Stablecoins: Hype, Hope, or the Next Monetary Era?

Dollar-backed tokens now account for over $250 billion in circulation, moving more value on-chain than Visa and Mastercard combined. Can they transform money, or will risks outweigh the promise?

Stablecoins have surged into a $250 billion market, already moving more value on-chain than Visa and Mastercard. Backed mostly by the US dollar, they promise faster, cheaper, and more inclusive global payments while serving as the backbone of decentralized finance. Their adoption is accelerating as regulators provide clarity and institutions embrace them, from Wall Street to emerging markets where access to stable money is scarce.

But the rise of stablecoins comes with risks: shadow banking dynamics, reserve vulnerabilities, and potential challenges to monetary sovereignty. They may strengthen the dollar’s reach, yet rivals like China are preparing competing tokens, and US debt-driven debasement remains unresolved. The question now: are stablecoins a stabilizing bridge or a destabilizing force?

A Pillar of Modern Crypto Infrastructure

Stablecoins are a unique category of cryptocurrency designed to hold a steady value by pegging their worth to traditional assets such as fiat currencies, commodities, or other financial instruments. Unlike their volatile crypto counterparts, stablecoins deliver the liquidity and predictability required for everyday transactions and trading.

Today, the bulk of stablecoins are fiat-backed, with roughly 99 percent pegged to the US dollar. Prominent examples include Tether’s USDT, Circle’s USDC, and Binance’s BUSD. Algorithmic versions and commodity-backed variants also exist, though they remain less widely used.

These tokens have quickly become foundational infrastructure for the crypto market, frequently used for trading, remittances, and decentralized finance. Their appeal lies in combining crypto’s speed and access with the stability of fiat value.

A Surge Toward Mainstream Acceptance

Momentum behind stablecoins has grown significantly in 2025. Payment giants such as Visa and Mastercard, as well as financial heavyweights like JPMorgan and Wells Fargo, are embedding stablecoin mechanisms into their operations. Retail players like Amazon and Walmart are also exploring digital tokens for payments to reduce fees and enhance efficiency.

McKinsey projects that daily stablecoin transaction volumes, currently around $30 billion, could surge to $250 billion within three years. Meanwhile, research predicts the market could grow to $2 trillion by 2028, although some experts consider this projection optimistic.

Regulatory Clarity and Emerging Tensions

Much of this growth stems from clearer regulation. In mid-2025, the United States enacted the GENIUS Act, one of the most comprehensive federal frameworks for stablecoins to date. The law mandates one-to-one backing with cash or safe assets, auditing requirements, and enhanced transparency. Issuers with over $50 billion in market cap must submit annual audits and protect holders in bankruptcy scenarios.

Tether, the dominant stablecoin issuer with over $150 billion in circulation, faces heightened scrutiny due to opacity around its reserves. In contrast, Circle stands to benefit from newfound legitimacy, evidenced by a stock market surge. The legislation also includes anti-money-laundering provisions and law enforcement cooperation.

In Europe, the MiCAR framework has been in force since 2024, but regulators have gone further, requiring platforms that handle stablecoins to obtain additional payment or e-money licenses. ECB President Christine Lagarde has urged lawmakers to extend equivalent safeguards to foreign issuers to avoid regulatory loopholes.

The Bank for International Settlements has also cautioned that stablecoins may strain financial stability and undermine monetary sovereignty in emerging markets.

The International Payments Advantage

One of the strongest drivers behind the rise of stablecoins is their utility in international payments. Cross-border transfers under the existing system remain costly, slow, and opaque. The global financial system still depends heavily on the SWIFT network, which routes payments through layers of correspondent banks. Each intermediary adds fees, delays, and foreign-exchange spreads. Roughly 40 percent of international transfers via SWIFT take five days or longer to settle, and costs often exceed 3 percent of the transaction value in non-core corridors.

Stablecoins cut through this complexity. By enabling direct peer-to-peer settlement on blockchain networks, they reduce costs dramatically and allow transactions to clear almost instantly. A USDT transfer on the Aptos blockchain, for instance, can cost a fraction of a cent and settle in seconds. For exporters, importers, and migrant workers sending remittances, this efficiency is transformative.

The implications for global trade are significant. SMEs in emerging markets often struggle to access reliable banking channels. Stablecoins offer them a digital alternative to make and receive payments across borders without the friction of intermediaries. They also enable 24/7 transactions, a marked contrast to legacy systems bound by banking hours and holidays.

This international payments utility is not just about cost savings. It can also drive inclusion. In countries with weak banking infrastructure or capital controls, stablecoins provide access to digital dollars where physical ones are scarce. For individuals and businesses alike, they offer a bridge to participate in global commerce.

Hidden Cracks in the Foundation

Despite their promise, stablecoins conceal intrinsic vulnerabilities. A recent study by the National Bureau of Economic Research finds that Tether and Circle are exposed to annual run risks of around 3.9 percent and 3.3 percent respectively, thousands of times greater than deposit-insured banks. Over ten years that translates to approximately a one-in-three chance of a significant run, calling into question the implicit “stable” claim.

The danger is contagion dynamics akin to money market funds. If investors lose confidence and redeem en masse, issuers must liquidate underlying reserves, potentially destabilizing broader financial markets.

Other risks include counterparty exposure, particularly when reserve assets are held with centralized banks, as seen when USDC briefly de-pegged during the collapse of Silicon Valley Bank in 2023. Audit gaps persist, notably in Tether’s case, where auditors have never confirmed full reserve coverage.

Cybersecurity is another frontline. Stablecoins operating on blockchain are not immune to exploits, smart-contract vulnerabilities, oracle failures, and hacks.

For citizens in high-inflation countries such as Argentina, Turkey, and Venezuela, stablecoins have become a hedge against local currency collapse. NGOs in African markets use them for aid distribution, bypassing traditional banking barriers. These use cases highlight their strength but also raise sovereignty questions when foreign tokens overshadow national currencies.

A Reckoning for Monetary Sovereignty

Stablecoins blur the line between privately issued money and public currency. Analysts warn of “privatized seigniorage,” where profits accrue to issuers rather than governments, potentially eroding state monetary prerogatives. Countries may confront fragmented currency systems if stablecoin adoption outpaces regulation.

John Wu of Ava Labs argues that, when well regulated, stablecoins can enhance the international role of the US dollar rather than weaken it. Yet this dynamic may further entrench dollar dominance, especially when the global economy remains sensitive to shifts in US monetary policy.

A Dollar Lifeline: Or a Double-Edged Sword?

Stablecoins have been celebrated as a digital extension of the US dollar, reinforcing its dominance across borders by embedding it within global digital infrastructure. Yet this narrative is far from guaranteed.

Superpowers such as China are actively preparing yuan-backed stablecoins, with Hong Kong and Shanghai positioned as early testbeds. If these projects scale, they could challenge the dollar’s near-monopoly in the stablecoin market. For countries in Asia, Africa, and Latin America, many of which are already looking to diversify away from dollar dependence, yuan-linked tokens could provide a viable alternative. Similar initiatives in South Korea and Japan underscore the likelihood of a more multipolar stablecoin ecosystem in the coming years.

Even for the dollar, the lifeline provided by stablecoins is not without trade-offs. By drawing ever-larger sums into short-term US Treasuries, they may lower borrowing costs, but they also concentrate risks in ways that resemble shadow banking. A sudden run on redemptions could disrupt Treasury markets, spilling into the broader financial system.

More fundamentally, stablecoins cannot mask the structural weakness of the US dollar itself. The American currency remains under long-term pressure from soaring government debt levels and persistent fiscal deficits. Continuous money creation to finance spending erodes confidence in the greenback’s value, regardless of how many tokens are issued to represent it. In this sense, stablecoins may temporarily strengthen the dollar’s reach but do little to resolve the underlying challenge of debasement.

The Road Ahead: Realignment or Revolution?

The narrative surrounding stablecoins is at a crossroads. On one side, they promise faster, cheaper, and more inclusive financial services: everything from frictionless international remittances to programmable money and financial innovation. On the other, they confront risks that could undermine that promise.

Stablecoins already demonstrate undeniable advantages. In international payments, they slash costs and settlement times, offering SMEs and individuals in underserved markets a lifeline to global commerce. Within decentralized finance, they provide a stable bridge between volatile crypto assets, underpinning much of the ecosystem’s functionality.

Yet for all these strengths, challenges abound. Competition is intensifying as China and other countries explore alternatives to dollar-backed tokens. Risks are rising, from systemic runs to Treasury market disruptions. And the uncertainty over whether stablecoins will stabilize or destabilize the financial system remains unresolved.

The answer to whether they represent hype, hope, or the foundation of the next monetary era will depend on how regulators, issuers, and markets navigate this precarious balance. What is clear is that stablecoins have moved from the fringes of crypto into the center of the financial debate, and their trajectory will shape the future of money itself.