In today’s newsletter, Claudia Marcela Hernández analyzes how stablecoins have evolved beyond volatility fixers to become the fundamental settlement asset for global tokenized markets and cross-border payments, following the clarity of the GENIUS Act.
After that, i Ask an expertMorva Rohani breaks down how stablecoin regulation serves as a foundation for tokenized capital markets, why some jurisdictions see US stablecoin policy as a risk, and the key factors advisors should use to assess a stablecoin’s credibility.
Learn about the latest advances in the Clarity Act i Continue reading.
Good reading.
-Sarah Morton
Are stablecoins the infrastructure reshaping global finance?
Stablecoins were originally designed to solve one of crypto’s earliest problems: volatility. By pegging their value to fiat currencies like the US dollar, stablecoins gave 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 that role is changing fast.
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 settlement currency of choice for tokenized financial markets.
Institutions that once approached crypto cautiously are beginning to recognize the technology’s potential. The International Monetary Fund (IMF) has noted that stablecoins can improve the efficiency of cross-border payments by reducing the number of intermediaries involved in global transactions. Meanwhile, politicians in the United States are moving to integrate stablecoins into the regulated financial system.
Because most of these tokens are pegged to the US dollar, they can also do something far more consequential: quietly expand the dollar’s reach across the blockchain-based global economy.
How are a Stablecoin issued and why do they matter?
A user delivers fiat currency, typically US dollars, to a licensed issuer. In return, the issuer mints a corresponding amount of stablecoins on a blockchain and maintains a 1:1 peg. The received fiat is placed in reserve accounts, usually in cash or short-term US Treasury bonds, which support the value of the tokens in circulation.
When a user wants to exit, the process works in reverse: Stablecoins are redeemed and the user receives fiat from the reserves. This issue-redemption mechanism is what anchors the stablecoin’s price to its reference asset.
Stablecoins enable near-instant, 24/7 settlement, independent of banking hours. They allow for 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 stated that transaction volume for stablecoins has reached tens of trillions of dollars annually, underscoring their growing role as a core component of digital financial activity.
For politicians, this is both an opportunity and a challenge. The US Treasury Department has noted that digital payment innovations, including stablecoins, can increase 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.
· Transfers: In many emerging markets, stablecoins offer faster and cheaper alternatives to traditional money transfers, which often charge significant fees.
· Decentralized Finance (DeFi): Stablecoins serve as collateral, liquidity pools and settlement assets across lending protocols, decentralized exchanges and derivatives markets.
· Real-World Tokenized Assets: As tokenization expands to include bonds, real estate, and commodities, stablecoins are increasingly serving as settlement currency for digital financial markets.
· Corporate treasury and global settlement: Fintech companies and multinationals 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 Act
The transition of stablecoins from niche crypto-instruments to recognized financial infrastructure accelerated significantly in 2025 with the passage of the GENIUS Act (the Guiding and Establishing National Innovation for US Stablecoins Act in the United States).
The legislation created the first comprehensive federal framework governing the issuance of stablecoins. Under the law, regulated entities, including banks and approved non-bank financial institutions, are allowed to issue stablecoins with high-quality liquid assets and subject to strict requirements, including reserve transparency, regular auditing, anti-money laundering and counter-terrorism financing (AML/CTF) under the Bank Secrecy Act.
One of the most important aspects of the GENIUS Act was legislative clarity. For years, uncertainty about whether stablecoins should be treated as securities, commodities or banking products has created hesitation among institutional players. The law addressed this ambiguity by establishing stablecoins as a distinct category of digital payment instruments.
Stablecoins and money power
Dollar-denominated stablecoins dominate the market by a wide margin compared to those pegged to other currencies. This dominance has an important meaning because 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 Markets in Crypto-Assets (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 hubs such as Hong Kong and Singapore are developing licensing schemes aimed at overseeing stablecoin issuance 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 oversee them. And ultimately, their long-term value will not be defined by how quickly they scale, but by how safely and sustainably they become part of the global financial system.
– Claudia Marcela Hernández, digital asset specialist
Ask an expert
Q. How important is stablecoin regulation to tokenized capital markets?
Stablecoin regulation is important because tokenized capital markets need a credible on-chain settlement asset. But regulation alone is not enough. In order for stablecoins to support institutional tokenized markets, there must also be legal certainty around final settlement, redemption at par, issuer credit risk and how stablecoin-based settlement fits into payment system and securities legislation.
In that sense, stablecoin regulation is a necessary foundation for tokenized capital markets, but not the whole framework. What institutions ultimately need is confidence that the settlement asset is reliable, that obligations are legally met when transactions are settled on-chain, and that the broader market structure can operate with a clear, coordinated view.
Q. Are some jurisdictions starting to see US stablecoin policy as a risk?
Yes, there is growing recognition that stablecoins have geopolitical and monetary implications. Because the vast majority of fiat-backed stablecoins are denominated in US dollars, their adoption could expand the dollar’s reach into blockchain-based financial systems. As US policy frameworks formalize regulated dollar-backed stablecoins, this dynamic becomes more entrenched, positioning the US to shape both the currency and the standards for digital financial infrastructure.
In Canada, for example proximity to the US, deep financial integration and broader geopolitical uncertainty have sharpened this focus. The concern is less about direct competition and more about dependency. Without a domestic framework, Canadian users and institutions could default on foreign-issued, USD-based stablecoins.
Canada’s approach has been to create a framework that enables innovation and competition while ensuring safety, consumer protection and interoperability with global regimes. The goal is to allow both domestic and foreign stablecoins to operate under Canadian supervision while maintaining monetary relevance and ensuring Canadians have confidence in regulated opportunities in a digital financial system.
Q. How can advisors assess whether a stablecoin is trustworthy?
As stablecoins integrate into regulated systems, credibility comes down to a few core factors. First, reserve quality and transparency: Assets should be fully backed by high quality liquid instruments with regular disclosure or audit. Second, redemption: holders must have a clear, enforceable right to redeem at par. Third, regulatory oversight: credible issuers operate within defined legal and compliance frameworks. Governance also matters, 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 it can consistently meet redemptions and maintain user confidence during periods of stress.
– Morva Rohani, Executive Director, Canadian Web3 Council
