Remember all the talk about central bank digital currencies (CBDCs) and their potential threat to personal sovereignty – where the authorities can snoop on your purchases and put expiry dates on money?

An interesting development may halt these plans in their tracks in the form of the GENIUS Act recently enacted by Donald Trump’s administration in the US. In essence, it allows US banks to issue stablecoins provided they are 100% backed by US Treasuries with a 90 day maturity and less. It means Tether and USDC will have competition.

The EU believes this could push stablecoin supply from $230 billion in 2025 to $2 trillion by 2028.

We’re already seeing stablecoins transform the payments and ecommerce space with near instant settlement (unlike several days for banks and card issuers like Visa and Mastercard) and much lower costs.

Visa and Mastercard are already integrating stablecoins into their systems while some of the biggest US merchants like Walmart and Amazon are exploring their use. Everyone likes the idea of handling less cash, and stablecoins appears to be just the ticket.

EU regulatory authorities have been left in the dust on this one. European Central Bank head Christine Lagarde still thinks the digital Euro has a future, but she is simply out of her depth here. 

Comments Listed Reserve: 

There is absolutely no chance that the digital euro will compete here. They will likely be swamped by the speed of US innovation. It’s almost like the Americans have seen the issue (and there is one) and they have just gone for it. Let's hammer home our dominance by flooding the world with dollars via this mechanism. The European response will almost certainly be a €1,000 maximum per person, EU citizens only, and KYC only. Nobody will use it other than as a handy way of not getting mugged when visiting Rome.  

This takes currency wars to the next level. Once it was about managing competitive devaluations. Now the distribution mechanism has been weaponised. Stablecoins were always hugely popular in our industry because they are useful. Their legitimisation is likely to see a massive increase in issuance. Even the ECB thinks $2 trillion in the next few years. I’d say much more.

A feature of the crypto landscape is that it is always 10 steps ahead – in technological terms – of the regulators. Stablecoins were originally designed as a way for crypto bros to park their profits without leaving the crypto rails. Now we have discovered they are as good as, if not better, than actual dollars. 

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