the complexities, opportunities, and risks of stablecoins, and explores the underlying power dynamics, regulatory shifts, and implications for the future of the global monetary system.
What are Stablecoins? Understanding the Basics
Stablecoins are a type of cryptocurrency, but with a crucial difference from volatile assets like Bitcoin or Ethereum: they are designed to maintain a stable value, typically pegged 1:1 to a fiat currency such as the U.S. dollar. The most prominent examples, Tether (USDT) and USD Coin (USDC), are issued by private companies (Tether Limited and Circle, respectively), and their combined market capitalization represents over 80% of the global stablecoin supply (CoinMarketCap, 2024).
Unlike traditional cryptocurrencies, the value of a stablecoin is backed by reserves. When a user deposits $1 with an issuer, they receive one stablecoin in return; they can redeem it at any time for $1, ensuring the price remains stable. This mechanism mimics a modern version of the gold standard, with the fiat reserves (often short-term U.S. Treasuries) standing in for gold (Eichengreen, 2019).
The process is straightforward in principle, but it relies on the issuer’s transparency and solvency. For example, Tether’s Q1 2024 report showed $149.27 billion in assets backing $143.68 billion in issued tokens, suggesting over-collateralization. Still, periodic scrutiny over reserves and regulatory compliance remains a persistent challenge (Tether, 2024).
Profitability and Market Dynamics
The business of issuing stablecoins is astoundingly lucrative. Tether, with just over 100 employees, reportedly earned $13 billion in profit in 2023, translating to over $100 million per employee—a margin rivaling any technology company (Forbes, 2024). The core profit driver is simple: issuers invest user deposits in highly liquid, low-risk assets (mostly U.S. Treasuries), earning significant interest, especially in a high-rate environment (Adams & McKenzie, 2023).
Circle, issuer of USDC, has also experienced rapid growth, particularly as crypto exchanges incentivize user adoption with additional rewards and “yield farming” programs. In 2024, over $10 billion in interest was distributed to trading platforms as part of this ecosystem, echoing the competitive cycles seen in credit card rewards (Bloomberg, 2024).
Global Legislative Push: From the U.S. to Asia
A defining trend of 2024 is the legislative acceleration around stablecoins. The U.S. Senate’s "GENIUS Act" (still pending House approval) would require all stablecoin issuers to obtain licenses, hold 100% high-quality liquid reserves (such as U.S. Treasuries and reverse repos), and follow stringent transparency and anti-money-laundering rules. Notably, if an issuer goes bankrupt, stablecoin holders are prioritized in asset recovery—an unprecedented legal safeguard (U.S. Senate, 2024; CRS, 2023).
The European Union's MiCA (Markets in Crypto-Assets) regulation came into effect in 2023, banning interest payments on stablecoin deposits and imposing daily transaction caps, citing concerns over financial stability and monetary policy transmission (European Commission, 2023). Singapore’s Monetary Authority rolled out its stablecoin regulatory framework in 2023 as well, making licensing and robust reserves mandatory (Monetary Authority of Singapore [MAS], 2023).
Hong Kong is adopting a “sandbox” approach, allowing selected firms to pilot stablecoin operations in a controlled environment with the first licenses already granted to JD, Xiaomi-backed banks, and other major players. The focus is on cross-border payments and exploring the compatibility of stablecoins with digital renminbi initiatives (HKMA, 2024).
Meanwhile, China continues to ban public stablecoin use, instead focusing on the digital yuan (e-CNY), but has begun limited stablecoin experiments via Hong Kong. In Latin America, countries like Brazil and Argentina are actively embracing stablecoins as citizens seek to escape hyperinflation and currency controls (Chainalysis, 2023; World Bank, 2024).
Stablecoin Utility and Adoption: Beyond Hype
Stablecoins offer several key advantages:
Cross-Border Payments: Traditional cross-border wire transfers are slow (days) and costly (5%+ fees), particularly in emerging markets. Stablecoins enable near-instant, low-cost global transfers, bypassing banks and the SWIFT network (Frost et al., 2020).
Privacy and Accessibility: Transactions can be pseudonymous, offering privacy similar to cash, but with blockchain transparency for auditability.
Stability: Unlike Bitcoin or Ethereum, stablecoins offer price certainty, making them more suitable as a medium of exchange.
Inflation Hedge: In countries facing hyperinflation (e.g., Argentina, Nigeria), stablecoins act as a lifeline, letting users escape currency devaluation and capital controls (Chainalysis, 2023).
The numbers are striking: stablecoin transaction volume exceeded $27.6 trillion in 2024, surpassing the combined payments processed by Visa and Mastercard (Visa, 2024; Mastercard, 2024). Monthly cross-border stablecoin payments have reached $50 billion, growing 20-30% month-on-month.
Risks, Regulation, and Systemic Challenges
Despite their promise, stablecoins pose significant risks:
Money Laundering and Illicit Use: Their privacy and speed make them attractive for black market transactions and sanctions evasion (FATF, 2023).
Systemic Instability: Without strong reserves and transparent auditing, the collapse of a major issuer could trigger contagion across financial and crypto markets, as seen in the 2022 Terra/Luna crash.
Regulatory Uncertainty: Ambiguous or absent regulation previously limited institutional participation, though this is now rapidly changing.
Disintermediation: Stablecoins bypass banks and traditional payment networks, potentially undermining central bank monetary policy and financial sector profitability (Arner et al., 2020).
This is why governments are rushing to regulate, requiring robust licensing, 100% reserve backing, frequent disclosures, and strict anti-money-laundering measures. For example, OKX, a major crypto exchange, paid over $84 million in fines to U.S. regulators in 2024, shut down wallet services used for illicit activity, and aggressively pursued regulatory licenses across multiple jurisdictions (U.S. DOJ, 2024).
The Geopolitical and Monetary Stakes
Why are governments so focused on stablecoin regulation? Three central reasons:
Preserving the Dollar’s Hegemony: Over 99% of stablecoins are dollar-backed. Their spread effectively dollarizes foreign economies, entrenching U.S. currency dominance and expanding the reach of U.S. monetary policy (Eichengreen & Viswanath-Natraj, 2020).
Boosting U.S. Treasury Demand: Stablecoin reserves, now dominated by short-term Treasuries, represent a new source of demand for U.S. debt. While this mostly benefits short-term bill issuance, the effect is still significant—Tether alone was the seventh-largest global buyer of U.S. Treasuries in 2024.
Maintaining Power in Digital Finance: As the crypto economy matures, control over stablecoin regulation is a proxy for influence over the future of digital assets and payment rails.
Conversely, China seeks to promote the digital yuan and develop offshore RMB stablecoins, piloting projects in Hong Kong and using regulatory “sandboxes” to test cross-border use cases (PBOC, 2024).
The Broader Movement: Tokenization and RWA (Real-World Assets)
Stablecoins are just the first wave in a broader movement toward tokenization of real-world assets (RWA)—the practice of issuing digital tokens on blockchains that represent ownership in physical assets, such as property, bonds, or intellectual property. BlackRock’s 2024 launch of a tokenized money market fund ("BUIDL") with Securitize, now at $2.9 billion AUM, marks the start of mainstream finance entering the on-chain economy (BlackRock, 2024).
In Asia, Ant Group and others are actively developing RWA use cases for charging stations, solar infrastructure, and more, viewing tokenization as a means to democratize investment and improve transparency.
The Road Ahead: Cautious Embrace or Reluctant Surrender?
Jurisdictions worldwide fall into three broad categories:
Active Embracers: Singapore, Hong Kong, UAE—actively courting the industry, aiming to become global crypto-financial centers.
Cautious Moderates: U.S., EU, South Korea—strict, but increasingly open, with heavy focus on consumer protection and systemic risk.
Restrictors: Mainland China, Bangladesh, Afghanistan—outright bans or severe restrictions, often paired with development of central bank digital currencies (CBDCs).
Even banks and payment giants, once fierce critics, are now racing to issue their own stablecoins. As Jamie Dimon of JPMorgan (once a vocal Bitcoin skeptic) presides over the launch of JPM Coin, and PayPal and Stripe integrate stablecoins into their payment stacks, the financial world is converging on digital assets as the next frontier.
Conclusion: Disruption, Power, and the Global Race for Digital Money
The rise of stablecoins is not merely a technological evolution—it is a battleground for monetary sovereignty, regulatory power, and future economic influence. Whether driven by the desire to safeguard the dollar, unlock new markets, or ride the wave of digital transformation, governments and industry leaders are shaping the rules of the new financial order.
Stablecoins hold the promise of efficiency, inclusivity, and innovation—but also harbor risks of instability, regulatory arbitrage, and disruption to traditional monetary frameworks. Their trajectory will depend not just on technological advances, but on the evolving dance of regulation, global power competition, and market demand.
As we watch this global experiment unfold, one thing is clear: the stablecoin revolution has only just begun, and its impact will ripple through economies, politics, and everyday finance for years to come.
Not Financial Advice, Please do your own Due Diligence!
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References
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Eichengreen, B. (2019). From commodity to crypto: The evolution and regulation of currency. Princeton University Press.
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