What Are Stablecoins and Why Do They Matter?

For people interested in crypto, even if you're not an expert, these developments are important. Stablecoins act like bridges between traditional money (like the U.S. dollar) and the often-volatile world of digital assets like Bitcoin.

The U.S. Congress is quickly approaching a vote on legislation that could bring substantial changes to the rapidly expanding market for stablecoins, a type of digital asset tethered to a stable value such as the U.S. dollar.

Stablecoins have exploded in popularity, now amounting to over $216 billion globally according to information presented alongside the legislative proposals. This rapid growth has caught the attention of regulators worldwide, including in the U.S., who want to make sure these digital dollars are used safely and reliably.

What Are Stablecoins and Why Do They Matter?

Before diving into the laws, let’s quickly recap what stablecoins are. Imagine a digital token that’s designed to always be worth, say, exactly one U.S. dollar. Unlike Bitcoin or Ethereum, whose prices can swing wildly, stablecoins aim for stability by being backed by real-world assets. Usually, this means the company issuing the stablecoin holds an equivalent amount of dollars, government bonds, or other safe assets that can be quickly liquidated if required in reserve for every digital coin they create.

This stability makes them useful for several things:

Stablecoin Payloads

The stablecoin market has exploded in recent years, now worth over $216 billion globally according to information presented alongside the legislative proposals. This rapid growth has caught the attention of regulators worldwide, including in the U.S., who want to make sure these digital dollars are safe and reliable.

Enter the GENIUS and STABLE Acts: What Do They Propose?

Seeing the need for clear rules, U.S. lawmakers have introduced two major bills:

The GENIUS Act

(Guiding and Establishing National Innovation for U.S. Stablecoins Act)

At the time of writing, this bill has already made progress, passing the Senate Banking Committee in March 2025 with rare bi-partisan support from both Republicans and Democrats. It focuses heavily on making sure stablecoin issuers are transparent and accountable. According to the Senate Banking Committee’s information release, key proposed rules include:

Full Backing: Issuers must hold reserves equal to at least 100% of the value of all their stablecoins in circulation. These reserves must be in safe assets like cash, bank deposits, or short-term U.S. government debt. Risky practices like using algorithms alone to maintain value (algorithmic stablecoins) would likely be banned or heavily restricted given the chaos that Terra-Luna reaped on the market a few years ago.

Transparency: Companies would have to publicly report details (known in crypto as Proof of Reserves) about their reserves every month on their websites. This includes what assets they hold and how much.

Regular Checks: Independent accounting firms would need to examine these reserves monthly. For very large issuers (those with over $50 billion in stablecoins), annual audited financial statements would be required.

Consumer Protection: The rules aim to protect users. Issuers would need to follow consumer protection laws, and regulators could take action against bad actors. Importantly, if an issuer goes bankrupt, stablecoin holders would have priority in getting their money back.

Anti-Money Laundering (AML): Stablecoin issuers would be treated like other financial institutions and required to follow rules designed to prevent money laundering and terrorist financing.

Who Regulates? The bill proposes a split system. Large issuers (with over $10 billion in market cap) would be overseen by federal banking regulators like the Federal Reserve or the Office of the Comptroller of the Currency (OCC). Smaller issuers could be regulated primarily at the state level.

The STABLE Act

(Stablecoin Transparency and Accountability for a Better Ledger Economy Act)

Introduced in the House of Representatives shortly after the GENIUS Act moved forward in the Senate, the STABLE Act shares similar goals. It aims to establish clear rules for U.S. dollar-backed stablecoins, focusing on transparency, consumer safety, and holding issuers responsible.

While specific public details are less exhaustive than for the GENIUS Act, statements suggest it proposes a comparable framework. Industry groups like the American Bankers Association note its focus on giving federal authorities like the OCC power over certain issuers while emphasizing consumer protection. It appears likely to also involve a federal-state regulatory split similar to the one proposed in the GENIUS Act.

Both bills signal a move towards bringing stablecoins firmly within the traditional financial regulatory perimeter, aiming to prevent collapses like those seen with some failed stablecoin projects in the past and build broader confidence.

Impact on Stablecoin Use and Adoption

So, what could these rules mean for everyday users and businesses?

Increased Trust in the U.S.

One of the biggest potential impacts is increased trust. Knowing that stablecoins are backed 1-to-1 by safe assets and regularly checked could make more people comfortable using them. With estimates suggesting around 65 million Americans already own some form of cryptocurrency, clear regulations could encourage wider adoption for payments, savings, or