Regulators Legitimize Stablecoins, Paving the Way for Payments Revolution

Retail stablecoin adoption has reached a new milestone, with transaction volumes surging in 2025, rising by approximately 50% year-over-year. The U.S. dollar-denominated stablecoin market, which accounts for roughly 99% of the global stablecoin market, has grown to $225 billion, representing about 7% of the broader $3 trillion crypto ecosystem tracked by J.P. Morgan Global Research. The market cap of the stablecoin basket ended June 2025 up 2% month-over-month, continuing seven consecutive months of positive growth despite a more volatile overall crypto market [2].

This surge in adoption is partly attributed to the regulatory clarity provided by the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), signed into law in July. The law creates a federal regulatory framework for stablecoin issuance and adoption, providing a clear pathway for non-banks, subsidiaries of insured depository institutions, and state-chartered entities to become permitted stablecoin issuers. Teresa Ho, head of U.S. Short Duration Strategy at J.P. Morgan, noted that stablecoins "seem here to stay," highlighting the law’s potential to legitimize and accelerate stablecoin adoption [2].

Stablecoins differ from traditional cryptocurrencies in that they maintain a stable value relative to an underlying asset—typically a fiat currency such as the U.S. dollar. They are broadly categorized into fully reserved stablecoins, which are backed one-to-one by assets like fiat or short-term government securities, and algorithmic stablecoins, which use smart contracts to adjust token supply in response to price fluctuations. J.P. Morgan projects the stablecoin market could expand to $500–750 billion in the coming years, although the firm considers more aggressive forecasts—such as $2 trillion by 2028—as overly optimistic [2].

The rise of stablecoins has also drawn the attention of traditional financial institutions. Mastercard, for example, has been actively integrating stablecoins into its payment systems. The company introduced a crypto credential system that simplifies blockchain transactions by replacing complex wallet addresses with user-friendly usernames. This innovation aims to reduce errors and streamline merchant settlement processes, particularly for cross-border transactions. Stablecoins offer distinct advantages over traditional payment methods: lower transaction fees, instant settlement times, and predictable value—attributes that are especially valuable for corporate treasury and global payments management [3].

However, stablecoins are not without risks. They can be vulnerable to run risks, where large numbers of investors redeem their holdings simultaneously, as seen in the collapse of TerraUSD in 2022. The Bank for International Settlements has also noted that stablecoins fall short of three key monetary tests—singleness, elasticity, and integrity—raising concerns over their regulatory compliance and systemic stability. Despite these challenges, the growing infrastructure and regulatory developments indicate that stablecoins are being increasingly integrated into the traditional financial ecosystem [2].

In China, stablecoin adoption is more complex. While Hong Kong has introduced its own regulatory framework for stablecoin issuers, Beijing remains cautious, limiting the use of cryptocurrencies. The Chinese government’s dilemma is underscored by the dominance of U.S. dollar-backed stablecoins, which constitute more than 99% of the global stablecoin market. This raises concerns in China about the entrenchment of the U.S. dollar in the international monetary system. Despite this, Hong Kong has emerged as a testing ground for stablecoins, aligning with global trends as the digital asset gains traction [5].

Source:

[1] Stablecoin Has Arrived. Is The Payments Revolution (https://www.investors.com/news/stablecoin-genius-act-payments-revolution/)

[2] What to Know About Stablecoins (https://www.jpmorgan.com/insights/global-research/currencies/stablecoins)

[3] Stablecoin Adoption and the Future of Payments - Redbridge (https://www.redbridgedta.com/market-intelligence/stablecoin-adoption-and-the-future-of-payments/)

[4] China turns crypto-curious (https://www.economist.com/finance-and-economics/2025/09/02/china-turns-crypto-curious)

[5] China's stablecoin dilemma: why US dollar tokens matter (https://www.scmp.com/economy/china-economy/article/3324322/chinas-stablecoin-dilemma-why-us-dollar-tokens-matter-and-how-beijing-might-respond)