What are stablecoins? New US law puts this cryptocurrency in spotlight

Stablecoins may soon break into the financial mainstream as a landmark regulatory bill passed through the US Congress this week, signalling Washington’s growing embrace of the cryptocurrency sector.

Stablecoins are digital tokens pegged to the value of real-world assets, such as the US dollar or gold. Originally designed as a safe haven for crypto investors during market volatility, their appeal has since expanded to digital payments and remittances.

On July 17, the US House of Representatives passed the GENIUS Act in a 308–122 vote, with strong bipartisan support, including many Democrats. The bill, which puts a spotlight on regulating stablecoins, had already passed the Senate and now awaits President Trump’s signature. The legislation opens the door for private firms to legally issue stablecoins under federal oversight.

Though some companies have already been issuing stablecoins, they’ve been operating in a regulatory gray zone. The GENIUS Act clarifies that these firms must comply with anti-money laundering statutes and are required to report suspicious transactions.

Unlike traditional cryptocurrencies, which are infamous for wild price swings, stablecoins are meant to hold steady value—as the name implies. As explained by Bitpanda, their value is anchored one-to-one to reserve assets, most commonly the US dollar. That means one stablecoin typically equals $1. Companies issuing these coins are expected to maintain sufficient reserves—such as cash or short-term US government bonds—to back the currency and ensure consumer confidence.

Among the largest issuers are Tether, based in El Salvador, which issues the USDT token, and US-based Circle, which issues USDC. Both coins are pegged to the dollar.

Tether’s USDT leads the market with a capitalization of nearly $154 billion, comprising 62% of the stablecoin market, according to CoinMarketCap. Circle’s USDC follows with a market value of about $61 billion, accounting for roughly 25%.

Crypto advocates have broadly welcomed the regulatory clarity, though others remain skeptical—particularly in light of the Trump family's links to the crypto sector. Notably, a company affiliated with the Trumps, World Liberty Financial, has launched its own stablecoin.

“Stablecoins seem (to be) here to stay,” JPMorgan Chase analysts wrote in an April research note. “A few years ago, we probably would have debated the accuracy of that sentence. Not today.”

However, consumer protection experts argue the proposed safeguards don’t go far enough.

“The reason you would never recommend grandmother use a stablecoin is she would have to give away a dollar that’s protected by the federal government and deposit insurance, and which comes with a ton of consumer protections, and which pays interest in her banking account, in exchange for a stablecoin that doesn’t have any of those things,” said Corey Frayer, director of Investor Protection at the Consumer Federation of America told NBC News.

The stablecoin market has exploded in recent years, growing from just $20 billion in 2020 to $246 billion by May 2025, according to Deutsche Bank analysts.

First introduced in 2014, stablecoins gave crypto traders a place to park funds between volatile trades. Their role has since expanded dramatically, particularly in digital commerce, said Darrell Duffie, a finance professor at Stanford University.

In May, Visa announced a new partnership with Bridge—a stablecoin issuer owned by fintech giant Stripe—to facilitate payments in Latin America using the tokens.

Because of their steady value, stablecoins are increasingly seen as a digital alternative to traditional currencies, especially for international money transfers.

“Cross-border payments are providing the most exciting new use cases,” Duffie said. “Making a payment, such as a remittance or a vendor payment to or from an emerging-market country, can now be made faster and at lower cost than a conventional correspondent banking payment.”

The cryptocurrency sector, meanwhile, has been active on the political front, channeling campaign contributions to President Trump and allied lawmakers during the 2024 election cycle. “This is the return on investment for the campaign spending by the crypto industry,” said Hillary Allen, a law professor at American University, in an interview with CNN.

By Khagan Isayev