Regulators Redefine Stablecoin's Role in the Global Power Play

The regulatory landscape for stablecoins is evolving rapidly, with global policymakers seeking to enhance oversight and promote financial innovation. In the U.S., the passage of the GENIUS Act in July 2025 has established a clear legal framework for stablecoins, signaling a shift toward structured governance in a market valued at $288 billion. The law provides clarity for companies issuing dollar-pegged tokens such as Tether’s USDT and Circle Internet’s USDC, fostering greater participation from traditional financial institutions and large corporations like JPMorgan Chase and Citigroup, which are exploring their own stablecoin initiatives [1].

Meanwhile, the European Union is recalibrating its approach to digital currency following the U.S. regulatory move. The Financial Times reported that European policymakers are reconsidering the deployment of a digital euro, exploring the use of public blockchains like Ethereum and Solana rather than the previously favored private infrastructure. This shift is attributed to growing concerns over the dominance of U.S.-backed stablecoins and the potential marginalization of the euro in global cross-border transactions. The European Central Bank (ECB) remains in the evaluation phase, considering both centralized and decentralized technologies to ensure the euro’s relevance in a digitizing economy [1].

Beyond the U.S. and EU, China continues its efforts to expand the reach of the digital yuan through pilot programs, aiming to challenge the global dominance of the U.S. dollar. According to experts, this move reflects a broader strategy to hedge against U.S. currency influence and promote national sovereignty in the digital payments sector. While the digital yuan is not a stablecoin in the traditional sense, its government-backed structure positions it as a strategic alternative to U.S. dollar-pegged tokens. China’s early adoption of a central bank digital currency (CBDC) demonstrates a commitment to shaping the future of digital finance [2].

Stablecoins, by design, offer faster and lower-cost transactions compared to traditional financial systems, making them a compelling option for remittances and international commerce. However, their untested nature in public markets raises concerns about systemic risks, such as the potential for a bank-run-like collapse if confidence in a stablecoin’s peg wanes. The 2022 Terra-Luna incident serves as a cautionary example of how a breakdown in trust can lead to significant financial losses. As a result, regulatory frameworks are being designed to include safeguards against fraud and financial instability [2].

Analysts also highlight the geopolitical implications of stablecoin adoption. Countries like Canada and the U.S. are leveraging stablecoins to strengthen their currency’s international standing, while others, such as China, are exploring alternative digital currencies to reduce dependency on the U.S. dollar. The global competition to shape the future of digital money is intensifying, with stablecoins at the center of a broader strategic contest among economic powers. As regulatory clarity emerges, stablecoins are expected to play an increasingly important role in the global financial ecosystem, enabling new opportunities for yield generation and financial inclusion [2].

Source:

[1] U.S. Stablecoin Law Jolts EU Into Rethinking Digital Euro Strategy – Financial Times (https://www.coindesk.com/policy/2025/08/22/u-s-stablecoin-law-jolts-eu-into-rethinking-digital-euro-strategy-ft)

[2] Stablecoins could transform how we exchange money – CBC (https://www.cbc.ca/news/business/china-us-stablecoin-global-economy-1.7615601)