Among the first US Presidential orders was banning the Federal Reserve’s (Fed) digital dollar creation in January 2025 to keep the Central Bank from entering the organically developing digital currencies space. The move signalled a clear break from state-issued digital currencies and an ideological shift toward market-driven innovation.
US’ big 4 banks launch joint stablecoin initiative
By May, Bitcoin hit another all-time high above $111,000 and the country’s top banks—JP Morgan, Bank of America, Citi, and Wells Fargo—announced a joint stablecoin initiative, showing a 180-degree shift from the Democrat-era cryptocurrency sentiment. Not only does this mark a reputational pivot for institutions that once distanced themselves from crypto, but it also underscores how regulatory tailwinds can rapidly reshape institutional strategy.
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Across the Atlantic, the European Central Bank (ECB) set up new groups to explore digital euro use cases in its most-recent push. Yet, the share of euro-backed stablecoins remains under 1% of the total supply dominated by USD-backed coins (99%+); highlighting the disproportionate influence of US monetary infrastructure on global digital finance. This imbalance has emerged as a silent yet powerful driver of USD demand, especially important at a time when appetite for the dollar is weakening globally amid growing trade wars.
The significance of the GENIUS Act
The largest US incumbents moving into the crypto space via a stablecoin initiative was anticipated following the most-recent advancement of the GENIUS (Guiding and Establishing National Innovation for US Stablecoins) Act in the Senate. Years of restrictive regulation on crypto assets has left traditional banks with no choice but to campaign against the industry, which is arguably the biggest competitive threat to traditional finance and its institutions yet. The four banks’ joint stablecoin announcement now signals a systemic shift, as the GENIUS Act is set to bring long-awaited federal oversight to the stablecoin market in the form of consumer protection and national security measures. The timing suggests a strategic play of US banks aligning with federal efforts to regulate stablecoins in an attempt to steer it in their favour.
Meanwhile, Europe’s MiCA (Markets in Crypto-Assets) regulation proved too restrictive for by far the largest stablecoin Tether to comply, which is now unavailable on European exchanges. Though, the biggest demand for Tether’s services is concentrated in emerging markets out of necessity for fast, cheap, and reliable transfers.
With that said, the ECB’s two, new ‘Pioneers’ and ‘Visionaries’ workstreams are currently looking for and testing potential functionalities and use cases for the digital euro that aims to launch by the end of the year. The scope of these trials suggests that beyond consumer payments, the ECB is considering applications in programmable finance, automated tax collection, and cross-border trade—all areas where it seeks to reduce its dependence on US-based infrastructure.
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By GlobalDataPrivate versus government-issued digital currencies
So far, the trajectory of private vs government-issued digital currencies shows strong correlation with national interests and its regulatory backing, which is expected to continue shaping stablecoins’ and Central Bank Digital Currencies’ (CBDCs) regional development paths moving forward. The ECB is unlikely to relax MiCA rules as it recently named the digital euro one of the three structural economic policy priorities, amid their ongoing push for payments independence from US providers. On the other hand, creating a supportive regulatory environment for stablecoins aligns with the Fed’s monetary interests too; given that stablecoin issuers are set to become the largest US Treasury securities holders globally by 2030 as foreign government demand drops. This makes stablecoins not just a tech innovation, but an increasingly vital pillar of US fiscal stability.
Blandina Hanna Szalay is an analyst, banking & payments, at GlobalData
