In today’s newsletter, Claudia Marcela Hernández analyzes how stablecoins have evolved beyond volatility fixers to become the foundational settlement asset for global tokenized markets and cross-border payments, following the clarity provided by the GENIUS Act.
Then, in Ask an expertMorva Rouhani explains how stablecoin regulation serves as the foundation for tokenized capital markets, why some jurisdictions view U.S. stablecoin policy as a risk, and the key factors advisors should use to assess the credibility of a stablecoin.
Discover the latest advances in the Clarity Act in Continue reading.
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-Sarah Morton
Are stablecoins the infrastructure that is reshaping global finance?
Stablecoins were originally designed to solve one of the earliest problems in crypto: volatility. By pegging their value to fiat currencies such as the US dollar, stablecoins offered traders a reliable unit of account that could move across blockchains without the price fluctuations associated with assets like bitcoin. For years, they functioned primarily as liquidity tools in crypto markets. But this role is changing quickly.
Stablecoins are evolving from niche trading instruments to a fundamental layer of global financial infrastructure. They now serve as settlement assets in decentralized finance (DeFi), payment rails for cross-border transfers, and the preferred settlement currency for tokenized financial markets.
Institutions that once approached crypto cautiously are beginning to recognize the technology’s potential. The International Monetary Fund (IMF) noted that stablecoins could improve the efficiency of cross-border payments by reducing the number of intermediaries involved in global transactions. Meanwhile, policymakers in the United States are moving to integrate stablecoins into the regulated financial system.
Since most of these tokens are pegged to the US dollar, they could also have a much bigger impact: quietly extending the dollar’s reach across the entire global blockchain-based economy.
How is a Stablecoin issued and why is it important?
A user provides fiat currency, usually U.S. dollars, to an approved issuer. In return, the issuer creates an equivalent amount of stablecoins on a blockchain, maintaining a 1:1 ratio. The fiat received is placed in reserve accounts, typically held in cash or short-term U.S. Treasury bills, which guarantee the value of the tokens in circulation.
When a user wants to exit, the process works in reverse: the stablecoins are bought back and the user receives fiat reserves. This issue-repurchase mechanism is what anchors the price of the stablecoin to its reference asset.
Stablecoins allow near-instant settlement, 24/7, regardless of bank opening hours. They enable programmable transactions, where payments can be automated and integrated into digital systems. And they provide access to dollar-denominated value, often without requiring a traditional bank account.
The World Economic Forum has established that stablecoin transaction volumes reach tens of billions of dollars annually, highlighting their growing role as a critical component of digital financial activity.
For policymakers, this represents both an opportunity and a challenge. The US Treasury noted that digital payment innovations, including stablecoins, can improve efficiency, reduce costs and promote financial inclusion, provided appropriate safeguards are in place.
Use cases and applications
· Cross-border payments: Stablecoins enable near-instant international transfers at a fraction of the cost of traditional correspondent banking systems.
· Remittances: In many emerging markets, stablecoins offer faster and cheaper alternatives to traditional remittance providers, who often charge significant fees.
· Decentralized Finance (DeFi): Stablecoins serve as collateral, liquidity pools, and settlement assets on lending protocols, decentralized exchanges, and derivatives markets.
· Tokenized real-world assets: As tokenization expands into bonds, real estate, and commodities, stablecoins increasingly function as a settlement currency for digital financial markets.
· Corporate Treasury and Global Settlement: Fintech companies and multinational corporations are experimenting with stablecoins to facilitate cross-border treasury operations and instant settlement of international transactions.
In short, stablecoins are gradually becoming the base layer of digital financial activity.
The regulatory turning point: the GENIUS law
The transition of stablecoins from niche crypto instruments to recognized financial infrastructure accelerated significantly in 2025 with the passage of the GENIUS Act (the Act Guiding and Establishing National Innovation for American Stablecoins in the United States).
The legislation created the first comprehensive federal framework governing the issuance of payment stablecoins. Under the law, regulated entities, including banks and licensed non-bank financial institutions, are permitted to issue stablecoins backed by high-quality liquid assets and subject to strict requirements, including reserve transparency, regular audits, anti-money laundering and anti-terrorism financing (AML/CTF) under the Bank Secrecy Act.
One of the most important aspects of the GENIUS Act was regulatory clarity. For years, uncertainty over whether stablecoins should be treated as securities, commodities, or banking products created hesitation among institutional players. The law resolved this ambiguity by establishing stablecoins as a separate category of digital payment instruments.
Stable coins and monetary power
Dollar-denominated stablecoins largely dominate the market compared to those pegged to other currencies. This dominance has an important implication as stablecoins can extend the reach of the US dollar beyond the traditional banking system.
Other jurisdictions are responding with their own regulatory strategies. For example, the European Union, through its Crypto Asset Markets (MiCA) framework, has introduced strict requirements for stablecoin issuers operating within the EU, including reserve requirements and limits designed to protect monetary sovereignty – but is also exploring the creation of a central bank digital currency (CBDC).
In Asia, financial centers such as Hong Kong and Singapore are developing licensing regimes aimed at overseeing the issuance of stablecoins and integrating the technology into regulated financial markets. China, meanwhile, has taken a different path by prioritizing the development of a central bank digital currency and exploring digital yuan settlement systems that could expand its monetary influence internationally.
The future of stablecoins will depend on trust in their reserves, in their governance and in the systems that supervise them. And ultimately, their long-term value will be defined not by how quickly they evolve, but by how securely and sustainably they integrate into the global financial system.
– Claudia Marcela Hernández, digital assets specialist
Ask an expert
Q. How important is stablecoin regulation for tokenized capital markets?
Stablecoin regulation is important because tokenized capital markets need a credible on-chain settlement asset. But regulation alone is not enough. For stablecoins to support tokenized institutional markets, there must also be legal certainty regarding settlement finality, redemption at par, issuer credit risk, and how stablecoin-based settlement fits into the payment system and securities laws.
In this sense, stablecoin regulation is a necessary basis for tokenized capital markets, but not the entire framework. What institutions ultimately need is assurance that the settlement asset is reliable, that obligations are legally discharged when transactions are settled on-chain, and that the broader market structure can operate with clear and coordinated oversight.
Q. Are some jurisdictions starting to view US stablecoin policy as a risk?
Yes, it is increasingly recognized that stablecoins have geopolitical and monetary implications. Since the vast majority of fiat-backed stablecoins are denominated in US dollars, their adoption could expand the reach of the dollar in blockchain-based financial systems. As U.S. policy frameworks formalize regulated dollar-backed stablecoins, this dynamic becomes more entrenched, allowing the United States to shape both currency and digital financial infrastructure standards.
In Canada, for example, proximity to the United States, deep financial integration, and broader geopolitical uncertainty have heightened this focus. The concern is less about direct competition than about dependence. Without a national framework, Canadian users and institutions could default to foreign-issued stablecoins based on the US dollar.
Canada’s approach has been to create a framework that promotes innovation and competition while ensuring safety, consumer protection and interoperability with global regimes. The goal is to enable domestic and foreign stablecoins to operate under Canadian oversight, while preserving monetary relevance and ensuring Canadians have reliable, regulated options in a digital financial system.
Q. How can advisors assess whether a stablecoin is credible?
As stablecoins become more integrated into regulated systems, credibility comes down to a few fundamental factors. First, the quality and transparency of reserves: assets must be fully backed by high-quality liquid instruments with regular information or audits. Second, redemption: holders must have a clear and enforceable right to redemption at par. Third, regulatory oversight: Credible issuers operate within defined legal and compliance frameworks. Governance is also important, including issuer structure, jurisdiction and retention of reserves. Ultimately, the key question is not just whether a stablecoin trades at $1, but whether its structure ensures that it can consistently respond to redemptions and maintain user trust during stressful times.
– Morva Rouhani, Executive Director, Canadian Web3 Council
