During the 2024 elections, the cryptocurrency industry spent an unprecedented amount on campaign contributions, hoping to encourage Congress to enact legislation favorable to crypto. These efforts appear to have been largely successful, with many pro-crypto legislators now in Congress. Their initial focus? Regulating stablecoins.
Stablecoins are cryptocurrencies designed to maintain the value of a U.S. dollar. Supporters claim stablecoins help the U.S. maintain the dollar’s global prominence, while allowing for more accessible, affordable, and secure global transactions. Stablecoin usage is rapidly increasing: its total value is approximately $235 billion, a significant increase from $152 billion a year prior.
In March, President Trump stated his intention to sign stablecoin legislation by August. Congress has responded accordingly: both the House and Senate have recently moved stablecoin bills out of committee.
Here’s a concise overview of stablecoins, the proposed legislation, and potential risks.
What are stablecoins and who supports them?
Stablecoins function similarly to bank deposits. Typically, an individual seeking stablecoins provides U.S. dollars to an issuing company, which then creates a stablecoin on a blockchain. The user can then use this stablecoin as a payment method worldwide, wherever it’s accepted.
Crypto traders favor stablecoins because their prices are more stable compared to assets like Bitcoin or Ethereum, leading to more predictable trading. Moreover, many individuals worldwide appreciate stablecoins because they retain value better than currencies in countries experiencing high inflation, such as Argentina and Turkey.
In the U.S., stablecoin advocates span the political spectrum. On the right, political figures like House Majority Whip believe that stablecoins help preserve the dollar’s status as the world’s reserve currency. A substantial number of eurodollars—unsecured dollars issued by foreign banks rather than the Federal Reserve—remain in global circulation. Stablecoins could meet this considerable demand, offering a safer and more easily transactable alternative. Additionally, since stablecoin issuers often back their stablecoins with U.S. Treasuries, increased stablecoin demand could alleviate the burden of the growing U.S. debt, proponents suggest.
On the left, some Democrats believe stablecoins can promote financial inclusion and dismantle biased banking systems. New York Representative Ritchie Torres told TIME in September that he believed stablecoins could assist his constituents in his largely immigrant district in quickly sending money to the Caribbean and Latin America, while avoiding check-cashing fees or predatory lenders. “The ability to move a tokenized dollar at the speed of the blockchain has the potential to create a better, cheaper, and faster payment system for the lowest-income communities,” he stated. Torres was among those who voted in favor of the STABLE Act, which advanced out of the House Financial Services Committee on April 2.
What are the main stablecoins, and how is Trump now involved?
The stablecoin market is currently dominated by two players: USDT (issued by Tether) and USDC (issued by Circle). Tether is very popular outside the U.S. but has been accused of making misleading claims about its reserves. Howard Lutnick, Trump’s new Commerce Secretary, previously had ties to the company.
The bills under consideration in Congress could enable many other types of companies to issue their own stablecoins. Notably, the Trump family’s crypto company, World Liberty Financial, recently announced its own stablecoin. This is the latest of Trump’s crypto ventures, including an NFT collection and a meme coin.
World Liberty’s stablecoin announcement was quickly criticized due to concerns that Trump would again have a direct financial stake in an industry he is supposed to regulate. California Democrat Maxine Waters, who has been working on stablecoin legislation, now firmly opposes any bill that would allow Trump to own a stablecoin. French Hill, a Republican from Arkansas and the House Financial Services Committee Chair, stated this week that Trump’s crypto initiatives have made drafting legislation “more complicated.”
What kind of legislation is being considered?
Both the House and Senate have advanced stablecoin bills—The STABLE Act and the GENIUS Act, respectively—out of their respective committees. The bills outline guidelines for regulating stablecoins, and the amount and types of reserves stablecoin issuers must maintain. The House and Senate will now have the chance to reconcile the two bills, aiming to get a unified bill to President Trump by the summer.
If legislation is enacted, many financial institutions would likely seek to create their own stablecoins. Bank of America, for example, indicated it would launch a stablecoin once lawmakers legalize it. PayPal and Visa have also announced stablecoin initiatives.
What are the main critiques of stablecoin legislation?
There is strong bipartisan interest in a stablecoin bill in Washington. However, some lawmakers have expressed concerns. Elizabeth Warren, a prominent crypto skeptic in Congress, has argued that legitimizing stablecoins carries systemic risks, particularly vulnerability to bank runs. In 2022, the stablecoin UST collapsed when it lost its dollar peg and plummeted to zero. UST, however, was an algorithmic stablecoin, a type of currency that the STABLE Act prohibits from receiving federal approval for two years.
“The bill lacks basic safeguards necessary to ensure that stablecoins don’t blow up our entire financial system,” Warren remarked at a hearing for the GENIUS Act in March. “Under this bill, stablecoin issuers can invest in risky assets, including the very assets that were bailed out in 2008.”
Some critics also worry that the stablecoin bills, as currently drafted, could allow Big Tech companies like Meta and X to issue their own currencies, further consolidating corporate power. “If people think there’s a Big Tech surveillance state now, imagine what there would be when they have access to every piece of financial information about you,” says Arthur Wilmarth, a professor emeritus at George Washington University Law School. “There’s very little, if anything, in the bills that would give you protection.”