A single sentence can summarize the relationship between stablecoins and RWAs (real-world assets): stablecoins provide the “on-chain currency” for RWA transactions, while RWAs provide the “off-chain asset backing” for stablecoins. If RWAs create the expectation that any type of asset can be brought on-chain, then U.S. dollar stablecoins provide a tangible case of that expectation being realized.

After rounds of political maneuvering, the Guidance and Establishment of the U.S. Stablecoin National Innovation Act (referred to as the “Genius Act”) was finally enacted. On July 18, U.S. President Donald Trump officially signed the Act at the White House, making it the first federal-level legislation governing stablecoins. This means that, for the first time, the United States has established a regulatory framework for digital stablecoins, bringing stablecoins—once growing “in the wild”—into the formal stage of U.S. finance.

Connecting U.S. dollar debt on one side and the blockchain world on the other, the significance of dollar stablecoins goes far beyond the tokens themselves. U.S. debt is one of the most significant assets held by sovereign states and financial institutions in the real world, and its tokenization can be seen as a major “pilot project” for RWAs.

By observing the trajectory of U.S. dollar stablecoins, one can clearly see how RWAs link on-chain assets with the real world, how an RWA product affects the asset it is pegged to, and how, through that anchor, it reshapes the global financial landscape.

Why, then, has the United States—the most active region for stablecoins—introduced a regulatory framework at this time? What critical messages does the industry see in the Genius Act, and what impact might it have on the global financial system? How will other countries and regions respond?

The answers to these questions not only concern stablecoins themselves but also serve as an important window into understanding the operating logic and development prospects of RWAs.

Background

Stablecoins are a type of cryptocurrency. Unlike Bitcoin—the most famous cryptocurrency—stablecoins are relatively stable in price, pegged to fiat currencies (such as the U.S. dollar) or commodities (such as gold). They combine the technical advantages of cryptocurrencies with the credibility of traditional money.

One reason the U.S. government accelerated the creation of a stablecoin framework is the rapid growth of the sector. Since emerging in 2014, dollar stablecoins have grown explosively. Today, USDT and USDC are the dominant players. According to the Skynet H1 2025 Stablecoin Panorama Report released in July by CertiK, the world’s largest Web3.0 security company, the stablecoin market continued to expand in the first half of 2025, with total supply reaching USD 252 billion. This rapid growth under minimal regulatory oversight triggered policy concerns.

A more critical factor driving U.S. action is the Treasury debt dilemma. Treasury data released in June showed that major holders of U.S. debt—including Japan, the U.K., and Canada—were simultaneously reducing their holdings.

Facing this situation, U.S. debt needed a “self-sustaining” solution to maintain demand. The Genius Act allows federally or state-licensed financial institutions to legally issue stablecoins, while non-fintech firms may participate through compliant financial entities. U.S. media reported that several large banks, payment platform Zelle, and Uber are already in talks to issue a joint stablecoin.

The Act requires issuers to adopt a mandatory “100% reserve system”—meaning that every stablecoin issued must be backed 1:1 by U.S. dollars or U.S. Treasury securities. Put simply, buying stablecoins indirectly means buying Treasuries. While framed as a financial risk-prevention measure, this rule effectively opens a new market for U.S. debt.

The Risk Transfer Mechanism

While busy writing rules for the virtual world, the United States is ultimately playing a real-world game.

According to the latest U.S. Treasury data, Tether, the issuer of USDT, now holds USD 120 billion in Treasuries—more than Germany’s USD 111.4 billion—making it the 19th-largest holder globally. In effect, this creates a “tokenize-to-buy” loop, issuing stablecoins with one hand and purchasing Treasuries with the other.

Standard Chartered projects that stablecoins will absorb USD 400 billion of Treasuries annually. If the market reaches USD 2 trillion by around 2030, as expected, that would translate into USD 1.6 trillion flowing into Treasuries.

Financial outlet Global CFO commented that what began as a niche within the crypto ecosystem—dollar-pegged stablecoins—has now transformed into a major financial force. With the Act in place, stablecoins are rapidly becoming one of the largest and fastest-growing buyers of U.S. debt.

If stablecoins continue to grow “stably,” demand for Treasuries will stabilize and even expand, reinforcing the U.S.’s ability to sustain its interest rate levels and retain influence over global capital markets and national economies.

The Act also establishes bankruptcy protection, requiring issuers to segregate client funds from operational funds. Should an issuer go bankrupt, customer assets have priority in liquidation. In other words, issuer insolvency is openly acknowledged as a possibility. Placed alongside the “100% reserve” rule, this clause is particularly telling.

Issuers typically invest reserves in Treasuries rather than holding cash. If stablecoin growth stalls, it could trigger liquidity risks for Treasuries, potentially leading to a run. Taking USDT as an example: if panic selling occurs, holders rushing to redeem could force Tether to dump USD 120 billion of Treasuries at once, potentially crashing the bond market. If assets cannot be liquidated in time, Tether could collapse—mirroring the 2008 Lehman crisis. In this scenario, U.S. debt risk is shifted from the federal government to issuers and global stablecoin holders.

Another risk stems from the U.S. market’s sophisticated short-selling mechanisms. The potential for a stablecoin collapse provides fertile ground for speculative attacks, echoing the short-driven profits of the 2008 subprime crisis.

Xiang Songzuo, Dean of the Greater Bay Area Institute of Finance in Shenzhen, argues that as confidence in the dollar and Treasuries erodes and capital flows outward, forcing stablecoins to be pegged to dollars and Treasuries indeed draws demand back in, helping ease the U.S. debt crisis. Fundamentally, however, the Act transfers debt pressure from sovereign funds to global retail users, who should exercise caution when purchasing stablecoins.

How to Deal with the “Two Faces” of Stablecoins?

If the U.S. has rushed to establish a stablecoin framework to ease its debt concerns, does that mean others without such pressures can afford to sit back? From the actions of various countries and regions, the answer is clearly no.

The reason U.S. stablecoins can “channel liquidity” into Treasuries lies in their sheer transaction volume.

Zeng Gang, Chief Expert and Director at the Shanghai Finance and Development Laboratory, notes that many countries and regions lack the capacity to control money supply or provide credible backing for their currencies. This creates room for U.S. dollar stablecoins.

For example, a long-time tour guide in Africa observed that many street vendors now accept stablecoin payments. In regions plagued by war, political instability, and hyperinflation, traditional currencies often lose credibility, creating demand for USDT. Reports indicate that in countries like Nigeria and Argentina, where inflation is high, up to 40% of household savings are held in USDT.

Beyond substituting for weak sovereign credit, stablecoins also owe their traction to convenience and low cost. Initially designed as a medium of exchange within the crypto ecosystem, their potential in cross-border payments and settlement is now being recognized.

Unlike Bitcoin, which is investment-heavy, stablecoins are transaction-heavy, with payments as their core function. For cross-border traders, using banks involves contracts, customs documents, and days of review—plus time and cost. In contrast, stablecoins can bypass these steps. They also avoid the SWIFT system, which typically requires 3–5 days for fund transfers, charges significant fees, and lacks transparency in tracking intermediaries. Blockchain-based transfers, by contrast, enable peer-to-peer transactions. For personal use, Visa credit card transactions often cost around 3%, while stablecoin settlement fees are negligible.

Data shows stablecoins are rapidly encroaching on SWIFT’s market. In 2024, about USD 8.9 trillion in cross-border payments were settled using stablecoins, nearly 40% of SWIFT’s volume. Coupled with U.S. government backing, dollar stablecoins effectively extend the dollar into a new digital dimension—deepening U.S. penetration into global capital flows, fintech, and even fostering digital dollarization.

This trend has sparked concern abroad. Italy’s finance minister recently warned that dollar stablecoins could crowd out the euro. Without restrictions, U.S. dollar influence could further erode national monetary sovereignty.

According to Zeng Gang, stablecoin development is, in some sense, an extension of U.S. efforts to maintain control over the global financial system amid dollar hegemony’s decline. In the short term, they boost Treasury demand; in the long term, they may diversify reserve assets, catalyze new mechanisms, and drive a shift toward a multi-asset monetary system.

Other countries and regions are already responding. The EU, Japan, UAE, and Bahrain have released stablecoin regulations. South Korea is refining its Basic Digital Asset Act, which will open legal pathways for stablecoin issuance. On August 1, Hong Kong’s Stablecoin Ordinance took effect, with compliant Hong Kong-issued stablecoins expected by year-end.

Overall, regulators worldwide stress the need for caution. Despite their name, stablecoins can destabilize due to insufficient reserves, opaque issuers, or de-pegging from fiat. They also present challenges around capital control evasion, money laundering, and sanctions avoidance.

Thus, most jurisdictions seek a balance between development and risk mitigation. They recognize stablecoins’ benefits—enhancing payment efficiency, lowering costs, and promoting innovation—while imposing capital requirements, reserve transparency, audits, and cross-border limits to keep risks within manageable bounds. For many Global South economies, stablecoins represent both opportunities and threats to monetary sovereignty and financial stability.

The right path for stablecoin adoption rests on clear legal frameworks and enforceable regulations. This includes central banks or authorities setting unified standards, issuers maintaining verifiable reserves sufficient for redemption, cross-border regulatory cooperation to prevent arbitrage, and public education to enhance risk awareness. Only then can stablecoins’ advantages be harnessed while minimizing systemic and compliance risks—allowing innovation to progress safely and sustainably.