What are stablecoins? Everything to know about the crypto being debated in Congress

CNN

a day ago

Stablecoins are on the verge of going mainstream, analysts say, as a landmark regulatory bill makes its way through Congress.
The Senate is deliberating the GENIUS Act, which would provide a framework for regulating stablecoins. The bill last week passed a major procedural hurdle in the Senate after initial resistance from some Democrats.
Stablecoins are a type of crypto asset that is tied to the value of another currency, such as the US dollar or gold. They were initially created as a way for crypto investors to store their money but have grown in popularity in recent years for their use in digital payments.
The landmark bill would provide a boost of legitimacy to the crypto industry and is another example of how cryptocurrencies have had a major revival under President Donald Trump's second term.
Proponents of crypto have welcomed the focus on advancing stablecoin regulations. Yet critics have pointed to the Trump family's ties to the crypto industry: For example, World Liberty Financial, a company tied to the Trump family, has issued its own stablecoin.
'Stablecoins seem (to be) here to stay,' analysts at JPMorgan Chase said in an April note. 'A few years ago, we probably would have debated the accuracy of that sentence. Not today.'
While cryptocurrencies are known for being volatile and fluctuating in value, stablecoins are supposed to be, as their name suggests, stable.
This is because stablecoins are pegged one-to-one to another asset. They are most often linked to the US dollar, making one stablecoin worth $1.
Companies that issue stablecoins hold other assets to back their coins and assure buyers about their value. For example, a company issuing stablecoins pegged to the US dollar could buy and hold high-quality assets like US government bonds.
Two of the major stablecoin issuers are Tether, which issues USDT, and Circle, which issues USDC — and both of these stablecoins are pegged one-to-one to the dollar. Tether accounts for 62% of the total stablecoin market, according to analysts at Deutsche Bank.
The total market value of stablecoins surged from $20 billion in 2020 to $246 billion in May 2025, according to analysts at Deutsche Bank.
Stablecoins emerged in 2014 as way for crypto investors to park their money while buying and selling other more volatile cryptocurrencies like bitcoin. Since then, Stablecoins have ballooned in popularity particularly for their potential use in digital payments, said Darrell Duffie, a professor of finance at Stanford University.
Stablecoins, given their stable value, can serve as a medium of exchange and function as a digital currency. The crypto coins have emerged as useful in helping speed up payments.
'Cross-border payments are providing the most exciting new use cases,' Duffie said. 'Making a payment, such as a remittance or a vendor payment to or from an emerging-market country, can now be made faster and at lower cost than a conventional correspondent banking payment.'
While stablecoins are significantly less volatile than other crypto coins, they are not without risks. If the assets backing the coin drop in value and the one-to-one peg falls apart, it could cause the equivalent of a bank run, said Duffie.
Stablecoins gained notoriety in 2022 when TerraUSD, an obscure type of coin called an algorithmic stablecoin, crashed in value and caused a panic among investors.
There are also security risks like people forgetting the pass-code to their crypto wallet.
The GENIUS act stands for 'Guiding and Establishing National Innovation for U.S. Stablecoins of 2025.'
Circle would likely benefit from increased regulation more than Tether as Circle is a US-based company while Tether is based in El Salvador, Del Wright, a professor at Louisiana State University Law School who specializes in crypto, told CNN.
If the legislation passes, it could usher in mainstream adoption of stablecoins for digital payments and spur growth in the stablecoin industry, said Christian Catalini, founder of the cryptoeconomics lab at MIT. He added that traditional Wall Street firms and startups would also compete to offer stablecoins.
Visa (V) in May announced a partnership with Bridge, a stablecoin company owned by fintech startup Stripe, to enable payments using stablecoin in countries across Latin America.
'Stablecoins are on the cusp of mainstream adoption in 2025 as the US pushes forward with landmark legislation,' analysts at Deutsche Bank said in a May note. Despite the resistance in the Senate, 'we still expect progress this year.'