$366 Billion Stablecoin Set to Enter U.S. Regulatory Framework

An image reminiscent of dollar stablecoins and the U.S. Treasury market. Source: ChatGPT

The entry of a $270 billion (approximately 366 trillion won) dollar stablecoin into the U.S. regulatory framework is imminent. As the deadline for the implementation of the U.S. federal stablecoin regulation, the GENIUS Act, approaches, regulatory agencies are specifying the standards for stablecoin issuance, reserve assets, and oversight. This movement by regulatory agencies comes amid rising concerns over government financial crises due to recent increases in U.S. Treasury yields, with stablecoins being highlighted as a new demand source that could absorb Treasury volumes.

The GENIUS Act, enacted in July 2025, will take effect on the earlier of 18 months after its enactment or 120 days after the final rule announcement by the federal primary stablecoin regulatory agency. Under current law, this means the law will be implemented no later than January 2027.

"Demand for Short-Term Treasuries Will Increase"

As of September 29, the market capitalization of major dollar stablecoins reached $270 billion, according to the digital asset information site CoinGecko. This figure serves as an indicator of the global circulation scale of stablecoins, although some of it does not fall under the category of stablecoins regulated by the GENIUS Act. However, the payment stablecoins defined by the GENIUS Act do not only refer to coins used for purchasing goods. Therefore, even if stablecoins are utilized as funds for digital asset trading rather than for payment, they could still fall under the regulatory scope of the GENIUS Act.

The U.S. Treasury expects an increase in Treasury demand due to the growth of the dollar stablecoin market. U.S. Treasury Secretary Scott Bessen stated at the U.S. Treasury Market Conference held at the New York Federal Reserve Bank in November 2025 that "the stablecoin market could grow tenfold by 2030 based on the GENIUS Act," adding, "As money market funds (MMFs) and stablecoins grow, demand for short-term Treasuries will also increase."

Francis Brook, Deputy Secretary of the U.S. Treasury, reaffirmed this expectation at the 2026 Treasury Market Conference held at the same location on September 22. Deputy Secretary Brook explained that "stablecoin issuers already hold approximately $200 billion (about 271 trillion won) in short-term Treasuries and Treasuries nearing maturity," stating that "once the rules of the GENIUS Act are established, issuers can increase their Treasury holdings as they grow."

'Stability + Interest Income = Treasuries'

The legal basis for the growth of dollar stablecoins leading to increased demand for short-term Treasuries lies in the reserve asset requirements. Section 4 of the GENIUS Act stipulates that licensed issuers must maintain reserve assets backing the circulating stablecoins at a minimum ratio of 1:1. Permissible assets include cash and demand deposits, U.S. Treasuries with a remaining maturity of 93 days or less, and certain qualified repurchase agreements and MMFs. This means that while not all reserve assets need to be Treasuries, issuers must rely on short-term Treasuries as a primary operational tool to maintain safety and liquidity while earning interest income. As demand for dollar stablecoins increases globally, both issuance and reserve assets will rise, leading to a significant portion being directed towards U.S. Treasury purchases.

The Federal Reserve (Fed) released two proposed rules on September 24 to clarify the framework of this law. The first rule pertains to the full reserve asset requirement for issuers under Fed supervision, capital and risk management standards, and regulations regarding reserve asset custodians. The second rule outlines the approval process for Fed-supervised banks to issue stablecoins through subsidiaries. Both proposed rules will collect public comments for 60 days after publication in the Federal Register.

Remaining Challenge: 'Clarity'

Experts believe that once dollar stablecoins are established within the U.S. regulatory framework, demand for short-term Treasuries could reach $900 billion (approximately 1218 trillion won). Global financial group Standard Chartered analyzed in a report published in April 2025 that if the dollar stablecoin market grows to $2 trillion (approximately 2706 trillion won) by 2028, additional demand for short-term Treasuries could reach up to $900 billion.

However, the stabilization of stablecoins cannot be completed solely through the GENIUS Act. This law focuses on the soundness of issuers and the regulation of repayment and reserve assets. To broadly establish a market oversight system and broker regulations for stablecoins used as trading and settlement instruments, comprehensive legislation must be supplemented. Therefore, efforts have been made to regulate the interest and compensation payment systems of stablecoins through the federal digital asset comprehensive legislation, the CLARITY Act. However, the CLARITY Act was defeated in the Senate on September 15, with a final vote of 49 in favor and 50 against. The closure of debate in the Senate requires a typical 60 votes to move to a final vote, and it failed to secure the necessary 60 votes, not even achieving a majority.

Subsequently, on September 22, during an event held by CoinDesk in Washington, D.C., White House and Treasury officials mentioned the uncertainty surrounding the legislative process of the CLARITY Act, emphasizing the need for rule-making through the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). This indicates that even with the implementation of the GENIUS Act, uncertainties remain regarding how stablecoins will be utilized after issuance.

Concerns Over Reduced Private Lending

There are also concerns that the activation of stablecoins could undermine financial stability. If bank deposits shift to stablecoins, banks' funding costs may rise, and their lending capacity could decrease. According to data from the Kansas City Federal Reserve in August 2025, the increase in Treasury demand due to stablecoin issuance could lead to a decrease in private lending, and if large-scale redemption requests occur, the concentrated sale of Treasuries by issuers could exacerbate market instability.

Myeong Soo, co-founder of Undefined Labs, stated, "The success of integrating stablecoins into the regulatory framework should be judged not only by the issuance volume but also by actual payment utilization and repayment stability," explaining to Digital Asset that "supervision of reserve assets and regulation of the distribution market must be established together to create sustainable demand."

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