Cryptocurrencies are notoriously volatile. You don’t have to be a genius to know that’s the case. It’s why some have said calling them “currencies” is a misnomer.
After all, who wants to transact business using a medium of exchange that could be worth significantly more or significantly less only moments after buying or selling something in exchange for it? Very few people have that appetite for risk.
And yet, there’s widespread recognition that blockchain technology has the potential to revolutionize the way payments are made. In fact, many people are already using “the blockchain” to instantaneously remit “money” for a variety of reasons.
But it’s worth pausing here to consider a fundamental question: What is that money being remitted? What does the term money mean in the blockchain context? More often than not, it’s a tokenized representation of a real-world fiat (government-backed) currency. (Think a dollar, euro, pound, yen, etc. represented by a token (computer code) on the blockchain).
These so-called stablecoins are supposed to provide a 1-to-1 representation of the currency backing them. Today, the overwhelming majority of stablecoins are backed by the U.S. Dollar. So, in theory, someone should be able to redeem one USDC or one dollar-denominated Tether token for one dollar of real-world value.
But the problem is that these stablecoins haven’t always been so stable. In the past several years there have been a few high-profile depegging events. For example, the crypto token might only be worth 60 cents instead of a dollar or conversely it might be worth more, say $1.20. Both are bad and indicative of the type of volatility stablecoins seek to avoid.
Part of the problem may be nomenclature. Stablecoins, as the term has been used, really has referred to at least four different types of crypto assets.
But when most people think of stablecoins, they think of the fiat-backed variety, which tend to be much more stable (provided they’re properly capitalized) than their nominally named more exotic stablecoin counterparts.
The Senate’s Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act) seeks to bring needed clarity and stability to the stablecoin realm by providing clarity to the market about certain key stablecoin components .
For instance, it would define key terms, provide a federal regulatory framework, and establish the parameters of when the states and the federal government can share oversight of stablecoin issuers.
Importantly, too, as the Congressional Research Service explains, it would define payment stablecoins essentially as “a digital asset issued for payment or settlement and redeemable at a predetermined fixed amount (e.g., $1).” Moreover, “Issuers would be required to hold at least one dollar of permitted reserves [which are typically high-quality liquid assets like cash, insured deposits, treasury bills, or repurchase agreements] for every one dollar of stablecoins issued.” (Though Congress should take care to make sure any loopholes are closed so that stablecoins are truly backed on a 1-to-1 basis and that the same dollar isn’t promised to multiple creditors).
It would also end the turf war between the Securities and Exchange Commission and the Commodities Futures Trading Commission by taking them out of the equation when it comes to regulating payment stablecoins.
As CRS also explained, the Act “would grant stablecoin holders priority over all other claims against the issuer in bankruptcy” and would update the bankruptcy code accordingly. It would also “clarify that payment stablecoins are not securities or commodities and are not federally insured.”
One controversial—at least to some payment stablecoin issuers—is the fact the Act, as currently written, prohibits a “permitted payment stablecoin issuer” from offering “a payment of yield or interest on its issued payment stablecoin.”
Coinbase’s CEO, Brian Armstrong, has said that “unlike interest-bearing checking and savings accounts, stablecoins do not currently benefit from the same exemptions under the securities laws that allow issuers to pay interest to user.” He says that they “should be able to pay interest just like an ordinary savings account” and that doing so would be a “win-win” for the consumers and the U.S. economy.
Both Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent have emphasized that shoring up stablecoins could help undergird the U.S. Dollar as the world’s reserve currency and supercharge the dollar’s dominance.
Time will tell whether those predictions come true. But there’s broad bipartisan agreement that it doesn’t take a genius to see that legislation to stabilize the stablecoin market is long overdue, and the GENIUS Act is a step in that direction.
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