In a historic development for the digital asset sector, Congress passed the first federal legislation to regulate stablecoins on Thursday.
The bill, a centerpiece of what former President Donald Trump has dubbed “Crypto Week,” sets the groundwork for a regulatory framework overseeing dollar-linked tokens.
The legislation gained broad bipartisan support in the House after previously clearing the Senate and is now set to become law.
The bill was championed by Republicans and strongly backed by Trump, who reportedly lobbied lawmakers to support the measure.
It introduces both state and federal oversight for dollar-backed stablecoins, allowing for the broader integration of these tokens into the financial system.
Proponents argue that this step could unlock faster and cheaper payment mechanisms while bringing long-sought legitimacy to the $265 billion stablecoin market, a sector analysts at Citigroup estimate could grow to $3.7 trillion by 2030.
Political milestone for digital assets industry
This legislation represents a significant political milestone for the crypto industry.
Following the collapse of the FTX exchange less than three years ago, which had shaken confidence in digital assets, the industry has regrouped with increased political activity and funding.
Hundreds of millions of dollars have flowed into election campaigns supporting crypto-friendly lawmakers
The bill sets regulatory rules for dollar-backed stablecoins, mandating that issuers hold equivalent reserves in safe, short-term assets such as government debt.
This structure aims to protect consumers while enabling stablecoins to function as more reliable mediums of exchange.
Despite the bill’s momentum, not all lawmakers were in favor.
Prominent Democrats, including Senator Elizabeth Warren and Representative Maxine Waters, voiced concerns about the potential risks to consumers.
They warned that inadequate safeguards could create conditions for future government bailouts if issuers of these digital tokens were to fail.
Some Democrats also attempted, unsuccessfully, to include language that would prevent elected officials, including Trump and their families, from participating in stablecoin ventures.
Implications for traditional finance and key industry players
The measure’s passage has already prompted a response from some of the country’s top banking executives.
On recent earnings calls, leaders such as JPMorgan Chase’s Jamie Dimon, Bank of America’s Brian Moynihan, and Citigroup’s Jane Fraser acknowledged the growing threat posed by stablecoins to traditional payment systems.
They noted that the emergence of a digital dollar and stablecoin alternatives could potentially draw customer deposits away from banks and disrupt existing financial networks.
Stablecoins also hold promise for revolutionizing cross-border payments and could open the door for financial institutions, card networks, and tech firms to issue their own digital tokens.
Several major banks, including JPMorgan, have recently expressed interest in participating in the stablecoin ecosystem.
Companies already active in the U.S. stablecoin market, such as Circle Internet Group Inc., may stand to gain the most in the short term, given their readiness to comply with the new regulatory standards.
Eswar Prasad, a senior fellow at the Brookings Institution, described the measure as a long-awaited legitimization of the stablecoin industry, noting that it comes with “relatively light-touch regulation.”
As the stablecoin legislation moves toward enactment, the broader crypto market and traditional financial institutions alike are preparing to navigate this evolving landscape.
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