In today’s newsletter, Claudia Marcela Hernández discusses how stablecoins have evolved beyond volatility fixers to become the fundamental settlement asset for tokenized global markets and cross-border payments, following the clarity provided by the GENIUS Law.
So, in ask an expertMorva Rohani discusses how stablecoin regulation serves as a foundation for tokenized capital markets, why some jurisdictions view US stablecoin policy as a risk, and the key factors advisors should use to assess the credibility of a stablecoin.
Learn about the latest advances in the Clarity Law in Keep reading.
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– Sara Morton
Are stablecoins the infrastructure that is reshaping global finance?
Stablecoins were originally designed to solve one of the first problems with cryptocurrencies: volatility. By pegging their value to fiat currencies like the US dollar, stablecoins provided traders with a trusted unit of account that could move across blockchains without the price swings associated with assets like bitcoin. For years, they primarily functioned as liquidity tools within the crypto markets. But that role is changing rapidly.
Stablecoins are evolving from niche trading instruments to a fundamental layer of global financial infrastructure. They now serve as settlement assets in decentralized finance (DeFi), payment gateways for cross-border transfers, and the preferred settlement currency for tokenized financial markets.
Institutions that once approached cryptocurrencies with caution are beginning to recognize the technology’s potential. The International Monetary Fund (IMF) has noted that stablecoins could improve the efficiency of cross-border payments by reducing the number of intermediaries involved in global transactions. Meanwhile, policymakers in the United States are taking steps to integrate stablecoins into the regulated financial system.
Because most of these tokens are pegged to the US dollar, they may also be doing something much more consequential: quietly extending the reach of the dollar in the global blockchain-based economy.
How is a stablecoin issued and why is it important?
A user provides fiat currency, typically US dollars, to an authorized issuer. In exchange, the issuer mint an equivalent amount of stablecoins on a blockchain, maintaining a 1:1 peg. The fiat money received is placed in reserve accounts, typically in cash or short-term US Treasuries, which back the value of the tokens in circulation.
When a user wants to exit, the process works in reverse: the stablecoins are redeemed and the user receives fiat money from the reserves. This issuance-redemption mechanism is what anchors the price of the stablecoin to its reference asset.
Stablecoins allow for near-instant settlement, 24/7, regardless of banking hours. They allow programmable transactions, where payments can be automated and integrated into digital systems. And they provide access to dollar-denominated value, often without the need for a traditional bank account.
The World Economic Forum established that stablecoin transaction volumes have reached tens of trillions of dollars annually, underscoring their growing role as a central component of digital financial activity.
For policymakers, this presents both an opportunity and a challenge. The US Treasury has noted that innovations in digital payments, including stablecoins, can improve efficiency, reduce costs and promote financial inclusion, as long as appropriate safeguards are in place.
Use cases and applications
· Cross-border payments: Stablecoins enable near-instant international transfers at a fraction of the cost of traditional correspondent banking systems.
· Remittances: In many emerging markets, stablecoins offer faster and cheaper alternatives to traditional remittance providers, which often charge significant fees.
· Decentralized Finance (DeFi): Stablecoins serve as collateral, liquidity pools, and settlement assets in lending protocols, decentralized exchanges, and derivatives markets.
· Tokenized real-world assets: As tokenization expands to include bonds, real estate and commodities, stablecoins increasingly function as a settlement currency for digital financial markets.
· Corporate treasury and global settlement: Fintech companies and multinational companies are experimenting with stablecoins to facilitate cross-border treasury operations and instant settlement of international transactions.
In short, stablecoins are gradually becoming the base layer of digital financial activity.
The regulatory tipping point: the GENIUS Law
The transition of stablecoins from niche cryptographic instruments to a recognized financial infrastructure was significantly accelerated in 2025 with the passage of the GENIUS Act (the National Innovation Guidance and Establishment Act for US Stablecoins in the United States).
The legislation created the first comprehensive federal framework governing the issuance of payment stablecoins. Under the law, regulated entities, including banks and approved non-bank financial institutions, can issue stablecoins backed by high-quality liquid assets and subject to strict requirements including reserve transparency, regular audits, anti-money laundering and counter-terrorism financing (AML/CTF) under the Bank Secrecy Act.
One of the most important aspects of the GENIUS Act was regulatory clarity. For years, uncertainty over whether stablecoins should be treated like securities, commodities, or banking products raised doubts among institutional players. The law addressed this ambiguity by establishing stablecoins as a distinct category of digital payment instruments.
Stablecoins and monetary power
Dollar-denominated stablecoins dominate the market by a wide margin compared to those pegged to other currencies. That dominance has an important implication because stablecoins can extend the reach of the US dollar beyond the traditional banking system.
Other jurisdictions are responding with their own regulatory strategies. For example, the European Union, through its Markets in Crypto Assets (MiCA) framework, has introduced strict requirements for stablecoin issuers operating within the EU, including reserve requirements and limits designed to protect monetary sovereignty, but is also exploring the creation of a Central Bank Digital Currency (CBDC).
In Asia, financial centers such as Hong Kong and Singapore are developing licensing regimes aimed at overseeing the issuance of stablecoins and integrating the technology into regulated financial markets. Meanwhile, China has taken a different path by prioritizing the development of a central bank digital currency and exploring digital yuan settlement systems that could expand its monetary influence internationally.
The future of stablecoins will depend on confidence in their reserves, their governance and the systems that supervise them. And ultimately, their long-term value will be defined not by how quickly they grow, but by how securely and sustainably they become part of the global financial system.
– Claudia Marcela Hernández, specialist in digital assets
ask an expert
Q. How important is stablecoin regulation for tokenized capital markets?
Stablecoin regulation is important because tokenized capital markets need a credible on-chain settlement asset. But regulation alone is not enough. For stablecoins to support tokenized institutional markets, there must also be legal certainty around the purpose of settlement, par repayment, the credit risk of the issuer, and how stablecoin-based settlement fits within the payments system and securities laws.
In that sense, stablecoin regulation is a necessary foundation for tokenized capital markets, but not the entire framework. What institutions ultimately need is confidence that the settlement asset is reliable, that obligations are legally met when transactions are settled on-chain, and that the broader market structure can operate with clear and coordinated oversight.
Q. Are some jurisdictions starting to view the US stablecoin policy as a risk?
Yes, there is a growing recognition that stablecoins have geopolitical and monetary implications. Because the vast majority of fiat-backed stablecoins are denominated in US dollars, their adoption could expand the reach of the dollar into blockchain-based financial systems. As US policy frameworks formalize regulated dollar-backed stablecoins, this dynamic becomes more entrenched, positioning the United States to shape both the currency and the standards of digital financial infrastructure.
In Canada, for example, proximity to the United States, deep financial integration, and broader geopolitical uncertainty have sharpened this approach. The concern is less about direct competition and more about dependency. Without a national framework, Canadian users and institutions could choose not to use foreign-issued US dollar-based stablecoins.
Canada’s approach has been to create a framework that enables innovation and competition while ensuring safety, consumer protection and interoperability with global regimes. The goal is to allow domestic and foreign stablecoins to operate under Canadian supervision, while preserving monetary relevance and ensuring Canadians have regulated and trusted options in a digital financial system.
Q. How can advisors assess whether a stablecoin is credible?
As stablecoins become integrated into regulated systems, credibility comes down to a few fundamental factors. First, reserve quality and transparency: assets must be fully backed by high-quality liquid instruments with regular disclosure or audits. Second, reimbursement: holders must have a clear and enforceable right to reimbursement at par. Third, regulatory oversight: credible issuers operate within defined legal and compliance frameworks. Governance also matters, including issuer structure, jurisdiction, and custody of reserves. Ultimately, the key question is not just whether a stablecoin trades at $1, but whether its structure ensures that it can consistently fulfill swaps and maintain user trust during periods of stress.
– Morva Rohani, Executive Director, Canadian Web3 Council
