As lawmakers hash out a federal framework for stablecoins in the U.S., corners of the crypto industry may soon face competition from the likes of Uber and Meta.
Senate Banking Committee Chairman Tim Scott (R-SC) vowed this month that a stablecoin bill, dubbed the GENIUS Act, will be passed by both chambers of Congress and signed into law within the first 100 days of President Donald Trump’s administration.
As the bill gains momentum, some experts say the industry may be at a crossroads. While the measure would for the first time provide a pathway to legality for stablecoin giants like Tether and Circle, it would also likely unleash massive competition.
A federal framework would embolden countless companies to dive into the $233 billion stablecoin market, according to Niklas Kunkel, the founder of blockchain oracle builder Chronicle Labs. At the least, many firms will consider what strategic advantages stablecoins have, he told Decrypt.
“As soon as this legislation passes, there are going to be 10,000 companies looking at this,” Kunkel said. “I would expand that beyond just payment companies and asset issuers. [...] You can include tech companies: the Amazons, Ubers, Metas and Googles of the world."
Among interested firms, Kunkel bet 1,000 of them would debut a stablecoin within the following year that stablecoin legislation is passed. In lieu of adopting an existing stablecoin like Circle’s USDC, however, Kunkel said firms will be incentivized to release their own equivalent.
“They would love their users to use their own branded stablecoin because they can make the yield on the underlying reserves,” he explained. “They may even be white-labeled.”
As an example of a white-labeled stablecoin, Kunkel pointed to Paxos. The company once issued a Binance-branded stablecoin called BUSD, while playing a central role in PayPal’s stablecoin foray as the issuer of PayPal USD (PYUSD).
As digital assets are pegged to the price of a fiat currency, such as the U.S. dollar, stablecoins are often backed by reserves of cash and U.S. Treasuries that generate yield. In Coinbase’s fourth quarter, the company disclosed $224 million in revenue from assets backing USDC.
A thawing iceberg
A report published by S&P Global Ratings on Wednesday found that the GENIUS Act would increase the adoption of stablecoins in the U.S. The lack of regulation in the U.S. is “one of the main impediments” to broader adoption, the analysts wrote.
In November, Paxos CEO Charles Cascarilla wrote in a letter addressed to Trump and former Vice President Kamala Harris—then the Democratic presidential candidate—that America’s opportunity to cement financial dominance through stablecoins had been stifled so far by “countless examples of regulatory overreach.”
Though firms like BlackRock have issued tokenized money market funds that resemble stablecoins, S&P analysts wrote that a lack of regulation and supervision has prevented their broader adoption in fields like everyday payments.
Chronicle Labs is developing a network for oracles, which allow blockchains to connect with external, real-word data sources. Before starting the Switzerland-based firm, Kunkel worked for five years at MakerDAO, the popular lending protocol behind the stablecoin DAI. (MakerDAO has since rebranded to Sky and replaced DAI with USDS.)
Kunkel was part of the founding team at MakerDAO when the organization launched in 2017. And at this point, building something that resembles a bank and operates solely on stablecoin rails is possible, he said. The regulatory backdrop just needs to catch up.
“As soon as you get the government involved, everything slows down to a crawl,” he said. “The rate at which that iceberg thaws is going to determine how far into the future that we have to look before we realize this.”
When PayPal introduced its stablecoin in 2023, the firm faced criticism from Rep. Maxine Waters (D-CA), a top Democrat on the House of Representatives Financial Services Committee.
She said that “federal oversight and enforcement of its stablecoin operations is essential,” expressing deep concern that the payments giant had moved before a framework was passed.
Ultimately, stablecoin legislation may further intertwine the U.S. financial system with crypto’s sprawling decentralized finance, or DeFi, landscape, according to S&P analysis.
“In our view, the role of stablecoins will continue to evolve and could eventually lead to more integration between traditional finance and decentralized finance,” they wrote.
Edited by James Rubin