Author: Guo Liqin, Researcher at Caijing

Editor: Zhu Tao

Since late May, with key developments in stablecoin legislation in the United States and Hong Kong, global financial markets have seen a new wave of enthusiasm for cryptocurrencies represented by stablecoins.

Proponents believe this signifies an important step for cryptocurrencies to integrate into the global mainstream financial market, and that blockchain technology will reshape traditional financial payment systems; while skeptics argue that, compared to the cost reduction and efficiency gains brought by cryptocurrencies, the security challenges they pose still need to be weighed. The contest among various parties will gradually move from behind the scenes to the forefront alongside the U.S. legislative process.

On the evening of May 19, local time, the U.S. Senate conducted a key procedural vote on the stablecoin regulatory bill, passing it with 66 votes in favor and 32 against. The bill is officially titled the "Guidance and Establishment of the U.S. National Stablecoin Innovation Act" (hereinafter referred to as the "GENIUS Act"), which will regulate stablecoin issuers at the federal level in the United States.

Subsequently, David O. Sacks, the White House's cryptocurrency and artificial intelligence director, further released positive expectations, stating that the GENIUS Act would pass with "strong bipartisan support" and boost market demand for U.S. Treasury bonds. Sacks views the bill as a national economic strategy that will enhance the dollar's dominance in the network.

On March 7, 2025, David O. Sacks spoke to the media about digital currencies and the executive order on U.S. digital asset reserves. Image/Visual China

The "stablecoin" in the bill refers to a type of cryptocurrency pegged to stable assets (such as the U.S. dollar, gold, etc.), aimed at reducing price volatility and providing a stable store of value and medium of exchange. Historically, stablecoins were created to address the extreme volatility of cryptocurrencies like Bitcoin and Ethereum. The most well-known stablecoins are USDT issued by Tether and USDC issued by Circle, both pegged to the U.S. dollar at a 1:1 ratio, together accounting for about 90% of the global stablecoin market value. According to reports from various institutions, the total market value of global stablecoins has grown more than 22 times over the past five years, reaching nearly $250 billion.

On May 21, the Legislative Council of the Hong Kong Special Administrative Region officially passed the "Stablecoin Ordinance," becoming the first comprehensive regulation of stablecoins in the Asia-Pacific region. On May 30, the Hong Kong SAR government published the "Stablecoin Ordinance" in the Gazette, meaning the ordinance officially took effect as law.

The financial market was the first to welcome the surge. On May 22, Bitcoin broke through the $110,000 mark, surpassing the record high set on January 20 during Trump's inauguration. On June 2, in the Hong Kong stock market, stablecoin concept stocks collectively surged, with Lianlian Digital rising by 80% at one point, Yika rising nearly 50%, and OKLink rising over 45%. On June 3, A-share digital currency concepts were repeatedly active.

On June 5, local time, USDC issuer Circle was listed on the New York Stock Exchange under the ticker "CRCL," marking the first IPO in the stablecoin sector. The opening price soared 122.58% to $69, with an intraday high of $103, reaching a maximum increase of 234.68%. Due to excessive price volatility, Circle triggered a temporary halt in trading at one point, ultimately closing at $83.23, with a single-day increase of 168.5% and a total market value exceeding $18 billion.

However, it has been over three weeks since the last advancement of U.S. stablecoin legislation, and relevant parties are still in contention. Skeptics continue to raise concerns about potential conflicts of interest arising from the Trump family's entry into the stablecoin market, along with other accusations including corruption, money laundering, fraud scandals, and issues regarding the "transparency" of stablecoins themselves. The latest development is that Senate Majority Leader John Thune plans to initiate a new round of key procedural voting on the bill as early as June 11 local time.

1. Legislative Progress Below Expectations

Although Trump has shown support for the cryptocurrency industry since his second term, he still needs to compromise with Congress on the legislative process.

According to U.S. scholar Sun Yuanzhao, Trump's calls for accelerated legislation may significantly impact Republican lawmakers, as failure to comply could be seen as "betrayal." However, since the Republican Party currently holds only a slight majority in both chambers, the bill must also gain support from some Democratic lawmakers to pass.

The enactment of a new law in the U.S. Congress often requires a lengthy political struggle, involving multiple negotiations and compromises during the review period in both the House and Senate. The stronger the bipartisan consensus, the easier it is for the law to pass. Previously, the market widely believed that stablecoin legislation with more bipartisan support would achieve breakthroughs soon.

Cryptocurrencies generally include five types: stablecoins, central bank digital currencies, financial products and real-world asset tokenization (RWA), tokens not backed by off-chain assets (Bitcoin, Ethereum), and meme coins (Trump Coin, Dogecoin). During the last U.S. Congress, stablecoins, which are mostly pegged to U.S. dollar assets, helped maintain the dollar's status as the global dominant currency, thus gaining more bipartisan support for related legislation. From a market perspective, stablecoins have also received widespread attention for their roles in cross-border payments, cryptocurrency trading, transfers between digital asset exchanges, and value storage in countries where the use of the dollar may be restricted.

The GENIUS Act was initiated on February 4, 2025, by a bipartisan group including Senators Bill Hagerty and Tim Scott. The bill determines federal or state regulatory agencies based on the scale of stablecoin issuance and generally adopts bank-like regulatory requirements for issuers.

Key points of the early version of the bill include: 1. Defining payment stablecoins as digital assets used for payment or settlement (not classified as "securities") that are pegged to a fixed currency value; 2. Establishing clear procedures for institutions seeking licenses to issue stablecoins; 3. Implementing reserve requirements for stablecoin issuers, with total reserves at least equal to the amount of stable currency in circulation, and requiring issuers to publish monthly proof of reserve adequacy by independent auditors; 4. Applying the Federal Reserve's regulatory framework for deposit institutions to issuers exceeding $10 billion in stablecoin issuance, and the Office of the Comptroller of the Currency's framework for non-bank issuers; 5. Allowing state-level regulation of issuers with a market value below $10 billion and providing exemption procedures for issuers exceeding that threshold to continue state-level regulation.

So far, the GENIUS Act has passed two key procedural votes, both due to bipartisan support.

On March 13, local time, the U.S. Senate Banking Committee quickly passed the GENIUS Act with a vote of 18 to 6, marking the first step toward the bill becoming law (see: U.S. Cryptocurrency Legislation Breakthrough: How Much Influence Did Trump Have?). The current members of the Senate Banking Committee include 13 Republicans and 10 Democrats. In this vote, in addition to all Republican members, five Democratic members also voted in favor of the bill.

The passage of the bill in the Senate procedural vote on May 19 was the second step, after which it will enter the full Senate vote, House review, and many other processes before Trump can officially sign it into law. Although this progress has caused a stir in both the cryptocurrency market and mainstream financial markets, three weeks have passed, and the bill has yet to move to the next step, indicating that its final passage remains uncertain.

After the GENIUS Act passed the Senate procedural vote, there was a belief that the bill could enter and pass the full Senate vote within a week, and even reach the Trump signing stage a few weeks later. For instance, one of the bill's main supporters, Republican Senator Cynthia Lummis, once stated that passing the bill before May 26 (Memorial Day) was a "fair goal."

Sun Yuanzhao believes that the slower-than-expected pace of stablecoin legislation primarily indicates that there are many layers of "bargaining" behind the scenes. In his view, the next key time point for legislative breakthroughs may be before July 4 (U.S. Independence Day) and before August. At the White House cryptocurrency summit on March 7, Trump urged lawmakers to pass stablecoin legislation before the August recess to provide regulatory certainty for dollar-backed stablecoins and the digital asset market.

2. The Game and Controversy Behind the Legislation

In fact, the two votes that the bill has already received also went through behind-the-scenes communication and negotiation.

On May 8, several Democratic senators temporarily blocked the progress of the GENIUS Act due to concerns that Trump's cryptocurrency business and the bill's anti-money laundering provisions might present conflicts of interest. At that time, the proposal, which required 60 votes for procedural passage, received only 48 votes due to opposition from all Democratic members and three Republican members. After the bill faced resistance, Republicans and Democrats continued negotiations, ultimately producing a new amendment draft over the weekend, which garnered sufficient support from Democrats, allowing the bill to progress on May 19.

The revised GENIUS Act addressed many previous hot topics, including increasing demand for short-term U.S. Treasury bonds, strengthening the dollar's status as a global reserve currency, and revising "anti-money laundering" regulations to prevent tech giants from improperly issuing stablecoins, but it still remains controversial.

A recent research report from Deutsche Bank sent to Caijing indicates that, first, the GENIUS Act strengthens the dollar's dominant position by stipulating that all stablecoins must be pegged 1:1 to high-quality, low-risk liquid assets (U.S. Treasury bonds maturing within 93 days, insured bank deposits, or physical U.S. dollars), and that issuers must disclose their monetary reserves regularly each month. The bill codifies standards widely adopted by industry players like Tether, supporting the short-term U.S. Treasury market while promoting the global liquidity of the dollar.

Secondly, the revised bill prohibits tech companies like Meta and Apple from issuing stablecoins unless they meet stringent conditions regarding financial risk and user data privacy, reflecting deep concerns about the potential for tech giants to use their data monopoly to control financial infrastructure. This also means that the U.S. government aims to maintain the dollar's hegemonic position while curbing the potential threat of private tech giants to monetary sovereignty.

Additionally, the bill strengthens regulatory oversight of stablecoin issuers outside the U.S., directly targeting industry leaders. The bill authorizes the U.S. Treasury Secretary to jointly regulate offshore issuers with the newly established "Stablecoin Certification Review Committee," closing previous legal loopholes—previously, the U.S. allowed offshore issuers to continue operating as long as they restricted stablecoin transfers when requested by law enforcement. This means that offshore entities like Tether must comply with the same regulatory standards as domestic stablecoin providers.

However, the revised bill still has some unresolved controversies. The aforementioned report indicates that, on one hand, the bill explicitly prohibits regulated stablecoins from paying yields or interest. This restriction may prompt funds to flow from stablecoins to tokenized money market funds (a type of income-generating tool linked to underlying assets). Despite the legislative ban, market innovations continue to emerge. Income-generating stablecoins issued by institutions such as Spark Protocol and Figure Markets are rapidly developing, accounting for 2.8% of the $247 billion stablecoin market as of May 21 (with a scale of $5.9 billion).

On the other hand, although the bill has strengthened anti-money laundering and national security provisions after revision, it has not resolved the controversy over potential conflicts of interest brought by Trump that previously stalled the bill. Democrats continue to criticize the bill for involving conflicts of interest related to Trump and his family. Trump's financial dealings with multiple crypto projects—including the USD1 stablecoin issued by his family-controlled "World Freedom Finance" and several "influencer coins"—have raised concerns that this legislation could facilitate economic benefits for political figures.

After the vote, Democratic Senator Elizabeth Warren condemned the bill for "fostering Trump's corrupt behavior." She pointed out that the USD1 stablecoin could become a shadow banking tool for "offshore anonymous intermediaries" to funnel funds to Trump and his associates. Since its launch on March 25, the market value of USD1 has skyrocketed from $128 million on April 28 to $2 billion in May, ranking seventh in the stablecoin market value leaderboard. The $2 billion cooperation agreement reached between its issuer "World Freedom Finance" and the UAE's MGX Fund on May 1 directly fueled the surge of this stablecoin.

According to Sun Yuanzhao, another reason affecting the progress of the GENIUS Act is the higher-priority federal budget bill (One Big Beautiful Bill Act), which occupies more legislative resources. "Budget, tax law, and immigration law—these three issues are enough to leave all lawmakers overwhelmed."

Zhu Keliang, head of the Silicon Valley office of DeHeng Law Firm, believes that unless the U.S. can pass the "One Big Beautiful Bill" within the next one to two months, the likelihood of passing stablecoin legislation this year is very low.

On May 22, the U.S. House of Representatives narrowly passed the "One Big Beautiful Bill" by a single vote. The bill contains multiple provisions and exceeds 1,000 pages. It will extend the corporate and individual tax cuts passed by Trump during his first term in 2017, provide new tax relief for tips, auto loans, and more, while increasing defense spending and providing more funds to combat illegal immigration.

In addition to the Senate, the House also has several similar legislative proposals pending, the most notable being the revised STABLE Act. During the last Congress, both parties strongly supported a specific regulatory framework for stablecoins, namely the STABLE Act. French Hill, chairman of the House Financial Services Committee, released a revised version of the bill in February. On March 11, the House held a hearing to preliminarily discuss the integration of several drafts.

According to five lawyers, including Margo Tank from the law firm O'Melveny & Myers, both the GENIUS Act and the STABLE Act aim to establish a legal framework for stablecoins. They clarify the requirements for federal (or state) licensing and regulation, including transparency and 1:1 reserve standards, redemption and consumer protection requirements, as well as compliance requirements such as anti-money laundering.

The lawyers stated that for these bills to become law, "they need to pass in their respective chambers and be coordinated in the event that different versions pass in the House and Senate, followed by presidential signing."

3. Is Innovation Inevitable?

With the development of cryptocurrencies, how to effectively regulate cryptocurrencies, including stablecoins, has been a significant controversy worldwide, with the core issue being how much compliance cost is necessary to promote such innovation.

Another challenge faced by global regulatory agencies is that once cryptocurrency regulation is strengthened, the related industry chain will shift to countries and regions with more lenient regulatory environments.

The United States and Hong Kong have taken the lead in making the first regulatory steps oriented towards "promoting innovation."

In David Sacks' view, stablecoins provide a new, more efficient, cheaper, and smoother payment system—opening up new payment tracks for the U.S. economy and expanding the dollar's dominance in new fields.

Xiao Feng, chairman and CEO of HashKey Group and chairman of Wanxiang Blockchain, believes that both Hong Kong's Stablecoin Ordinance and the U.S. GENIUS Act breakthroughs essentially signify that both regions recognize the concept of "currency tokenization based on blockchain distributed ledgers."

In Xiao Feng's view, U.S. dollar stablecoins are a core interest of the U.S. government, and legalizing the operation of U.S. dollar stablecoins through legislation aims to actively seize emerging fields in cryptocurrency and expand existing international applications of the dollar, such as "petrodollars."

The scale of stablecoins has indeed become significant. According to Changjiang Securities, as of May 1, 2025, the total scale of stablecoins was approximately $227.37 billion, a year-on-year increase of 46.5%, with a rapid growth rate. As of early May, the 30-day rolling trading volume of stablecoins had reached $2 trillion, surpassing traditional payment channels like Visa and PayPal.

Transformations on the industrial side have already begun. A recent research report from Bank of America Securities pointed out that as the development of stablecoins becomes clearer, blockchain technology will reshape the payment ecosystem, challenging the traditional "five-party payment model" (merchants, acquiring institutions, issuing institutions, card organizations, and cardholders).

Bank of America Securities stated that banks with blockchain technology capabilities can process transactions directly, and the economic value of traditional payment service providers will be diminished by blockchain infrastructure. Some of the largest banks in the U.S. are exploring the issuance of joint stablecoins, and JPMorgan has been operating a blockchain-based digital payment infrastructure called "Kinexys" for years. As one of the largest custodial banks, BNY Mellon recently launched a digital asset data insights product that publishes on-chain and off-chain data to the blockchain.

Another important reason for various parties in the U.S. to push for legislation is that the rapidly developing crypto assets (including stablecoins) and their related business activities are regulated in the U.S., but this regulation is inconsistent, creating uncertainty for businesses and individuals in the ecosystem. For example, multiple regulatory agencies have different definitions of cryptocurrencies. The U.S. Securities and Exchange Commission (SEC) views them as securities, the Internal Revenue Service (IRS) views them as property, and the Commodity Futures Trading Commission (CFTC) sees them as commodities.

According to the multinational consulting firm Grant Thornton, compared to stablecoins, the market structure is another more complex area that cryptocurrency legislation needs to address. Such legislation needs to clearly define when cryptocurrencies and tokens without fixed values should be regulated as securities by the SEC or as commodities by the CFTC. Bitcoin, the largest cryptocurrency by market capitalization to date, is regulated as a commodity by the CFTC, but this regulatory agency primarily oversees futures and derivatives, with limited direct authority over the spot market.

During the last Congress, the U.S. House of Representatives drafted and passed the Financial Innovation and Technology Act for the 21st Century (FIT21), making it the current legislative template. Grant Thornton believes that the SEC's cryptocurrency special working group and Trump's cryptocurrency working group may play a role in formulating this legislation.

The U.S. law firm Wachtell Lipton believes that even if the U.S. Congress passes relevant stablecoin legislation, coordinating decentralized technology with a centralized regulatory system will still pose challenges, including the replacement of intermediary finance by decentralized finance (DeFi), tokenization of real assets, and the operation of decentralized autonomous organizations (DAOs). Moreover, there is a fragility in bipartisan consensus—Illinois has emulated New York's stringent BitLicense system (a license issued for cryptocurrency activities), and the Oregon Attorney General's lawsuit against the world's largest cryptocurrency exchange, Coinbase, to "fill the federal regulatory vacuum" serves as evidence.

4. Still Need to Prove "Honesty" and "Safety"

The cryptocurrency industry, which claims to have disruptive power over traditional finance but is rife with fraud and money laundering scandals, faces a real challenge in the upcoming U.S. legislative agenda: how to convince a broader range of stakeholders with a safe, sustainable, and compliant performance.

On November 11, 2022, the world's second-largest cryptocurrency exchange, FTX, announced bankruptcy due to a liquidity crisis. On December 12 of the same year, FTX CEO Sam Bankman-Fried faced eight criminal charges and was arrested in the Bahamas. These charges included telecommunications fraud, conspiracy to commit money laundering, and violations of federal campaign finance laws.

Bankman-Fried's largest fraudulent act was mixing customer deposits on the FTX trading platform with the assets of his own fund, Alameda Research. Alameda Research misappropriated billions of dollars in customer funds from the FTX exchange. This directly led to FTX's insufficient reserve funds, unable to meet customer withdrawal demands, ultimately resulting in bankruptcy. On March 28, 2024, the court sentenced Bankman-Fried to 25 years in prison.

FTX's bankruptcy was referred to by then U.S. Treasury Secretary Yellen as the "Lehman moment" for cryptocurrencies. The entire cryptocurrency industry suffered a "winter" in 2022, with the crisis spreading to nearly all related institutions, markets, or regions.

It is worth noting that FTX was valued at over $30 billion at its peak in 2021. Bankman-Fried was hailed as the "king of cryptocurrency" and was included in TIME magazine's list of the "100 Most Influential People in the World" in 2022.

The listing of stablecoin issuer Circle also experienced "twists and turns." In early 2022, Circle attempted to go public through a special purpose acquisition company (SPAC), but coincided with the aforementioned series of cryptocurrency explosions, causing Bitcoin to drop from $69,000 to $15,000, ultimately shelving Circle's listing plan.

At the end of 2023, during the Silicon Valley Bank crisis, Circle had $3.3 billion frozen in that bank, leading to its issued stablecoin USDC losing its peg, triggering panic redemptions in the market. Fortunately, after the Federal Reserve intervened for rescue, USDC restored its 1:1 peg.

Cao Huining, a finance professor at Cheung Kong Graduate School of Business, published an article in June 2022 titled "Stablecoins Are Not Stable: Lessons from the Collapse of Luna and UST," arguing that even stablecoins backed by fiat currency lack transparency and may not actually have sufficient reserves. For example, USDT and USDC have yet to release complete audit reports. Moreover, in his view, the price of stablecoins does not necessarily remain "stable"; it is merely a conventional term. Stablecoins backed by cryptocurrencies or algorithmically supported may be affected by cryptocurrency price fluctuations and are highly dependent on community operations, making their value stability easily compromised.

Xiao Feng believes that due to the lack of laws and regulations, stablecoin issuers are unclear about what rules to follow to improve their transparency. However, with the gradual issuance of relevant stablecoin laws in the U.S., Hong Kong, and other regions, the issue of transparency will naturally be resolved.

In response to social controversies, the U.S. STABLE Act and GENIUS Act define payment stablecoins as digital tokens pegged to fixed currency values, rather than algorithmic stablecoins that collapsed in 2022. Additionally, the reserves supporting stablecoins must be kept separate from other company assets—this is a lesson learned from the asset mixing that led to the collapse of FTX.

Additionally, it is worth noting that Paul Krugman, the 2008 Nobel Prize winner in Economics, stated in a post on May 9 that cryptocurrencies remain tools for crime. In his view, during the upcoming voting process for the GENIUS Act, the Democrats should not endorse this scam, "but they are likely to do so."

The article points out that the shadow of Trumpism corruption looms over the crypto space. "Trump Coin" and "Melania Coin" have become blatant tools for bribery, and the newly launched USD1 stablecoin from Trump's family-controlled crypto company, "World Freedom Finance," is no different. Cryptocurrencies are openly pricing the U.S. presidency, with buyers including not only wealthy foreigners but also foreign governments. The article cites investigations indicating that a few large investors have profited significantly from "Trump Coin," while tens of thousands of small investors attracted by the presidential name have lost everything after buying at price peaks.

In Paul Krugman's view: No matter how the final text of the bill is dressed up, it is fostering corruption. Because the entire crypto industry is inherently corrupt, "money laundering and fraud are its entire purpose."

As a key proponent of this round of U.S. cryptocurrency legislation, Trump firmly opposed cryptocurrencies during his first presidential term, criticizing their price instability as akin to "thin air."

However, during his second presidential campaign, Trump discovered that cryptocurrency holders represented an important voter bloc, publicly supporting "innovation and Bitcoin," claiming he would make the U.S. the "global cryptocurrency capital," and announcing he would accept cryptocurrency donations to win over this group's votes.

Whether through accelerated legislation or influencing the election, it shows that the impact of cryptocurrencies in the U.S. is continuing to grow.

A study released by the U.S. publicly traded company Coinbase, which provides digital currency exchange and wallet services, on July 11, 2024, indicates that the voting willingness of cryptocurrency voters is extremely strong, with nearly nine out of ten registered voters planning to cast a crucial vote in the November elections, a rate four times that of ordinary voters. On the other hand, one-sixth of cryptocurrency holders are concentrated in seven key election states in the U.S., with Generation Z and Millennials accounting for 65% of the total number of registered voters who own cryptocurrencies, and about 40% of cryptocurrency holders residing in swing states where election outcomes are easily influenced.

In recent years, the cryptocurrency industry has invested heavily in lobbying and public relations marketing activities in Washington.

In past elections, Wall Street and large corporations have been the main sources of political donations in the U.S. However, in 2024, the cryptocurrency industry has also emerged as an important new force. According to media statistics, during this election cycle, the cryptocurrency industry raised over $245 million in campaign funds from corporate and individual donations.

According to a report by the nonprofit regulatory organization Public Citizen, campaign funds provided by cryptocurrency companies account for nearly half of all corporate contributions, far exceeding any other industry, including traditionally large political donors like oil companies and banks.

In the 2020 U.S. presidential election, the then-prominent Sam Bankman-Fried was one of the CEOs who donated the most to Biden, with personal donations of $5.2 million, second only to Bloomberg founder Michael Bloomberg.

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