Stablecoin Regulation in the U.S.: Latest Proposals and Their Impact
The regulatory landscape for stablecoins is rapidly changing as U.S. lawmakers introduce multiple proposals to enhance oversight and consumer protection. The GENIUS Act, STABLE Act, and Waters Discussion Draft represent significant steps toward establishing a comprehensive framework for stablecoin issuers. These regulations emphasize transparency, security, and compliance, ensuring that stablecoins operate within a well-defined legal structure.
Our previous article examined the GENIUS Act and its implications for stablecoin issuers. Here, we compare three key legislative proposals, their market impact, and the importance of choosing a fully regulated stablecoin issuer for long-term stability and institutional adoption.
Three Proposed Stablecoin Regulations
Stablecoin regulation is a growing priority for U.S. lawmakers, leading to three key legislative proposals. While their approaches differ, all aim to enhance oversight and consumer protection.
The GENIUS Act: A Flexible Framework with Bipartisan Support
The GENIUS Act was introduced by Republican lawmakers with bipartisan support. It restructures stablecoin oversight by dividing regulatory authority between state and federal agencies while introducing stricter enforcement and transparency requirements. Under this framework, states can regulate stablecoin issuers with a market cap of up to $10 billion. Larger issuers may remain under state supervision if they meet specific conditions, ensuring continued regulatory flexibility. The Act also mandates monthly liquidity reports and compliance with transaction freeze orders and designates stablecoin issuers as financial institutions for anti-money laundering (AML) purposes.
The STABLE Act: A State-Focused Approach
The STABLE Act, also proposed by Republicans, emphasizes state-based regulatory oversight. It recognizes the existing frameworks of state-level financial regulators, such as the New York Department of Financial Services (NYDFS), allowing issuers to continue operating under familiar guidelines. Notably, this proposal does not include a federal issuance cap, distinguishing it from the GENIUS Act, which requires state-qualified issuers exceeding $10 billion in circulation to transition to federal oversight.
The Waters Discussion Draft: Centralized Federal Oversight
The Waters Discussion Draft, led by Democratic lawmakers but emphasizing bipartisan collaboration, advocates for a centralized federal regulatory model. Under this framework, both banks and non-bank financial institutions could issue stablecoins, provided they are backed by safe, liquid assets such as short-term U.S. treasuries. The proposal prioritizes uniform federal oversight, ensuring that all issuers comply with consistent regulatory standards. Additionally, it includes provisions to enhance consumer protection, particularly in guaranteeing rapid redemption of stablecoins to maintain user confidence and market stability.
Key Regulatory Requirements Across All Proposals
Despite structural differences, all three proposals impose key regulatory requirements:
・One-to-One Reserve Backing: Issuers must hold reserves equal to the stablecoins in circulation to ensure financial stability.
・Transparency and Reporting: Regular audits and public disclosure of reserve assets are required to maintain market trust.
・Regulatory Approval: Issuers must secure authorization to operate within the U.S. financial system.
・Consumer Protection Measures: Provisions to safeguard users, prevent fraud, and ensure seamless redemption processes are included in all proposals.
Implications for the Market
While much attention has been given to the impact of these laws on individual stablecoin issuers, their influence extends further into the financial system as a whole.
Institutional Adoption of Stablecoins
Regulated stablecoins will play a central role in mainstream finance and bridge digital and traditional markets, particularly in cross-border payments and settlements. Banks and fintech companies will favor partnerships with compliant issuers, while regulatory clarity will encourage broader stablecoin adoption by traditional financial institutions. This integration will enhance efficiency and reduce transaction costs.
The Role of Stablecoins in the Broader Economy
Regulated stablecoins are increasingly seen as essential connectors between digital assets and traditional finance, prompting more structured regulatory support. As stablecoins integrate into payment networks, compliance and transparency will be key to fostering trust among businesses and consumers. Government agencies and policymakers are likely to provide more structured regulatory support, ensuring stablecoins remain a stable and efficient medium of exchange even in volatile markets.
Benefits of Choosing a Regulated Stablecoin
As the regulatory landscape continues to develop, it is crucial for businesses, investors, and financial institutions to prioritize stablecoin issuers that adhere to the highest compliance standards. The benefits of choosing regulated stablecoins include:
・Long-Term Security — Fully backed reserves ensure that stablecoins maintain their value and provide user confidence.
・Market Trust — Regulatory approval minimizes legal and financial risks, making compliant stablecoins the preferred choice.
・Scalability and Integration — Compliant stablecoins are more likely to be integrated into mainstream financial infrastructure, increasing their utility and adoption.
Regulated stablecoins issued by GMO Trust
Since their launch in 2021, GYEN and ZUSD have operated under the oversight of the New York Department of Financial Services (NYDFS), aligning with key regulatory principles reflected in recent legislative proposals. Also, GMO Trust maintains full reserves to ensure stablecoins remain fully redeemable with their underlying currencies, along with attestation reports provided every month.
With high transparency and financial security standards, GMO Trust ensures that our stablecoins continue to meet the expectations of regulators and institutional participants in the digital asset market.
As the demand for fully compliant stablecoins increases, maintaining transparency and regulatory adherence remains crucial for institutional adoption. GMO Trust will continuously adapt to evolving U.S. regulations to meet the highest standard, and we are prepared to support institutional users with our fully compliant and transparent stablecoins.
About GMO-Z.com Trust Company
GMO Trust connects traditional finance and blockchain technology for everyone. We issue GYEN, the world’s first regulated Japanese Yen stablecoin, and ZUSD, our trusted U.S. Dollar stablecoin. Visit our website to learn more.
Disclaimer
This content is not financial advice and it is not a recommendation to buy or sell any financial instruments, FX trading, cryptocurrency or engage in any trading or other activities. You must not rely on this content for any
financial decisions. Acquiring, trading, and otherwise transacting with financial instruments or cryptocurrency involves significant risks.
We strongly advise our readers to conduct their own independent research before engaging in any such activities. GMO Trust does not guarantee or imply that any cryptocurrency or activity described in this content is available or legal in any specific reader’s location. It is the reader’s responsibility to know the applicable laws in their country.
