On June 17, local time, the U.S. Senate passed the National Innovation Act to guide and build the U.S. Stablecoin by a vote of 68 to 30, the regulation of stable currency pegged to the dollar.
When the bill passed by a landslide, Republican senator Bill Haggerty said, “America is on its way to being a cryptocurrency capital!”
The $250bn market size of the stablecoin came into view in the US national legal framework, while the yield curve on Wall Street’s trading terminals trembled slightly.
When the STABLECOIN officially came to the stage of American Finance, a financial experiment began.
01
A stable coin? How?
In March, Donald Trump’s cryptocurrency project, World Liberty Financial, launched a dollar-linked token called USD1.
Unlike other cryptocurrencies in the financial markets, cryptocurrencies like USD1 are backed by legal tender and real assets. This means that, compared to bitcoin, its value fluctuates more steadily, so it is called a“Stable currency”.
In fact, the emergence of stable money is not an accident, but the evolution of cryptocurrency results.
Bitcoin was born in the context of the 2008 financial crisis. During the crisis, some parts of the public lost confidence in the traditional banking system, fearing that assets would be frozen and institutions would fail, creating a“Decentralised, non-dependent” cryptopayment system.
But the problem is that currencies such as bitcoin fluctuate so wildly that they have little stability in day-to-day payments. Over time, Bitcoin has become more of a“Digital gold”– seen as an investment object rather than a medium of exchange.
In 2013, the price of bitcoin soared from $13 at the start of the year to nearly $1,000 by the end of the year, as retail investors flooded the market with the concept of bitcoin as digital gold. This has been followed by multiple bursts of bubbles and speculative crashes.
In early 2014, MT. Gox collapsed, and bitcoin prices plummeted. Bitcoin investors around the world are panicking. The price of bitcoin plunged 15 percent to $464.66, according to the data.
But even so, bitcoin continues to thrive. Today, its price is over $100,000.
In order for cryptocurrencies to move into a more broadly practical scenario with such dramatic price fluctuations, the central conundrum of“Currency instability” must be addressed. The concept of a“Stable currency” was born: by tying cryptocurrencies to real-world legal tender (such as the dollar) , making them less valuable than bitcoin because of speculation, and ups and downs.
Therefore, the stable currency market value will be relatively stable, also can play out its currency attribute.
At present, the world’s two largest market capitalisation of stablecoin Taida (USDT) and the U. S. dollar (USDC) , the combined market value of the two accounts for about 90% of the total market cap.
The“Guide and establish the U. S. Stablecoin National Innovation Act” passed by the Senate is intended to create an initial institutional framework for this emerging asset class.
The bill specifies that for every dollar of stable money issued, it must be backed by“Highly liquid, safe assets” of equal value, ranging from the dollar to short-term treasury bills.
This requirement is essentially to solve the long-standing credit vacuum in cryptographic assets and to inject“Realistic anchors” into currency stability.
At the same time, the bill also included stablecoin anti-money Laundering and financial regulation system for the first time. For example, issuers are required to crack down on illegal transactions and money laundering at the behest of the judiciary or regulators. This means that stablecoin will no longer be a financial instrument in a grey area, but to assume compliance obligations.
On the issue of eligibility, the bill provides that whether banks, credit union subsidiaries, or part of eligible non-bank institutions are expected to obtain stable currency issuance license in the future.
The bill still needs to be passed by the House of Representatives before it can be sent to the president to sign into law.
Predictably, the US will be the first country in the world to bring stablecoin into the mainstream financial regulatory system once it is officially launched. This will not only change the ecological structure of the cryptocurrency industry, but could also create new challenges for the global financial system.
And Is America really ready for all this?
02
The United States uses stable money
What do you mean“Safe”?
The National Innovation Act to guide and build the Stablecoin passed the Senate, and United States Secretary of the Treasury immediately endorsed it.
The stablecoin market is expected to grow to $3.7 trillion by 2030, basent said. A stable money ecosystem backed by US treasuries would boost private demand for US treasuries, potentially lowering government borrowing costs and helping control national debt.
It’s not hard to see how this digital currency legislation has a lot to do with the stability of America’s dollar-backed financial and monetary sector.
Right now, there’s a chronic problem with dollar assets — debt. By pushing stablecoin, the U. S. also hopes to ease the debt problem.
The U.S. economy has long relied on a seemingly perfect closed loop: exporting dollars around the world through huge trade deficits, and countries using large amounts of dollars to buy U.S. Treasury bonds, back to the United States. The U. S. uses the borrowed money to invest around the world, earning big returns that cover interest.
However, the latest figures show that US debt has reached $36,200 bn and is still growing at an alarming rate. Even more alarming is a qualitative change, Bureau of Economic Analysis to a 2024 loss in net primary account income on US investments around the world, according to data from the US Bank Bea.
This sends a grim signal. From a balance-of-payments perspective, the balance of payments that sustains the dollar cycle is being broken.
Wong Ching, Chief Macro Analyst at Oriental Jincheng, told Tan Zhu that interest payments on US federal government bonds as a percentage of fiscal spending in fiscal 2024 have exceeded the safe limit of 10% .
The U. S. debt crisis, the emergence of a new situation.
In this case, if the U. S. debt continues to expand indefinitely, the sustainability of a question mark. At the same time, such signals could shake the confidence of U. S. bondholders. How can the US borrow if fewer people are willing to buy us debt?
The advent of the stable currency has opened up new possibilities for the US.
Imagine that an individual buys a USDT issued by TEDA for $1. Because the USDT is backed by Treasury securities, the user believes it will be convertible into the future The coin company can use the $1 received to buy U. S. bonds or make a second investment.
In this way, stable money has“Chain” purchasing power, and this dollar in the real financial system in circulation.
Stablecoin as a cryptocurrency, can be“Chain” to complete“Point-to-point” transactions, without the need to go through a bank or third-party platform, can improve transaction efficiency, there is room for demand, especially in scenarios such as cross-border payments. With the United States dollar assets, and can make the value of stable currency relatively stable.
As a result, the US envisages an expansion of the stablecoin market to $3,700 bn by 2030, with Stablecoin issuers becoming one of the largest holders of us treasuries.
This will form a new“Chain of U. S. Debt Cycle”: the U. S. Treasury issued bonds, stable currency companies with U. S. dollars to buy, the U. S. Treasury to obtain funds;. And stablecoin companies can sell stablecoin money to continue to buy government bonds, issue stablecoin…
To ensure that this cycle is“Manageable,” the National Innovation Act also specifically restricts the issuance of stablecoins by foreign entities in the United States. This keeps the key“New buyers” within the government’s control.
But the US’s push for stable currencies is not just about defusing us debt risk. It is also about deepening the impact of the dollar on the global financial system.
Stablecoins are traded on a blockchain, peer-to-peer, decentralised basis, without going through national central banking systems. More than 90% of the world’s stablecoins are now pegged to the dollar and have long been used across borders.
That is what America would like to see. If everyone trades online with stablecoins, the virtual equivalent of the“Dollar”, will further squeeze the real world of the local currency space.
If the stable currency spreads unchecked, the influence of the dollar will further erode the sovereign monetary system of other countries. Italy’s finance minister has warned that the dollar-linked stable currency could“Crowd out” the euro. For developing countries with fragile monetary systems and high inflation, the impact will be more direct and severe.
Thus, in the view of the United States, stablecoin is not only the solution to the U. S. debt problem, “Rescue Pill”, will become the U. S. Dollar hegemony to the global digital finance area of a window.
03
Stable money
Will it stabilise us finance?
A careful examination of the logic behind the bill, and the reality of stabilising the money market, might lead to a less optimistic conclusion. From the start, the game of relying on stabilizers to prop up US debt may have faced many uncertainties.
The first thing to see is that this cycle of stable money will inevitably accumulate systemic risk.
One is that it is difficult to ensure that the issuer has sufficient reserves of equivalent funds.
In theory, the stablecoin issuer takes the user’s cash and issues the equivalent; by this logic, it should have sufficient reserves to meet the user’s demand for cash back at any time. But issuers usually invest the money.
TEDA, the largest issuer of TEDA stable notes, is a big holder of U.S. treasuries and is reported to have held more than $120 billion by the first quarter of 2025, more than most of the world’s sovereigns.
This inevitably leads to the problem of TEDA having to come up with so much cash right away if users are concentrating on cashing out. But Treasury bonds are not assets that can be cashed out immediately, and if there is a liquidity problem, it will be like a bank run.
Such a run would undoubtedly be the spark that ignites a systemic crisis.
On the other hand, even if put aside the risk, from the bill on the actual role of U. S. debt, it may also be“Far water is difficult to quench near thirst.”.
The first is more“Stock transfer” than“New liquidity”.
Even the US Treasury’s Advisory Committee on borrowing (TBAC) has voiced concern about this. While it predicts that the currency could grow eightfold over the next three years to more than $2,000 bn, this growth is more about“Stock transfers” than new liquidity.
In fact, people who buy these stable currencies pegged to the U.S. dollar also have to buy them in U.S. dollars, whether they withdraw dollars from banks or money funds, or sell their original purchases of U.S. Treasury bonds, could mean a sell-off in some U. S. debt. As a result, aggregate real demand for U. S. debt is limited.
The second is that the“Straitjacket” attached to the bill may turn out to be a“Dissuasive signal”.
The bill“Name” for stable currency, but also required it to be included in the anti-money laundering system, subject to audit, in line with regulatory action. Such compliance costs money and will be less attractive to users and platforms that seek anonymity and“Decentralisation”, it may even drive them to move up the chain to mortgage-based stablecoins or platforms with non-us backgrounds. In this way, “Rescue the U. S. Debt,” the original purpose of the defeat.
The deeper problem is that the stablecoin preference does not match the“Root cause” of the US debt problem.
For the sake of liquidity, the stable currency issuer’s portfolio mainly anchors short-term treasury bonds such as T-bills, which still can not solve the liquidity problem of the medium and long-term treasury bonds. Medium-and long-term treasuries, which account for nearly 80 per cent of us debt, are a source of stress for the treasury.
One example is the 2023 increase in treasury issuance in the second half of the year, which caused the market to quickly become unbalanced, with the 10-year yield soaring from 3.8 per cent to more than 5 per cent, a direct indication that the market has clearly lost interest in long-term bonds.
If the Treasury chooses to match the growth trend of the STABLECOIN with the addition of future fed policy, it may indeed“Take a breather” by pushing down the ratio of medium-and long-term bonds.
But it comes at a price. To make this adjustment, the treasury would need to increase the share of short-term debt from its current level of about 21 percent — well above the 15 percent to 20 percent range recommended by the Treasury Borrowing Advisory Committee. Once that happens, more debt is quickly coming due each month and needs to be repaid, exposing the treasury to greater interest-rate volatility and short-term funding pressures.
After all, stablecoin is a financial Sunac tool, and the digitisation of financial assets and transactions is a future trend. But behind the stable currency affects financial stability, regulation and the structure of national debt and a series of fundamental issues, need to be treated carefully, slowly.
If it can not be designed properly, and instead ignores its risk attributes, it can be used as a lever to increase debt, to delay the resolution of the dollar’s own real problems, or even as a“Sickle” to harvest the sovereign rights of other countries’ currencies, will undoubtedly lead to risk accumulation, to the operation of the U. S. Financial System brings counter-attack.