During the 2024 elections, the crypto industry spent an unprecedented amount of money on campaign donations in the hopes of encouraging Congress to pass pro-crypto legislation. Those efforts seem to have largely succeeded, with pro-crypto legislators filling the halls of Congress. The first crypto-related area they’ve decided to tackle? Stablecoin regulation.
Stablecoins are cryptocurrencies designed to hold the value of a U.S. dollar. Proponents argue that stablecoins help the U.S. preserve the global importance of the dollar, while allowing people worldwide to transact more freely, cheaply, and securely. Stablecoin usage is growing enormously: its total market cap is around $235 billion, up from $152 billion just a year ago.
In March, President Trump said that he hoped to sign stablecoin legislation by August. Congress has responded accordingly: In the past month, both the House and Senate have advanced stablecoin bills out of committee.
Here’s a brief overview of stablecoins, the proposed legislation, and potential risks.
What are stablecoins and who supports them?
Stablecoins are somewhat like bank deposits. Typically, a consumer who wants a stablecoin gives a dollar to an issuing company, who mints a stablecoin on a blockchain. The user can then send that stablecoin around the world as a form of payment to anyone who accepts it.
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Crypto traders like stablecoins because they do not fluctuate in price nearly as much as assets like Bitcoin or Ethereum, making trading more predictable. And many non-traders across the world appreciate stablecoins because they hold their value better than currencies in countries with high inflation, like Argentina and Turkey.
In the U.S., stablecoin supporters come from across the political spectrum. On the right, political leaders like House Majority Whip Tom Emmer argue that stablecoins help maintain the dollar’s status as the world’s reserve currency. A massive number of Eurodollars—unsecured, unofficial dollars that are issued by foreign banks as opposed to the Federal Reserve—remain in circulation across the world. Stablecoins could fill this significant demand—and offer a safer, more transactable alternative. And because stablecoin issuers often secure their stablecoins by buying U.S. Treasuries, an increase in stablecoin demand could help ease the burden of the U.S.’s ballooning debt, proponents argue.
On the left, some Democrats believe that stablecoins provide paths to financial inclusion and toward dismantling biased banking systems. New York Representative Ritchie Torres told TIME in September that he believed stablecoins could help constituents in his heavily-immigrant district send money home to the Caribbean and Latin America quickly, while avoiding check-cashing fees or predatory loan sharks. “The ability to move a tokenized dollar at the speed of the blockchain has the potential to create a better, cheaper, and faster payment system for the lowest-income communities,” he said. Torres was one of six Democrats who voted in favor of the STABLE Act, which passed out of the House Financial Services Committee on April 2.
What are the main stablecoins, and how is Trump now involved?
The stablecoin market is currently dominated by two players: USDT (issued by Tether) and USDC (issued by Circle). Tether is extremely popular outside the U.S. but has been accused by regulators of making misleading statements about its reserves. Howard Lutnick, Trump’s new Commerce Secretary, previously had financial ties to the company.
The bills being considered by Congress would open the door for many other types of companies to issue their own stablecoins. Notably, the Trump family’s crypto company World Liberty Financial recently announced its own stablecoin. This is just the latest of Trump’s crypto ventures, which have included a federal Bitcoin reserve and a meme coin.
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World Liberty’s stablecoin announcement drew swift criticism over concerns that Trump would yet again have a direct financial stake in an industry he is supposed to regulate. California Democrat Maxine Waters, who has been working on stablecoin legislation for years, now says she staunchly opposes any bill that would allow Trump to own a stablecoin. French Hill, a Republican from Arkansas and the House Financial Services Committee Chair, said this week that Trump’s crypto initiatives made drafting legislation “more complicated.”
What kind of legislation is being considered?
Both the House and Senate have passed stablecoin bills—The STABLE and GENIUS Acts, respectively—out of their respective committees. The bills lay out guidelines for how stablecoins will be regulated, and the amount and types of reserves stablecoin issuers must have on hand. The House and Senate will now have the opportunity to reconcile the two bills in the hopes of getting a unified bill onto President Trump’s desk by the summer.
If legislation passes, many financial institutions would likely seek to create their own stablecoin. Bank of America, for instance, said it would launch a stablecoin once lawmakers make it legal to do so. PayPal and Stripe have also announced stablecoin initiatives.
What are the main critiques of stablecoin legislation?
The appetite in Washington for a stablecoin bill is high among legislators on both sides of the aisle. But some lawmakers have raised concerns. Elizabeth Warren, one of the most vocal crypto skeptics in Congress, has argued that the legitimization of stablecoins comes with systemic risks, especially because they could be susceptible to bank runs. In 2022, the stablecoin UST caused a massive crypto crash when it lost its dollar peg and hurtled to zero. UST, however, was an algorithmic stablecoin, a type of currency that the STABLE Act bans from getting federal approval for two years.
“The bill lacks basic safeguards necessary to ensure that stablecoins don’t blow up our entire financial system,” Warren said at a hearing for the GENIUS Act in March. “Under this bill, stablecoin issuers can invest in risky assets, including the very assets that were bailed out in 2008.”
Some critics also worry that the stablecoin bills, as they are currently written, allow for Big Tech companies like Meta and X to issue their own currencies, further consolidating corporate power. “If people think there’s a Big Tech surveillance state now, imagine what there would be when they have access to every piece of financial information about you,” says Arthur Wilmarth, a professor emeritus at George Washington University Law School. “There’s very little, if anything, in the bills that would give you protection.”
