Stablecoins a 'Stealth Weapon' for US Power, Dollar Milkshake Creator Says

U.S. stablecoin policy has evolved rapidly in 2025, with the introduction of a federal regulatory framework that now positions stablecoins as core financial infrastructure. The Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the GENIUS Act, introduced reserve requirements, transparency rules, and clear oversight mechanisms. This legislation repositioned stablecoins from unregulated tokens to federally supervised instruments.

The market responded by accelerating adoption, with stablecoin settlement volumes on-chain expected to jump 87% in 2025 from 2024, reaching $90 trillion. This growth reflects a broader trend of stablecoins evolving into digital cash for liquidity management, collateral transfers, and settlement.

New stablecoin blockchains and platforms, such as Tether-aligned Stable and Circle's Arc, emerged to support institutional-grade transactions. These developments suggest a shift in how financial institutions and corporations use stablecoins, especially as they align with federal compliance standards.

Why Did This Happen?

Regulatory clarity played a key role in the growth of stablecoins. Before the GENIUS Act, stablecoin issuers operated in a regulatory gray area, with uneven reserve backing and limited transparency. The collapse of TerraUSD in 2022 highlighted the risks of this unregulated environment.

The Trump administration pushed for a federal approach to crypto oversight, culminating in the GENIUS Act. This law provided a legal framework for stablecoin issuance, including requirements for 1:1 asset backing, monthly reporting, and annual audits. The act also excluded stablecoins from being classified as securities, reducing regulatory friction.

How Did Markets Respond?

The market has embraced the new regulatory environment. Stablecoin market capitalization topped $250 billion by the end of 2025, with these tokens now accounting for over 30% of on-chain transactions.

Major players, including banks and fintech firms, began issuing stablecoins under the new rules. This institutional backing increased trust and adoption, particularly in tokenized markets and cross-border payments.

What Are Analysts Watching Next?

Analysts are closely monitoring the geopolitical implications of U.S. stablecoin policy. The Trump administration's broader strategy in the Western Hemisphere, often referred to as the "Donroe Doctrine," seeks to curb Chinese and Russian influence in regions like Venezuela.

This strategy aligns with the U.S. national security strategy, which emphasizes restoring American dominance in the Americas. While this approach boosts regional influence, it also puts U.S. companies at risk of retaliation from countries like China.

The U.S. dollar's role as a global reserve currency remains a focal point. The Dollar Milkshake Theory, proposed by Brent Johnson, suggests that the U.S. financial system could further consolidate its dominance during a global crisis.

This theory posits that as global liquidity contracts and countries face debt crises, the demand for U.S. dollars will rise. The U.S. dollar's strength as a safe-haven asset and its central role in global trade and debt settlements support this view.

Investors are also tracking the performance of Bitcoin and other cryptocurrencies in 2026. Despite regulatory progress and ETF inflows, Bitcoin prices have not yet mirrored the historic surges seen in prior cycles. As of early January 2026, Bitcoin trades around $93,000, supported by ETF inflows and continued institutional demand.

The interplay between stablecoin adoption, U.S. dollar dominance, and global financial stability is a key theme for 2026. Investors, policymakers, and analysts are watching how these trends converge, particularly in light of potential global financial shocks.

Investors should consider the implications of these developments on their portfolios. A stronger U.S. dollar and a more entrenched stablecoin system may impact global trade, debt markets, and capital flows. Those exposed to non-dollar-denominated assets or emerging markets could face heightened risks.