This world is steadily and irreversibly moving towards digitalization.

Written by: Wei Sir

Recently, stablecoins seem to have become a hot topic, and several friends have asked me, what exactly are stablecoins?

I think this is actually quite simple, but many experts have made it too complicated, so I am writing this article to provide a concise answer.

Note: This article only discusses US dollar stablecoins.

I. What Does the U.S. "GENIUS Act" Say?

On July 18, 2025, Trump signed the "GENIUS Act" (full name: "Guiding and Establishing National Innovation for U.S. Stablecoins Act").

The act clarifies that stablecoins are legal digital assets for payment and are subject to specific regulations (to prevent loss of control and money laundering).

Core rules: Stablecoins must have a 1:1 reserve in U.S. dollars or U.S. Treasury bonds (to prevent price instability), issuers must disclose reserves monthly, and must meet regulatory qualifications to issue; in the event of bankruptcy, stablecoin holders' claims are prioritized.

In simple terms, US dollar stablecoins, such as USDT and USDC, are equivalent to U.S. dollars.

USDT was launched by Tether in 2014, and it is exchanged at a 1:1 ratio with the U.S. dollar. USDC is a stablecoin issued by Circle in 2018, also pegged 1:1 to the U.S. dollar, meaning 1 USDC corresponds to 1 U.S. dollar bill.

What is the deeper meaning behind this act?

This marks the U.S. government's recognition and embrace of the modernization of the U.S. dollar.

Not only does the U.S. have a stablecoin act, but other regions around the world also have similar legislation. For example, the EU's "Markets in Crypto-Assets Regulation" (MiCA) will take effect in December 2024; Hong Kong's "Stablecoin Regulation" will take effect in August 2025.

II. What Are the Benefits of Stablecoins?

For the public, the biggest benefit of stablecoins is their convenience and safety.

Americans use U.S. dollars for payments, which, although electronic, involve many back-end processes that generally rely on banks and third-party payment institutions. Any one of these links could fail or become unavailable, making it less secure (the information systems of U.S. banks may have bugs, vulnerabilities, and could be hacked).

Domestic payments may be better, but cross-border transfers can be troublesome, often requiring multiple banks and clearing institutions, taking 1-3 days, and incurring high fees—transferring $1,000 could cost as much as $20-50 in fees.

In simple terms, using traditional U.S. dollar payments is inconvenient, unsafe, costly, and time-consuming.

However, using stablecoins like USDT and USDC allows transfers to be completed directly on the blockchain (such as the TRON network or Ethereum network) without going through any banks. Whether sending to Europe or Asia, funds can arrive in seconds or minutes, and the fee for a $1,000 transfer is often only $2-3, or even lower.

Moreover, those familiar with blockchain know that it is very secure; the system itself does not make transfer errors (unless you make a mistake), and its security is hundreds of times better than traditional technologies (not a rigorous comparison). Otherwise, blockchain would not have become so widely known.

Americans might wonder, if there is a better way to transfer money, why not use it?

As long as USDT can be reliably exchanged 1:1 for U.S. dollars, that is all that matters.

This is the essential reason why USDT has become popular.

The U.S. government has enacted legislation to ensure it can be exchanged 1:1 for U.S. dollars, protecting the rights of American citizens.

By 2025, the average daily transfer amount of stablecoins exceeded $100 billion, surpassing the combined average daily transfer amounts of Visa and Mastercard (approximately $67.1 billion). Moreover, the growth rate is rapid, with a 32.8% increase compared to 2024. In Southeast Asia and Africa alone, the average daily transfer amount of USDT via the TRON blockchain reached $13.1 billion.

III. Why Is the U.S. Government Embracing Stablecoins?

The direction of human society's development is continuous digitalization.

Stablecoins represent the digital transformation of currency.

The U.S. dollar has transitioned from physical cash to electronic bookkeeping over the past few decades, and now to a more advanced blockchain bookkeeping.

The U.S. government thinks, since the digital transformation of the U.S. dollar is an unstoppable trend, why not face it and embrace it?

Why not legalize it and impose strict regulations to protect the interests of the nation and its citizens?

The digital yuan being developed in our country also stems from this idea and embraces blockchain technology, albeit taking a different route.

Some may ask, what are the differences between the two? Here is a brief comparison.

The U.S. prefers a market-driven approach, where stablecoins (like USDT and USDC) are primarily issued by private enterprises, with the government playing more of a regulatory role. This model aligns with the long-standing liberal ideology in the U.S. Correspondingly, from a technical perspective, U.S. stablecoins rely on public chain technology and are designed to be decentralized, which also fits American culture (the pursuit of power decentralization and individual freedom), although stablecoins also have the ability to combat money laundering, freeze, seize, and burn.

China prefers stability and security, with the digital yuan being directly issued by the central bank, allowing for precise control over currency circulation and ensuring national financial security. The digital yuan uses a dual-layer operating system (central bank → banks and authorized institutions → public), with centralized regulation by the central bank at its core, and moderately borrowing from alliance chain technology in its operational layer (still led by the central bank, rather than equal decision-making among nodes), avoiding the erosion of monetary sovereignty by private entities or external forces.

IV. In Summary

This world is steadily and irreversibly moving towards digitalization.

Stablecoins represent the digital transformation of currency.

Because U.S. dollar stablecoins are more convenient, effective, and secure than traditional U.S. dollars.

Therefore, U.S. dollar stablecoins are inevitably and increasingly being used.

And the U.S. government will inevitably follow suit and strengthen regulation.

At this point, you can conclude your reading.

V. Why Do Other Experts Make It So Complicated?

Most experts discussing stablecoins tend to view new phenomena through traditional lenses, which complicates the issue and makes it hard for the public to understand.

In fact, there are just a few points (none of which are core issues), which I will explain below.

1. Some experts say, "U.S. dollar stablecoins strengthen the position of the dollar and U.S. debt."

This is because the GENIUS Act requires stablecoins to have 1:1 reserve support, such as U.S. dollars or short-term government bonds, which increases the demand for U.S. debt. Additionally, U.S. dollar stablecoins can penetrate "unbanked" areas through blockchain, expanding the circulation and demand for the dollar.

It is clear that the issuers of USDT and USDC will soon need to purchase a large amount of U.S. debt. Because without purchasing, they cannot meet the requirements of the GENIUS Act.

Specifically, the legal liquid assets for the 1:1 reserve of U.S. dollar stablecoins include: U.S. dollar cash, demand deposits at the Federal Reserve, U.S. Treasury bonds with a remaining maturity of no more than 93 days, repurchase agreements backed by government bonds with a maturity of no more than 7 days, reserve deposits held at other central banks that meet the "substantially equivalent" standard, and money market funds that only invest in the above asset categories.

USDT has already issued 167 billion stablecoins (issued across multiple chains such as Ethereum, TRON, Solana), with its reserve assets including $127 billion in U.S. Treasury bonds, approximately $12 billion worth of 100,000 bitcoins, approximately $8.7 billion worth of 80 tons of gold, and $7.7 billion in secured loans. The latter three categories do not meet the requirements of the GENIUS Act and need to be converted to U.S. dollars or Treasury bonds. If this is not completed by May 2027, it may be delisted from U.S. exchanges.

Therefore, the issuer of USDT, Tether, needs to hurry to sell gold and buy U.S. debt!

To explain to beginners why a 1:1 reserve is necessary: for example, if someone wants to "crash the coin price"—intentionally selling a large amount of stablecoins to drive the price below $1 (for instance, down to $0.95), the stablecoin issuer will use cash from their reserves to actively "buy the dip" in the market: you want to sell at a low price? I will buy all the coins you sell at a price close to $1, and the seller will be defeated.

2. Some experts say, "U.S. dollar stablecoins will bring many risks."

They believe that the anonymity of U.S. dollar stablecoins could lead to anti-money laundering and transparency issues.

This is a problem that traditional dollars also face, not a unique risk of U.S. dollar stablecoins. It’s simple: the U.S. government provides regulatory requirements, and stablecoin issuers can implement them through management and technical means; it is not an insurmountable problem.

The GENIUS Act requires stablecoin issuers to implement anti-money laundering (AML) and know your customer (KYC) measures, including conducting risk assessments, checking sanction lists, identifying customer identities, establishing suspicious transaction reporting mechanisms and timely reporting, retaining transaction records for regulatory review, and having the technical capability to respond to administrative orders, enabling actions such as seizing, freezing, destroying, or restricting transfers of stablecoins. You see, these are the same requirements that the U.S. imposes on banks (The Bank Secrecy Act).

Hong Kong's "Stablecoin Regulation" stipulates that stablecoin transfers must comply with travel rules similar to traditional wire transfers, which require that when financial transactions exceed a certain amount (e.g., $1,000 / euros), the identity information of both parties must be transmitted with the transaction, sharing and retaining this information at every stage of the payment chain so that regulatory agencies can track and prevent illegal activities.

The EU's MiCA also has similar requirements.

3. Some experts say, "U.S. dollar stablecoins are not legal tender, but they cannot simply be viewed as payment tools."

This is a new phenomenon that we will gradually come to understand. The world is constantly changing, and concepts are continuously evolving.

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