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These are good times for stablecoin issuers. The Senate has passed the GENIUS Act, and with it signaled that the United States is open for blockchain business. The crypto industry is delighted, U.S. startups have a clearer idea of how to approach web3, and the clouds of regulatory uncertainty that hung over the previous U.S. administration have lifted.
Summary
- The U.S. just went all-in on stablecoins with the GENIUS Act, signaling a regulatory green light and turbocharging the industry, just as Circle’s IPO hits its stride.
- But the stablecoin boom is going political, with rising regionalism turning blockchain into a battleground of compliance, control, and competing national currencies.
- The era of “nation chains” is here, as countries like China and Russia race to build domestic CBDCs while U.S. rules shut out foreign issuers and favor corporate giants.
- Still, crypto’s not going anywhere: Bitcoin survives, stablecoins are here to stay, and while regulators scramble, users have already won the long game.
The mood music is positive right now, as seen in the soaring value of Circle stock. The USD Coin (USDC) issuer looks to have completed its IPO at the perfect time, with the market multiplying the company’s valuation into the tens of billions. Stablecoins are big business now, and everyone wants a piece of it.
But this ebullience shouldn’t be taken as evidence that the going will be good from hereon in for stablecoins and similar instruments such as central bank digital currencies. Because where there are people, there is politics, and the thriving blockchain industry is poised to enter an era of unprecedented politicization.
Stablecoin wars are stirring
The coming decade will be characterized by a return to regionalism as the age of post-globalization begins in earnest. The U.S is walking back its overseas interests and returning to a domestic “America first” policy. Other regions, including Europe, grappling with trade tariffs and the repercussions of global conflicts that impact logistics and energy prices, are also now looking to domestic alternatives for everything from cloud computing to AI.
This seismic shift is also being reflected within the crypto industry as exchanges become picky about which regions they serve, crypto services become localized, and legislation such as the EU’s Markets in Crypto-Assets Regulation compels stablecoin issuers to park assets in European bank accounts and submit to stringent regulation. Blockchain might be borderless, but the platforms that run on it are increasingly becoming geo-restricted.
Some of this is just a natural consequence of global regions belatedly starting to regulate crypto assets, which means adding onerous laws that, while designed to support innovation, invariably add more hoops that must be leapt through in order to remain compliant. But the politicization of crypto is about more than merely competing regulatory standards: it’s also about what nation-states are doing when it comes to blockchain. Here, the same differences that divide them in real life look poised to do the same onchain.
Rise of the nation chains
The GENIUS Act is great if you’re a major U.S. stablecoin issuer or a U.S. business wondering if it’s okay to accept USDC for payments. But it makes life significantly harder for overseas stablecoin issuers and users. Foreign stablecoin issuers must comply with U.S. regulations or face a potential ban if deemed non-compliant by the Treasury Department. The Act also mandates enhanced oversight of foreign issuers and coordination with issuers before blocking transactions.
In the new stablecoin economy the U.S. is building, it’s safe to say that Russia, China, and pariah states such as Iran aren’t invited. That is why the likes of Russia and China are pressing ahead with their own systems for CBDCs. They’ll still run on a blockchain of some kind, but it will be permissioned and localized: a walled garden for domestic consumption only. Blockchain is going to become balkanized, and while Bitcoin (BTC) will still be global, many of the chains being used for digital currency will run only as far as the national borders of their operator. As you read these words, the rise of the nation chains is underway.
Searching for a global unit of account
Despite its vast national debt and refocus on domestic business, the U.S. still dominates global trade with its dollar forming the de facto global unit of account. While it’s in no danger of being supplanted by another fiat currency, its dominance is poised to diminish as national and regional governments champion their own stables, pegged to things like the EUR, YEN, and CNY.
But even within the family of stablecoins that are pegged to the U.S. dollar, and which serve as the crypto industry’s default pricing mechanism, a shakeup is underway. Where once there were many dollar-pegged stablecoins to choose from, ranging from fiat-backed to crypto-collateralized, soon there will likely be few. Binance’s BUSD has already been reined in by U.S. regulators, while the GENIUS Act outright bans algorithmic stablecoins.
Because the GENIUS Act favors large corporations over small stablecoin issuers, it will effectively heighten monopolization, allowing a handful of approved companies to dominate proceedings. Given the onerous compliance costs and reporting standards now placed on them, not just in the U.S. but in regions like Europe too, private stablecoin issuers have some tough choices to make. Do they “subscribe” to the onerous requirements demanded by regulators or retreat into the shadows?
By the end of 2025, expect to see more than 40% of DEX stablecoin volume replaced by “official” digital currencies or certain stablecoins blocked in certain jurisdictions. Against this backdrop of competing regulations, stricter stablecoin controls, and higher compliance costs, there is also the specter of Strategic Bitcoin Reserves, assembled by national governments, to factor in. Bitcoin is meant to be apolitical, but if global nations start stockpiling it like it were depleted uranium, it risks becoming the battleground for a digital resource war.
The silver lining
The prospect of increased politicization leading to the balkanization of the onchain landscape makes for gloomy reading. Can’t crypto users just be left alone to trade their tokens in peace without being penalized by which country they’re from or which stablecoin they’re holding? While the emergence of competing CBDCs and regionalized stablecoins adds complexity to an already fragmented onchain landscape, there is a silver lining to all this.
No one’s trying to ban Bitcoin anymore or put the buffers on blockchain innovation. This is the age of AI, after all, where no nation wants to be last to adopt technologies that will define human progress and economic growth for a generation. And the stablecoin genie won’t go back in the jar either. Tokens and blockchain technology aren’t going anywhere, and will continue to make inroads into every aspect of our lives.
A few years ago, confessing to owning crypto made you look like an outsider and caused your bank to start asking awkward questions. Not anymore. When everyone’s guilty of using blockchain, no one’s guilty. So while the politicians do their politicking and regulators their regulating, crypto users should keep calm and carry on. They’ve already won. Now it’s left to the states to joust it out in the blockchain battlelines that are being drawn up.
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