Author: Iris, Attorney Mankun

Over the past few decades, the global dominance of the US dollar has relied on the evolutionary mechanism of the "Bretton Woods System - Petrodollar - US Treasury Bonds + Swift System." However, as we enter the Web3 era, decentralized financial technologies are gradually shaking the foundations of traditional clearing and payment pathways, while stablecoins pegged to the dollar are quietly becoming a new tool for "dollar outflow."

In this context, the significance of stablecoins has long transcended the compliance of a single crypto asset; it may very well be the digital carrier for the continuation of "dollar hegemony" in the Web3 era.

On March 26, 2025, the US Congress officially proposed the "STABLE Act" (Stablecoin Transparency and Accountability for a Better Ledger Economy Act), which systematically establishes the issuance thresholds, regulatory framework, and circulation boundaries for dollar stablecoins for the first time. As of now, the bill has passed the review of the House Financial Services Committee on April 2 and is awaiting a vote in the House and Senate before it can officially become law. This not only responds to the long-term regulatory vacuum in the stablecoin market but may also be a key step in attempting to build the "institutional infrastructure" for the next generation of dollar payment networks.

So, what problems does this new bill aim to solve? Does the difference from MiCA reflect the US's "institutional strategy"? And is it paving the way for Web3 dollar hegemony?

These questions will be shared one by one by Attorney Mankun in this article.

What kind of dollar stablecoin does the STABLE Act aim to establish?

According to the document, the newly introduced stablecoin bill attempts to create a clear compliance framework specifically applicable to "Payment Stablecoins." We have distilled its five core points:

1. Clearly define regulatory targets, focusing on "Payment Stablecoins"

The first step of the STABLE Act is to clarify the core regulatory target: dollar-pegged stablecoins issued to the public that can be directly used for payments and settlements. In other words, the assets that are truly included in the regulatory framework are those used as on-chain "dollar substitutes," rather than all tokens claiming to be pegged to the dollar.

To avoid risk diffusion, the bill explicitly excludes some high-risk or structurally unstable token models. For example, algorithmic stablecoins, partially collateralized stablecoins, or "pseudo-stablecoins" with speculative attributes and complex circulation mechanisms are not within the scope of this bill. Only stablecoins that achieve 1:1 dollar asset full support, possess a transparent reserve structure, and are intended for public daily trading circulation are considered "Payment Stablecoins" and are required to comply with the regulatory arrangements under this bill.

From this perspective, the STABLE Act is not genuinely concerned with the "technical carrier" of stablecoins but rather whether it is constructing a "dollar on-chain payment network." What it aims to regulate is the issuance method and operational foundation of the "digital dollar," not all tokens labeled with USD.

2. Establish a "redemption rights" mechanism, 1:1 dollar peg

In addition to regulatory entry thresholds and issuer qualification requirements, the STABLE Act particularly emphasizes the "redemption rights" arrangement for stablecoin holders, meaning the public has the right to redeem their stablecoins for fiat dollars at a 1:1 ratio, and the issuer must fulfill this obligation at all times. This institutional arrangement essentially ensures that stablecoins do not become "pseudo-pegged assets" or "internally circulating system tokens."

At the same time, to prevent liquidity crises or run risks, the bill also sets clear asset reserve and liquidity management requirements. Issuers must hold high-quality, liquid dollar assets (such as government bonds, cash, central bank deposits, etc.) at a 1:1 ratio and are subject to ongoing scrutiny by the Federal Reserve. This means that stablecoin issuers cannot "use user funds to invest in high-risk assets," nor can they achieve "pegging" through algorithms or other derivative structures.

Compared to some earlier market models of "partial reserves" and "vague disclosures," the STABLE Act enshrines "1:1 redeemability" into federal legislation, representing a higher requirement for the underlying credit mechanism of "digital dollar substitutes" in the US.

This not only addresses public concerns about stablecoins "de-pegging" or "exploding," but also aims to create a system of institutional guarantees + legal trust for dollar stablecoins to support their long-term use in the global clearing network.

3. Strengthen fund and reserve supervision, avoid "trust churn"

Based on the requirement that "stablecoins must be 1:1 redeemable," the STABLE Act further specifies the types, management methods, and auditing mechanisms for reserve assets, intending to control risks from the source and avoid the hidden dangers of "superficial pegging and substantial churn."

Specifically, the bill requires all payment stablecoin issuers to:

• Hold an equivalent amount of "High-Quality Liquid Assets," including cash, short-term US Treasury bonds, Federal Reserve account deposits, etc., to ensure user redemption requests;

• Not use reserve assets for lending, investment, or other purposes to prevent systemic risks arising from "using reserve funds for returns";

• Regularly undergo independent audits and regulatory reporting obligations, including reserve transparency disclosures, risk exposure reports, asset portfolio descriptions, etc., to ensure that the public and regulatory agencies can understand the asset base behind the stablecoins;

• Reserve assets must be stored separately in FDIC-insured banks or other compliant custodial institution accounts to prevent project parties from mixing them into their own funds.

This institutional arrangement aims to ensure that the "pegging" is real, auditable, and fully redeemable, rather than "pegged in name only, with floating profits on-chain." Historically, the stablecoin market has experienced multiple credit crises due to inadequate reserves, misappropriation of funds, or lack of information disclosure. The STABLE Act seeks to close these risk gaps at the institutional level and strengthen the "institutional endorsement" of dollar pegging.

On this basis, the bill also grants the Federal Reserve, the Treasury Department, and designated regulatory agencies long-term supervisory authority over reserve management, including freezing non-compliant accounts, suspending issuance rights, and enforcing redemptions, forming a relatively complete credit closed loop for stablecoins.

4. Establish a "registration system," bringing all issuers under regulation

In its regulatory path design, the STABLE Act does not adopt a "license classification management" approach but establishes a unified registration system for entry, with the core point being: all institutions intending to issue payment stablecoins, regardless of whether they are banks, must register with the Federal Reserve and accept federal-level regulatory scrutiny.

The bill sets two paths for legitimate issuers: first, insured depository institutions regulated by federal or state authorities can directly apply to issue payment stablecoins; second, non-depository trust institutions can also register as stablecoin issuers as long as they meet the prudent requirements set by the Federal Reserve.

The bill also emphasizes that the Federal Reserve not only has the authority to approve registrations but can also refuse or revoke registrations if it deems there is systemic risk. Additionally, the Federal Reserve is granted ongoing review authority over all issuers' reserve structures, repayment capabilities, capital ratios, and risk management policies.

This means that in the future, all issuances of dollar payment stablecoins must fall under the federal regulatory network, and it will no longer be allowed to bypass scrutiny through "only state registration" or "technological neutrality."

Compared to previous more lenient multi-path discussion proposals (such as the GENIUS Act allowing for state regulatory beginnings), the STABLE Act clearly demonstrates stronger regulatory uniformity and federal leadership, attempting to establish the legal boundaries for dollar stablecoins through a "national registration regulatory system."

5. Establish a federal-level licensing mechanism, clarifying diverse regulatory paths

The STABLE Act also establishes a federal-level stablecoin issuance licensing system and provides diversified compliance paths for different types of issuers. This institutional arrangement not only continues the "federal-state dual-track" structure of the US financial regulatory system but also responds to market expectations for flexibility in compliance thresholds.

The bill sets three optional paths for the issuance of "Payment Stablecoins":

• First, become a federally recognized payment stablecoin issuing institution, directly subject to review and licensing by US federal banking regulators (such as OCC, FDIC, etc.);

• Second, issue stablecoins as a licensed savings bank or commercial bank, which can enjoy higher trust endorsement but must meet traditional banking capital and risk control requirements;

• Third, operate on a state-level license basis but must accept federal-level "registration + supervision" and meet unified standards for reserves, transparency, anti-money laundering, etc.

The intention behind this institutional design is to encourage stablecoin issuers to legally "register on-chain" and fall within the purview of financial regulation, but not to enforce a one-size-fits-all banking model, thus achieving risk control while protecting innovation.

Additionally, the STABLE Act grants the Federal Reserve and the Treasury Department broader coordination powers to propose additional requirements for stablecoin issuance, custody, and trading based on systemic risk levels or policy needs.

In short, this system aims to create a multi-layered, multi-path, and tiered regulatory compliance network for stablecoins in the US, enhancing system resilience while providing a unified institutional foundation for stablecoins to go global.

Compared to MiCA, the US has taken a different route

In the global competition for stablecoin regulation, the European Union is the earliest and most complete region in terms of framework. Its "MiCA Act," which officially launched in 2023, incorporates all crypto tokens pegged to assets into the regulatory purview through "EMT" (Electronic Money Tokens) and "ART" (Asset-Referenced Tokens), emphasizing macro-prudential and financial stability, intending to build a "firewall" in the digital financial transformation.

However, the US's STABLE Act has clearly chosen a different path: it does not aim to comprehensively regulate all stablecoins, nor does it construct an all-encompassing regulatory system based on financial risks, but rather focuses on the core scenario of "Payment Stablecoins," using institutional means to build the next generation of payment networks on the dollar.

The logic behind this "selective legislation" is not complex— the dollar does not need to "dominate the stablecoin world"; it only needs to solidify the most critical scenario: cross-border payments, on-chain transactions, and global dollar circulation.

This is also why the STABLE Act does not attempt to establish a comprehensive asset regulatory system like MiCA but focuses on "on-chain dollars" that are 1:1 dollar-supported, have actual payment functions, and can be widely held and used by the public.

From an institutional design perspective, the two present a stark contrast:

• Different regulatory scopes: MiCA attempts to "cover all bases," almost encompassing all stablecoin models, including those with extremely high-risk reference asset products; whereas the US STABLE Act actively narrows its applicable scope, focusing only on assets that are genuinely used for payments and can represent the "dollar function."

• Different regulatory goals: The EU emphasizes financial order, system stability, and consumer protection, while the US focuses more on legally clarifying which assets can serve as legitimate forms of "on-chain dollars," thereby constructing an institutional-level dollar payment infrastructure.

• Different issuing entities: MiCA requires that stablecoins must be issued by regulated electronic money institutions or trust companies, effectively locking the entry point within the financial institution system; while the STABLE Act establishes a "new licensing mechanism," allowing non-bank entities that have undergone compliance review to legally participate in stablecoin issuance, thus preserving the potential for Web3 entrepreneurship and innovation.

• Different reserve mechanisms: The US requires 100% cash or short-term government bonds, strictly excluding any leveraged or illiquid assets; the EU, on the other hand, allows various asset forms including bank deposits and bonds, reflecting different levels of rigor in regulatory thinking.

• Different adaptability to Web3 entrepreneurship: MiCA, due to its heavy reliance on traditional financial licenses and auditing processes, naturally creates high barriers for crypto startups; whereas the US STABLE Act, while demanding strict compliance, leaves room for innovation in its system, aiming to encourage the development of "on-chain dollars" through compliance standards.

In short, the path taken by the US is not one of "comprehensive regulation," but rather a systematic approach that filters "qualified dollar payment assets" through compliance licenses. This not only reflects a change in the US's acceptance of Web3 technology but also serves as a "digital extension" of its global monetary strategy.

This is also why we say that the STABLE Act is not merely a financial regulatory tool, but the beginning of the institutionalization of the digital dollar system.

Summary by Attorney Mankun

Making the dollar the benchmark unit for global Web3 may be the true strategic intent behind the STABLE Act.

The US government is attempting to build a "next-generation digital dollar network" through stablecoins, one that can be programmatically recognized, audited, and integrated, to comprehensively lay out the underlying protocols for Web3 payments.

It may not be perfect yet, but it is sufficiently important at this moment.

It is worth mentioning that at the international level, the IMF's 2024 release of the seventh edition of the "Balance of Payments Manual" (BPM7) will for the first time include stablecoins in the international asset statistical system and emphasize their new role in cross-border payments and global financial flows. This not only lays the groundwork for the sovereign compliance of stablecoins, establishing "global institutional legitimacy," but also provides institutional support and external recognition for the US in constructing a stablecoin regulatory system and reinforcing the significance of dollar pegging.

It can be said that the global institutional acceptance of stablecoins is becoming a prelude to sovereign competition in the era of digital currencies.

As Attorney Mankun has observed: the compliance narrative of Web3 ultimately boils down to a competition in institutional building, and dollar stablecoins represent the most practically significant battlefield in this competition.

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