Stablecoins—digital dollars that move instantly across borders without banks—are quickly becoming a serious part of the financial system. Global movement of stablecoins (primarily among capital markets) amounted to $10.9 trillion worldwide in 2025. And consumers around the world are exhibiting growing interest in using stablecoins for purchases, cross-border transactions, and peer-to-peer payments. Stablecoins are here to stay and are poised to occupy an increasingly large role in the economy. The real question is whether the United States will lead this shift or let it move overseas.
That question is now before policymakers. The Office of the Comptroller of the Currency is nearly done accepting feedback on its proposed rulemaking to implement the GENIUS Act, a law signed by President Trump last summer with the intent to solidify the U.S. as the global leader in financial innovation. This will set the very first rules of the road to regulate stablecoin issuers. If we do not set a clear path forward for innovation, the proposal could make it harder for American firms to compete.
Regulating a market of this size and strategic importance should begin with a careful accounting of costs and benefits. Failing to consider a robust economic analysis would be a gift to legacy financial institutions eager to preserve their dominance.
Consider the questions raised on a stablecoin issuer’s ability to pay “yield.” While the GENIUS Act prohibits stablecoin issuers from paying interest on stablecoins, it leaves open the possibility for third-party arrangements that could offer interest-bearing products. The questions raised by the OCC, however, suggest they are considering going beyond the language of the GENIUS Act by creating a presumption that any entity involved in the stablecoin ecosystem is covered unless they can prove their activities do not satisfy the legal restriction. The cost and chilling effect on consumer-friendly innovation from presuming guilt unless proven innocent is obvious.
Another head-scratching idea raised is to limit each stablecoin issuer to a single brand of stablecoin. One virtue of a digital currency is the ability to tailor certain products for specific purposes and users, such as enabling PayPal users to exchange money within the PayPal ecosystem or by allowing a bank to issue stablecoins with their brand, much like credit cards are issued by banks. Instead of allowing a single regulated entity to manage the issuance of stablecoins on behalf of these downstream consumer-facing institutions, the questions posed by the OCC suggest they are considering a requirement that each stablecoin brand has a separate company, backed by its own fully capitalized, independently licensed entity. This requirement would be wasteful and redundant, driving up costs for smaller players and restricting competition. Large institutions can absorb those costs. Startups and new entrants cannot.
Then there are questions on reserve requirements. Mandating every issuer back their stablecoins with the same narrow set of assets, such as short-term Treasury bonds, insured bank deposits, or cash balances held at a Federal Reserve Bank, would be a mistake. While it is legitimate to require some backing for stablecoins (distinguishing them from pure crypto currencies such as Bitcoin or Ethereum), such a narrow definition excludes other comparable assets such as 1 or 2 year Treasuries or corporate commercial paper. In the short run, this could reproduce the dynamics of the 2008 financial crisis when herding around securitized subprime loan assets created first a bubble and then a bust in values. But long run concerns are even more striking—in the past three years the stablecoin market has grown 35-45% per year, several times the rate of the short-term Treasury market. Freezing such a narrow definition of permitted reserves in place quickly will impose an arbitrary ceiling on stablecoin growth.
Were these provisions to be included in any final rulemaking, we would all but guarantee the competitive advantage for overseas competitors. Today, most stablecoin issuers are based in the United States and 99% of global stablecoins are backed by U.S. assets. But if it becomes materially more expensive and legally uncertain to operate in the United States, firms will do what markets always do—they will move. If we throttle the stablecoin market while other countries allow it to flourish, the most likely outcome will be less U.S. oversight, less transparency, and fewer buyers for U.S. Treasuries, even as stablecoin issuers today already hold more than $155 billion in U.S. government debt.
Why head down this path? The answer lies less in abstract regulatory theory than in old-fashioned political economy. America’s largest banks have long enjoyed their role as gatekeepers of the financial system, collecting an estimated $200 billion annually in transaction fees. Stablecoins threaten that model by offering faster, cheaper alternatives that do not depend on legacy intermediaries.
Those same institutions now warn of chaos if innovation proceeds. They invoke community banks as sympathetic proxies, even though it is precisely smaller institutions that stand to benefit from lower-cost infrastructure and expanded competition. This is a familiar playbook: wrap self-interest in the language of stability and consumer protection, then call it reform.
Facilitating the establishment of the U.S. stablecoin market and providing a high ceiling for its growth will have another important virtue—of heading off calls for Chinese-style government-issued central bank digital currency. Decentralized government-regulated stablecoins issued by multiple competing private companies will meet the growing demand for digital payments without the threats to civil liberties and currency manipulation of government-issued digital money.
Congress has already recognized the stakes in legislation such as the CLARITY Act, which seeks to bring coherence to digital asset regulation. But legislation alone is not enough if regulators implement it in ways that entrench incumbents and export innovation abroad.
There is a better path, and the government has an opportunity to build on the momentum created when GENIUS passed, instead of bringing it to screeching halt. The economic arguments are clear, to say nothing of the risks of overreaching their authority as one of the first major tests of regulatory authority in a post-Chevron legal environment. Instead of painting itself into a narrow corner, the OCC would do well to provide a flexible framework for future evolution. Opening itself to legal challenges would further stall the clarity and innovation that is needed and was the intent of this law.
We are on the precipice of a revolution of the dollar’s global role that will unlock cheaper, faster, and easier ways for Americans to control their money. We need a framework that promotes competition, protects consumers, and reinforces American financial leadership.
