Crypto for Advisors: The advancement of stablecoins

From specialized trading asset to worldwide financial framework: How stablecoins are broadening the US dollar’s influence and what advisors should be aware of.

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You’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that dissects digital assets for financial advisors. Subscribe here to receive it every Thursday.

In this edition, Claudia Marcela Hernández explores how stablecoins have transformed from volatility mitigators to essential settlement assets for global tokenized markets and international transactions, particularly influenced by the clarity introduced by the GENIUS Act.

Additionally, in Ask an Expert, Morva Rohani clarifies how stablecoin regulation lays the groundwork for tokenized capital markets, the concerns some regions have regarding U.S. stablecoin policies, and the essential criteria advisors should utilize when evaluating a stablecoin’s trustworthiness.

Discover the latest updates regarding the Clarity Act in Keep Reading.

Enjoy the read.

– Sarah Morton

Are stablecoins the framework transforming global finance?

Stablecoins were initially created to address one of the primary challenges in crypto: volatility. By linking their value to fiat currencies like the U.S. dollar, stablecoins provided traders with a dependable unit of account capable of traversing blockchains without the price fluctuations associated with assets such as bitcoin. For an extended period, they primarily served as liquidity instruments within crypto markets. However, this function is swiftly evolving.

Stablecoins are transitioning from specialized trading tools into a critical component of global financial infrastructure. They now act as settlement assets in decentralized finance (DeFi), payment channels for international transfers, and the favored settlement currency for tokenized financial markets.

Institutions that once approached crypto with caution are beginning to recognize the technology’s possibilities. The International Monetary Fund (IMF) has observed that stablecoins could enhance the efficiency of cross-border payments by minimizing the number of intermediaries in global transactions. Simultaneously, U.S. policymakers are working to incorporate stablecoins into the regulated financial framework.

As the majority of these tokens are tied to the U.S. dollar, they might also be playing a more significant role: subtly expanding the dollar’s influence throughout the blockchain-driven global economy.

The Process of Issuing a Stablecoin and its Significance

A user provides fiat currency, usually U.S. dollars, to a licensed issuer. In exchange, the issuer creates an equivalent quantity of stablecoins on a blockchain, maintaining a 1:1 peg. The fiat received is stored in reserve accounts, typically in cash or short-term U.S. Treasuries, which underlie the value of the circulating tokens.

When a user wishes to exit, the procedure reverses: the stablecoins are redeemed, and the user obtains fiat from the reserves. This issuance-redemption system is what stabilizes the stablecoin’s price concerning its reference asset.

Stablecoins facilitate near-instant, 24/7 settlement, independent of traditional banking hours. They enable programmable transactions, allowing for automated payments embedded in digital systems. Moreover, they grant access to dollar-denominated value, frequently without the need for a conventional bank account.

The World Economic Forum has determined that stablecoins transaction volumes have reached tens of trillions of dollars annually, highlighting their increasing importance as a fundamental element of digital financial activity.

For policymakers, this scenario presents both an opportunity and a challenge. The U.S. Treasury has indicated that innovations in digital payments, including stablecoins, can boost efficiency, lower costs, and enhance financial inclusion, provided that suitable safeguards are in place.

Applications and Use Cases

·Cross-border payments: Stablecoins enable rapid international transfers at a significantly lower cost compared to traditional correspondent banking systems.

·Remittances: In numerous emerging economies, stablecoins provide quicker and less expensive alternatives to conventional remittance services, which often impose high fees.

·Decentralized finance (DeFi): Stablecoins function as collateral, liquidity pools, and settlement assets across lending protocols, decentralized exchanges, and derivatives markets.

·Tokenized real-world assets: As tokenization extends to include bonds, real estate, and commodities, stablecoins increasingly act as the settlement currency for digital financial markets.

·Corporate treasury and global settlement: Fintech firms and multinational corporations are exploring stablecoins to enhance cross-border treasury processes and enable instant settlement of international transactions.

In summary, stablecoins are progressively establishing themselves as the foundational layer of digital financial engagement.

The Regulatory Milestone: The GENIUS Act

The evolution of stablecoins from niche crypto instruments to acknowledged financial infrastructure gained significant momentum in 2025 with the enactment of the GENIUS Act (the Guiding and Establishing National Innovation for U.S. Stablecoins Act in the United States).

This legislation introduced the first comprehensive federal framework regulating the issuance of payment stablecoins. Under the law, regulated entities, including banks and authorized non-bank financial institutions, are permitted to issue stablecoins backed by high-quality liquid assets and are subject to stringent requirements, including reserve transparency, routine audits, and anti-money laundering and counter-terrorism financing (AML/CTF) conditions under the Bank Secrecy Act.

A key feature of the GENIUS Act was the establishment of regulatory clarity. For years, uncertainty regarding whether stablecoins should be classified as securities, commodities, or banking products created hesitation among institutional participants. The legislation resolved this uncertainty by categorizing stablecoins as a unique type of digital payment instrument.

Stablecoins and Monetary Authority

Dollar-denominated stablecoins significantly dominate the market compared to those linked to other currencies. This dominance carries important implications as stablecoins may extend the influence of the U.S. dollar beyond the conventional banking sector.

Other regions are responding with their own regulatory approaches. For instance, the European Union, through its Markets in Crypto-Assets (MiCA) framework, has implemented strict requirements for stablecoin issuers functioning within the EU, including reserve mandates and limits designed to safeguard monetary sovereignty — while also considering the introduction of a Central Bank Digital Currency (CBDC).

In Asia, financial centers like Hong Kong and Singapore are formulating licensing frameworks aimed at supervising stablecoin issuance and integrating the technology into regulated financial markets. In contrast, China has prioritized the advancement of a central bank digital currency and is investigating digital yuan settlement systems that could extend its monetary influence on a global scale.

The future of stablecoins will hinge on trust in their reserves, governance, and the systems that regulate them. Ultimately, their enduring value will not be determined by the pace at which they scale, but by how securely and sustainably they integrate into the global financial landscape.

– Claudia Marcela Hernández, digital assets expert

Ask an Expert

Q. How crucial is stablecoin regulation to tokenized capital markets?

Stablecoin regulation is vital as tokenized capital markets require a credible on-chain settlement asset. However, regulation alone is insufficient. For stablecoins to effectively support institutional tokenized markets, there must be legal clarity surrounding settlement finality, redemption at par, issuer credit risk, and how stablecoin-based settlement aligns with payment system and securities regulations.

In this context, stablecoin regulation serves as a necessary foundation for tokenized capital markets, but it is not the complete framework. Institutions ultimately need assurance that the settlement asset is dependable, that obligations are legally fulfilled when transactions settle on-chain, and that the broader market framework can function with clear, coordinated oversight.

Q. Are some regions beginning to perceive U.S. stablecoin policy as a risk?

Indeed, there is increasing awareness that stablecoins have geopolitical and monetary ramifications. Since the overwhelming majority of fiat-backed stablecoins are denominated in U.S. dollars, their acceptance could broaden the dollar’s influence in blockchain-based financial systems. As U.S. policy frameworks formalize regulated dollar-backed stablecoins, this dynamic becomes more entrenched, positioning the U.S. to influence both the currency and standards of digital financial infrastructure.

In Canada, for instance, the proximity to the U.S., deep financial integration, and wider geopolitical uncertainties have heightened this concern. The issue is less about direct competition and more about reliance. Without a domestic regulatory framework, Canadian users and institutions might turn to foreign-issued, USD-based stablecoins.

Canada’s strategy has been to establish a framework that fosters innovation and competition while ensuring safety, consumer protection, and alignment with global standards. The aim is to enable both domestic and international stablecoins to function under Canadian oversight while maintaining monetary relevance and ensuring Canadians have access to trusted, regulated options in a digital financial landscape.

Q. How can advisors evaluate the credibility of a stablecoin?

As stablecoins become integrated into regulated systems, credibility hinges on several essential factors. First, reserve quality and transparency: assets should be entirely backed by high-quality liquid instruments with regular disclosures or audits. Second, redemption: holders must possess a clear, enforceable right to redeem at par. Third, regulatory oversight: credible issuers must operate within specified legal and compliance frameworks. Governance also plays a role, including issuer structure, jurisdiction, and custody of reserves. Ultimately, the critical question is not just whether a stablecoin maintains a $1 value, but whether its structure guarantees it can consistently meet redemption demands and maintain user confidence during periods of stress.

– Morva Rohani, executive director, Canadian Web3 Council

Keep Reading

• Clarity Act update: yield will not be available to be earned in the latest version.
• The New York Stock Exchange has selected Securitize to help design its tokenized securities platform.
• UK challenger bank Monument to tokenize up to £250 million in retail deposits, marking the first instance of a UK-regulated bank tokenizing deposits on a public blockchain.