- Who We Serve
- What We Do
- About Us
- Insights & Research
- Who We Serve
- What We Do
- About Us
- Insights & Research
Spreading Stablecoins
Policies to support mainstream crypto adoption are underway.
By Ryan Boyle
President Trump’s array of day-one executive orders included “Strengthening American Leadership in Digital Financial Technology” to support the use of digital assets. The order included a goal of “promoting and protecting the sovereignty of the United States dollar” through the development of dollar-backed stablecoins. Following on Trump’s pledge to provide a friendlier environment for digital assets, private sector interest and legislative proposals are moving to grow this sector.
Stablecoins are cryptocurrencies pegged to the value of another currency. Unlike the wild swings that can occur in the value of Bitcoin and its ilk, stablecoins have a fixed value relative to some other financial asset. To provide assurance of their worth, they are backed by safe and liquid assets like cash and Treasury bills. Any currency can be the basis of a stablecoin, but the two leaders in this category, USDC and USDT, are both linked to the U.S. dollar.
The coins are most commonly used to facilitate the purchase of other cryptocurrencies. When a dollar deposit is made to a crypto exchange, the value is shown as a dollar stablecoin, which can then be traded into other tokens. Stablecoins also have use for cross-border commerce and remittances. These blockchain-based dollars can be exchanged freely worldwide, then converted into local currency.
Stablecoins are an easy entry to a volatile asset class.
With a fixed value backed by financial instruments, stablecoins have similarities to conventional products like bank deposits and money market funds. Stablecoins are instantly tradable at all times, not bound to market hours. However, most stablecoins do not pay interest to their holders; the issuers make money from the yield on the underlying assets that support them. And stablecoins carry no deposit insurance, nor the full faith and credit of a government-issued security.
Conventional financial products could benefit from integrating stablecoin technology. Money funds are exploring the use of blockchains to transfer and update share ownership. Bank depositors may enjoy the free, instant transfer capability afforded by a crypto-based deposit.
Regulation of cryptocurrencies is evolving. The Biden administration erred on the side of restricting their use. The Trump team is advocating a more laissez-faire approach, but unregulated financial products can invite fraud and facilitate unlawful actions. Balanced regulation will be a challenge. Stablecoins are a natural starting point, as they have the most in common with cash.
The House Financial Services Committee has drafted the Stablecoin Transparency and Accountability for a Better Ledger Economic (STABLE) Act. The House bill is largely aligned with a Senate proposal, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Both bills seek to align financial regulations: banks will be able to issue stablecoins subject to Federal Reserve regulation. The Office of the Comptroller of the Currency will gain authority to supervise large nonbank stablecoin issuers, and state regulators would supervise smaller coins.
Regulating stablecoins similarly to conventional financial instruments will help to overcome skepticism and reduce illicit activity. Audits will help ensure that coin issuers carry sufficient collateral to underpin their value. Some banks have signaled their willingness to issue stablecoins, once a regulatory framework is in place.
The road ahead for crypto adoption and crypto regulation is unclear. We have expressed skepticism of the need for cryptocurrency, as its volatile value and high transaction costs render it less useful as a means of exchange. But stablecoins’ cash-like nature overcomes these problems and will be accompanied by a regulatory framework that can serve as a stamp of approval. This may help stablecoins bridge into transaction usage that goes beyond the cryptocurrency arena.
Delving into cryptocurrencies requires learning new definitions, like “coins” that are ethereal and “wallets” unlike the kind made of leather. Hopefully, regulatory structures surrounding stablecoins will guard against the need to redefine “stable.”
Related Articles
Read Past Articles
Meet Our Team
Carl R. Tannenbaum
Chief Economist
Ryan James Boyle
Chief U.S. Economist
Vaibhav Tandon
Chief International Economist
Subscribe to Publications on Economic Trends & Insights
Gain insight into economic developments and our latest forecasts for the United States.
Information is not intended to be and should not be construed as an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Under no circumstances should you rely upon this information as a substitute for obtaining specific legal or tax advice from your own professional legal or tax advisors. Information is subject to change based on market or other conditions and is not intended to influence your investment decisions.
© 2025 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. For legal and regulatory information about individual market offices, visit northerntrust.com/terms-and-conditions.