Stablecoins in the Encryption World: Evolution of Applications and Regulations

The development of the encryption field is advancing rapidly, but from an application perspective, the current crypto world is not fundamentally different from what it was 5 or 10 years ago. Although the market size continues to expand, decentralized finance (DeFi) has become a major highlight, the truly well-known crypto applications still focus on the currency field, mainly Bitcoin and stablecoins.

Although both of these cryptocurrencies have received a lot of attention, their development paths are completely different. Bitcoin has gained global recognition with its astonishing price increase and has become a representative of decentralized currency. From a practicality perspective, stablecoins are the true encryption assets that have achieved large-scale global application.

Currently, the global stablecoin market capitalization has reached $243.8 billion. According to data platform statistics, the total trading volume of stablecoins in the past 12 months has reached $33.4 trillion, with the number of transactions reaching 5.8 billion, and the total number of active unique addresses reaching 250 million.

These data fully demonstrate that the application demand and logic of stablecoins have reached a considerable level of maturity. However, from a regulatory perspective, stablecoins are still in the adjustment phase. In recent years, the regulation of stablecoins has been continuously improved globally. Recently, the U.S. Senate passed the "Guiding and Promoting American Stablecoin Innovation Act" (GENIUS Act ), clearing obstacles for global stablecoin regulation once again.

The development of stablecoins is rapid, with a明显 head effect.

Stablecoins are encrypted assets that maintain stable value by being pegged to fiat currencies, precious metals, bulk commodities, or asset combinations. Their main goal is to eliminate the high volatility of cryptocurrencies, providing users with reliable settlement, value storage, and investment tools. As a measure of value in the crypto market, each expansion of stablecoins reflects the growth of the industry scale. In 2017, the total circulation of stablecoins globally was less than $1 billion, and now it is close to $250 billion. During the same period, the size of the global crypto market also grew from less than $1 trillion to $3 trillion, gradually entering the mainstream.

Recent data suggests that this bull market can be seen as a stablecoin bull market. After an incident on a certain trading platform, the global stablecoin supply dropped from 190 billion USD to 120 billion USD, but then steadily increased, continuing to rise over 18 months. Meanwhile, the price of Bitcoin climbed from a low of 17,500 USD to over 100,000 USD. The reason for this is that the liquidity in this bull market mainly comes from external institutions, and external institutions usually prefer stablecoins as a medium when entering the market, thus reflecting an increase in external liquidity and an expansion in the scale of stablecoins.

Currently, there are a variety of stablecoins. They can be categorized into centralized and decentralized stablecoins based on the control center, and into USD stablecoins and non-USD stablecoins based on fiat currency types. They can also be further subdivided according to whether they accrue interest, the type of collateral, and so on. Unlike other encryption assets, although interest-bearing or rebate stablecoins have appeared in the market, stablecoins are essentially core pricing tools due to their stable value. They are not used for speculation, are less subject to official restrictions, and can be used globally, which lays the foundation for stablecoins to become a global currency.

In terms of coverage, emerging markets such as Brazil, India, Indonesia, Nigeria, and Turkey, especially in regions with weak financial infrastructure and severe inflation, have also started to use stablecoins in daily transactions, aside from developed areas like Europe, America, Japan, and South Korea. According to a report from a payment company last year, the most popular use of stablecoins in non-encryption fields is as a currency alternative (69%), followed by payment for goods and services (39%) and cross-border payments (39%).

This indicates that stablecoins have begun to shed the label of being merely encryption investment tools and have become an important entry point for the integration of the crypto market and the global economy. Against this backdrop, the development landscape of global stablecoins has attracted significant attention. In terms of market share, US dollar stablecoins account for 99% of the stablecoin market and are colloquially referred to as the "dollar branch."

Looking at it in detail, due to the scale effects inherent in the currency itself, the strong become stronger, and the obvious trend towards centralization is a key feature of the stablecoin sector. Centralized stablecoins dominate the market, with USDT being the absolute leader, holding a market share of 152 billion USD, accounting for 62.29% of the total. The second is USDC, with a market size of about 60.3 billion USD, representing 24.71%. Together, these two stablecoins account for over 80% of the total market, indicating a high concentration. The third is USDe, which adopts a unique mechanism and offers high yields, strictly speaking, is a semi-centralized stablecoin, currently with a market size of 4.9 billion USD. The decentralized stablecoin USDS in a certain ecosystem is about 3.5 billion USD, while DAI currently has a size of only 4.5 billion USD. From the perspective of public chains, a certain public chain holds absolute dominance, with a market share as high as 50%, followed by a certain public chain (31.36%), a certain public chain (4.85%), and a certain public chain (4.15%).

From a business perspective, the issuance of stablecoins is a highly profitable venture. Large-scale issuance can bring the marginal costs of the issuer close to zero, and the model of direct conversion of digital currency to cash allows the issuer to profit significantly from risk-free returns. Taking a stablecoin issuer as an example, according to its revenue report for the entire year of 2024, the net profit reached $13.7 billion within a year, and the group’s net assets increased to $20 billion, while the company only has 165 employees, demonstrating remarkable efficiency per capita. Such a high level of profit is attracting major institutions to enter the space, and in recent years, traditional financial institutions and payment giants have been actively laying out strategies in this field, with internet companies also showing signs of interest. Currently, a project from a political figure’s family has also launched the stablecoin USD1, which quickly expanded after its soft launch on April 12, having integrated over 10 protocols or applications.

Regulatory Adjustment Accelerates, U.S. Senate Passes the GENIUS Act

As institutions rush in, regulation follows suit. Currently, places like the United States, the European Union, Singapore, Dubai, and Hong Kong have begun or have already improved their legislative frameworks related to stablecoins. As a center of encryption, the United States is undoubtedly the most watched region globally.

From the perspective of U.S. regulation, stablecoins have undergone a process from high uncertainty to gradual clarification. Before 2025, the U.S. Congress had not issued specific regulations for stablecoins and encryption. Under existing regulations, multiple regulatory agencies have defined stablecoins in order to gain dominance in this emerging field. One law enforcement agency regulates entities engaged in the issuance and trading of encryption through a licensing system, while one committee considers some stablecoins as securities according to the Securities Exchange Act, and another committee focuses on anti-fraud and anti-market manipulation regarding stablecoins based on commodity definitions. This complex regulatory system not only makes it difficult to define entities but also leads to a diverse trend in the stablecoin regulatory environment across states under the U.S. administrative system, with some states even having independent cryptocurrency licenses.

It can be seen that the regulation of stablecoins before 2025 is quite fragmented, and there is even regulatory chaos caused by the struggle between regulatory agencies, bringing high uncertainty and compliance challenges to the stablecoin industry. However, with the new government taking office, the regulation of stablecoins has been accelerated.

In February of this year, the U.S. House of Representatives Digital Assets Subcommittee and the Financial Services Committee respectively submitted the "2025 Stablecoin Transparency and Accountability Promotion Ledger Economy Act" (STABLE bill ) draft. In the same month, several senators jointly introduced the "Guidance and Establishment of the U.S. Stablecoin National Innovation Act" (GENIUS bill ) in the Senate.

The concentrated proposal of the two major bills is not accidental, but rather a forward-looking action supported by high-level backing. At the first encryption summit held by the White House in March this year, a senior official expressed great interest in stablecoins, calling them a "promising" growth model and clearly indicating a desire for Congress to submit the relevant legislation to the President's office before the August recess, sending a clear signal.

On March 17, the Senate Banking Committee passed the GENIUS Act with bipartisan support, with 18 votes in favor and 6 against, and formally submitted the bill to the Senate. On March 26, the STABLE Act was successfully submitted in revised form and was passed by the House Financial Services Committee on April 3, submitted to the House for a full vote.

Although both are stablecoin bills, their focuses are slightly different. STABLE prioritizes federal uniform control, while GENIUS emphasizes the establishment of a parallel dual-track management system at the state and federal levels. STABLE limits issuance eligibility to insured deposit institutions and federally approved non-bank entities, whereas GENIUS allows more types of issuing entities to have open access. Both require reserves to support 1:1 and disclose monthly, but STABLE is stricter, additionally requiring insurance from the Federal Deposit Insurance Corporation, while imposing a two-year ban on algorithmic stablecoins, whereas GENIUS allows for the exploration of algorithmic stablecoin mechanisms under specific conditions. Furthermore, the GENIUS bill supports providing interest or returns to stablecoin holders, while the STABLE bill explicitly prohibits the payment of interest.

During the practical process, both major bills faced various challenges. State governments opposed the federal regulatory priority in stablecoins, and some industry insiders expressed dissatisfaction with the strict provisions. Meanwhile, Genius mainly sparked discussions about compliance costs, arguing that the dual-track system would increase compliance costs and that the bill overly focused on the domestic U.S. market, neglecting the usage needs of third-world countries.

Currently, the GENIUS bill is progressing faster than STABLE. On May 9, the GENIUS bill failed to pass in the Senate vote with 48 votes in favor and 49 votes against, due to a certain party's demand for strengthening anti-corruption provisions and prohibiting members of the executive branch from holding encryption. However, the other side did not make concessions. In response, a senior official publicly expressed dissatisfaction with the decision.

Not long after, the GENIUS bill made a second attempt. The updated version has divided the regulatory mechanism by scale, where stablecoins with assets exceeding 10 billion are federally regulated, and those with a market value below 10 billion are regulated by individual states. At the same time, it clearly separates from the insurance credit and government credit of the United States, reducing systemic risk and increasing restrictions on technology companies participating in stablecoins. Although the updated bill still does not address the ethical norms questioned by a certain political party, there has been progress in protecting investors and existing mechanisms. Against this backdrop, some lawmakers changed their positions, and on the night of the 19th, the U.S. Senate passed the procedural motion for the GENIUS bill with a vote of 66 in favor and 32 against, clearing the way for final legislation.

The next step will enter the full debate and amendment process in the Senate, after which it will be submitted to the House of Representatives for review. Considering that the threshold for passage in the House is relatively low, there is a high likelihood that the bill will ultimately be submitted to the President's office for signing to become final legislation.

The passage of this bill is undoubtedly an important milestone in the history of American encryption assets, as it will fill the regulatory gap for stablecoins in the United States, clarify regulatory entities and rules, and further promote the robust development of the American stablecoin industry, contributing to the mainstreaming of the encryption industry. From the perspective of the United States itself, after the promulgation of the regulations, the influence of the dollar, based on stablecoins, will be more pronounced, and the trend of the encryption market becoming an appendage of the dollar will continue to strengthen, providing a core driver for the construction of centralized and decentralized hegemony of the dollar. It is worth noting that regardless of the type of bill, stablecoin holders are required to hold U.S. Treasury bonds, dollars, etc., which also creates a new and ongoing demand for U.S. debt.

Outside the United States, global stablecoin regulation has begun to take shape

The clear regulation of stablecoins will only be established in 2025, indicating that the United States is not leading in this area. In fact, even before the United States, the European Union had introduced the MiCA bill for the cryptocurrency market (, which provides a comprehensive regulatory framework for all crypto assets, including stablecoins. Regarding stablecoins, MiCA categorizes them into asset-referenced tokens and electronic money tokens, also prohibiting algorithmic stablecoins. It requires stablecoin issuers ), especially those with a certain market scale (, to maintain a 1:1 capital reserve, comply with transparency rules, and register with EU regulatory authorities. Meanwhile, a certain regulatory agency has suggested implementing strict capital management systems for insurance companies holding crypto assets ), including stablecoins (, requiring these companies to allocate 100% of capital against such asset holdings.