Stablecoins: Regulatory Developments as U.S. Lawmakers Push for Clarity

Stablecoins, digital currencies tied to assets like the U.S. dollar, have seen increased regulatory focus in the U.S. as Congress considers legislation. The SEC classifies specific stablecoins as payment tools rather than securities. With significant transactions and profitability in the sector, lawmakers aim to establish a clear regulatory framework.

A significant shift is occurring in the cryptocurrency industry, particularly concerning stablecoins, which are digital currencies pegged to assets such as the U.S. dollar. These assets maintain a constant value and have distinguished themselves from volatile cryptocurrencies like Bitcoin. According to the World Economic Forum, stablecoins are essentially designed to function as stable digital dollars.

In the last year, stablecoins have enabled approximately $15.6 trillion in transactions. The U.S. Securities and Exchange Commission (SEC) has stated that certain stablecoins, referred to as covered stablecoins, are not classified as securities if they adhere to specific criteria. Consequently, issuing entities are exempt from the standard securities registration procedures. The SEC suggests that these coins are primarily payment instruments rather than investments, akin to using U.S. dollars.

Increasing attention is being given to stablecoins by U.S. legislators from both political parties. Although a regulatory framework is currently lacking, Congress is working on potential legislation. The Senate Banking Committee has presented the Genius Act, while the House Financial Services Committee has pushed forward the Stable Act. Upcoming votes are anticipated, aiming to determine the operational framework and issuing authorities for stablecoins well into the future. Senator Bill Hagerty, a proponent of the Genius Act, commented on the previous administration’s negative stance on crypto and the need for a clear regulatory environment to foster innovation in stablecoins.

The stablecoin sector has expanded considerably, currently backed by over $230 billion. Tether, one of the leading issuers, reported profits of $13 billion in 2024 alone, highlighting the market’s substantial growth and increasing demands for regulatory oversight. This burgeoning market has attracted established companies like PayPal, who became the first major brand to introduce a stablecoin, indicating potential future entrants to the space.