What are stablecoins? Everything you need to know about crypto under debate in Congress

new York
CNN
—

Stablecoins are poised to go mainstream, analysts say, as a landmark regulatory bill moves through Congress.

The Senate is deliberate the GENIUS lawwhich would provide a framework for regulating stablecoins. The bill cleared a major procedural hurdle in the Senate last week after initial resistance from some Democrats.

Stablecoins are a type of crypto asset tied to the value of another asset, such as the US dollar or gold. They were initially created as a way for crypto investors to store their money, but have gained popularity in recent years for their use in digital payments.

This landmark bill would boost the legitimacy of the crypto industry and is another example of how cryptocurrencies have seen a major revival during President Donald Trump’s second term.

Crypto proponents have welcomed the focus on advancing stablecoin regulation. Still, critics have pointed out the Trump family’s ties to the crypto industry: for example, World Liberty Financial, a company linked to the Trump family, published its own stable currency.

“Stablecoins appear (to be) here to stay,” JPMorgan Chase analysts said in an April note. “A few years ago, we probably would have debated the accuracy of that phrase. Not today.”

While cryptocurrencies are known to be volatile and fluctuating in value, stablecoins are meant to be, as their name suggests, stable.

In fact, stable coins are linked one by one to another asset. They are most often pegged to the US dollar, making a stablecoin worth $1.

Companies that issue stablecoins are expected to hold reserves of other assets to back their coins and assure buyers of their value. For example, a company issuing stablecoins linked to the US dollar could hold cash or equivalent assets like short-term US government bonds.

Two of the main stablecoin issuers are El Salvador-based Tether, which issues USDT, and US-based Circle, which issues USDC – and both of these stablecoins are pegged to the dollar.

Tether’s stablecoin has a market value of just under $154 billion and represents 62% of the total stablecoin market, according to data from CoinMarketCap.

Circle’s stablecoin has a market value of around $61 billion and represents around 25% of the total stablecoin market, according to data from CoinMarketCap.

The total market value of stablecoins increased from $20 billion in 2020 to $246 billion in May 2025, according to Deutsche Bank analysts.

Stablecoins emerged in 2014 as a way for crypto investors to park their money while buying and selling other, more volatile cryptocurrencies like bitcoin. Since then, stablecoins have grown in popularity, particularly because of their potential use in digital payments, said Darrell Duffie, a finance professor at Stanford University.

Visa (V) announced in May a partnership with Bridge, a stablecoin company owned by fintech startup Stripe, to enable payments using stablecoins in Latin American countries.

Stablecoins, given their stable value, can serve as a medium of exchange and function as a digital currency. Crypto coins have proven useful in speeding up cross-border payments.

“Cross-border payments offer the most exciting new use cases,” Duffie said. “Making a payment, such as a remittance or supplier payment to or from an emerging market country, can now be made faster and more cost-effectively than a traditional correspondent bank payment. »

Although stablecoins are significantly less volatile than other crypto coins, they are not without risks. If the assets backing the coin fall in value and the one-to-one peg collapses, it could cause the equivalent of a bank run, Duffie said.

Stablecoins gained notoriety in 2022 when TerraUSD, an obscure type of coin called algorithmic stablecoincollapsed in value and caused panic among investors.

There are also security risks, such as people forgetting the passcode to their crypto wallet.

The GENIUS Act stands for “Guiding and Establishing Domestic Innovation for 2025 U.S. Stablecoins.”

The Crypto Industry During the Election Cycle paid money in Trump’s re-election campaign and in congressional races. “It’s about the return on investment of the crypto industry’s campaign spending,” Hillary Allen, a law professor at American University, told CNN’s David Rind.

If the legislation passes, it could pave the way for widespread adoption of stablecoins for digital payments and spur growth in the stablecoin sector, said Christian Catalini, founder of the MIT Cryptoeconomics Lab. He added that traditional Wall Street firms and startups would also compete to offer stablecoins.

For major stablecoin issuers, Circle would likely benefit more from increased regulation than Tether because Circle is a U.S.-based company while Tether is based in El Salvador, Del Wright, a law professor at Louisiana State University who specializes in crypto, told CNN.

Others have pointed out that the GENIUS Act does not adequately address the risks associated with stablecoins.

“As with banks, the U.S. government should closely regulate stablecoin companies to protect consumers and the economy from financial crashes,” Amanda Fischer, policy director at Better Markets, a nonprofit advocacy group, said in a statement. “The GENIUS Act instead exposes taxpayers to crypto-fueled bailouts by providing a dangerously weak regulatory framework.”

“Stablecoins are poised for mainstream adoption in 2025 as the U.S. moves forward with landmark legislation,” Deutsche Bank analysts said in a May note. Despite some resistance in the Senate, analysts “still expect progress this year.”