The Dollar Goes Digital
When I was a kid, going to Chuck E. Cheese meant one thing: turning my (parent’s) dollars into tokens. Now it means trying to chase down my daughter and calm her hysteria when she encounters a giant life-size mouse mascot.
But those shiny gold coins were useless anywhere else, but inside that arcade? They were the economy. You fed them into the Skee-Ball machine, earned more tokens from jackpot games, and maybe—just maybe—left with enough prize tickets to win a Chinese finger-trap or a battalion of army men.
But imagine this: what if Chuck E. Cheese got so big; its tokens were accepted at Target? Or Starbucks? Or your bank? That’s basically what’s happening in the world of crypto—with stablecoins.
Stablecoins are like those arcade tokens, but they’re pegged to real-world dollars and used across the entire crypto economy. And now, they’re not just staying inside the crypto “arcade.” They’re growing into something much bigger—an alternative financial system with billions of dollars moving daily.
So, while stablecoins might just be the most boring-sounding thing in crypto… they’re quietly becoming the most important.
Let’s break down what’s happening in 2025—and why it matters more than ever.
What Are Stablecoins?
Stablecoins are digital assets that are pegged 1:1 to fiat currencies, most commonly the U.S. dollar. Their job is to hold steady—unlike Bitcoin, Ethereum, or meme coins that rise and fall like a rollercoaster.
There are three major types:
- Fiat-backed: 1:1 reserves (USDC, USDT)
- Crypto-backed: overcollateralized by crypto (DAI)
- Algorithmic: software-based (and mostly failures so far)
Think of stablecoins as “programmable dollars” that move as fast as the internet.
Stablecoins now account for over $250 billion in value—and projections say that could hit $2 trillion by 2028. Why?
Because they:
- Let people hold dollars without dealing with banks
- Power smart contracts in decentralized finance (DeFi)
- Act as digital dollars for people in unstable economies, making the dollar more accessible than ever
- Settle payments & trades instantly—anywhere, anytime
As crypto grows, stablecoins grow with it. They’re the fuel behind the fun.c
Who’s Issuing These Tokens?
The biggest player is a Tether (USDT) with $150b+ market cap, now holding approximately 1.6% of all T-bills in existence. Then comes Circle (USDC) at $61b, and around a dozen others between $1b and $10b. Tether, with a profit of $13b in 2024, might be the most profitable company in the world on a per employee basis (~150 employees).
Over 90% of all stablecoins are pegged to the U.S. dollar (others are pegged to the Euro or commodities like gold). This makes them a key instrument in exporting the dollar digitally, without ever printing new bills.
Real Banks, Big Tech, and Washington Step In
2025 has been a big year for stablecoins:
Circle, the company behind USDC, went public June 5th. In a matter of weeks, the stock ($CRCL) has increased 540%, giving it a valuation of $48b. That’s a massive signal from the market: regulated stablecoins are here to stay, and there is massive institutional demand.
Other major companies, such as PayPal and JP Morgan have already launched stablecoins. PYUSD for PayPal has nearly $1b in assets while JPM Coin settles over $1b in internal daily settlements. JP Morgan also announced JPMD earlier this week, a stablecoin on the Base network, allowing for sub-second, sub-cent transactions for their institutional clients. Visa, Mastercard, BlackRock, Stripe, and even Amazon and Walmart are all circling stablecoins for cross-border payments and treasury use.
The U.S. Finally Moves: GENIUS Act Passes Senate Vote
After years of delay, Congress finally acted. The former administration was extremely hostile towards anything crypto, while the Trump administration has welcomed it with open arms, going as far as launching their own stablecoin, $USD1, which has accumulated $2b in assets.
Treasury Secretary Scott Bessent urged lawmakers to pass legislation establishing clear federal rules for stablecoins, arguing that it could not only boost demand for U.S. government debt but also reinforce the U.S. dollar’s position as the world’s dominant reserve currency.
The GENIUSAct (Government-Enabled Neutral Infrastructure for U.S. Stablecoins) just passed a 68–32 Senate vote and now heads to the House of Representatives, where it will undergo committee review, potential amendments, and a full vote before possibly advancing to the President’s desk for final approval and signature into law. President Trump wrote just days ago that he hopes the House will move lightning fast to get it to his desk so he can pass it.
What it includes:
- Mandatory 1:1 fiat reserves (i.e. you issue a digital dollar, you must hold a real dollar in a bank account somewhere)
- Federal licensing of issuers
- Real-time auditability
- Restrictions on offshore and interest-bearing stablecoins
It’s the first time a serious stablecoin regulation bill has moved this far in D.C., and it's poised to become law in 2025.
So, What’s Next?
- In the next 1–2 years I expect competition to ramp up between regulated U.S. coins (USDC, PYUSD, etc) and offshore giants (USDT). Major banks enter the fray by issuing their own bank-coins.
- Big Tech will join the party, too. Visa’s stock was down 7% on news of Walmart and Amazon potentially teaming up to launch a stablecoin. Back in 2019, Facebook (now Meta), aimed to launch a stablecoin backed by a basket of currencies and government debt instruments. The project faced significant regulatory hurdles, ultimately leading to its dissolution and sale.
- I expect to see the tokenization of T-bills and on-chain money markets, where the holder reaps the benefit of the yield
- Stablecoins begin showing up in corporate and institutional treasury tools
- As stablecoins proliferate, I expect to see tokenized stocks/bonds/ETFs that can be traded with stablecoins and instantly settled (say goodbye to 1-day settlement times!). Just this week, Reuters reported that Coinbase is seeking a green light from the SEC to offer "tokenized equities" to its customers. (source)
- Governments around the world may begin launching Central Bank Digital Currencies (CBDCs) as a direct response to the growing influence of stablecoins, aiming to offer a sovereign, regulated alternative that preserves monetary control while delivering the speed and convenience of digital payments.
- USD stablecoins could dominate remittances in Africa, South America, and Southeast Asia
Risks to Watch
- De-pegging Risk – Fiat-backed stablecoins aren’t immune to breaking their peg. Liquidity crunches, poor reserve management, or “bank run” scenarios can cause a stablecoin to temporarily or permanently lose its 1:1 value. USDC traded as low as $0.87 in March of 2023 during the Silicon Valley Bank collapse who they had $3.3b of funds with. Algorithmic and crypto-collateralized stablecoins are particularly vulnerable, as their peg depends on economic models that can fail under stress (see Terra/Luna collapse of 2022).
- Regulatory Risk – Stablecoins face inconsistent and evolving regulations across jurisdictions. What’s approved in the U.S. might be restricted or outright banned in Europe, China, or emerging markets. This regulatory fragmentation could limit cross-border use and introduce compliance burdens for issuers and users alike.
- Centralization Risk – Most fiat-backed stablecoins are issued by centralized entities (companies like Tether and Circle), which often have the ability to freeze, blacklist, or reverse transactions of specific wallet addresses. While this adds security and compliance capabilities, it also raises concerns about censorship, financial surveillance, and user autonomy. Tech giants like Amazon, Google, and Facebook could leverage their existing market power, giving them even more control and power.
- Key Management Risk – When users hold stablecoins in non-custodial wallets, they’re entirely responsible for safeguarding their private keys. Lost keys mean lost funds—there’s no recovery mechanism. As stablecoins become more widely adopted, user education and security practices will become increasingly critical.
- CBDC Competition – Central Bank Digital Currencies (CBDCs) could undercut stablecoins by offering similar functionality—fast, digital, programmable money—backed directly by a government authority. If widely adopted, CBDCs may displace certain stablecoin use cases, especially in domestic retail payments and regulated financial systems.
Final Thought: Follow the Tokens
Bitcoin is digital gold, Ethereum is digital oil, and stablecoins are digital dollars—liquid, stable, and programmable. The majority of stablecoins have found their home on the Ethereum network and its various sub-networks (layer-2s), with Tron and Solana being second and third place.
Stablecoins started as tokens for the crypto arcade, a place to park your funds while you figure out how you're going to spend them in the arcade… but they’re growing into something much bigger. If stablecoins are accepted “everywhere,” they could reshape payments, banking, and even international trade.
Disclosures
This material has been prepared for informational purposes only and should not be construed as a solicitation to effect, or attempt to effect, either transactions in securities or the rendering of personalized investment advice. This material is not intended to provide, and should not be relied on for tax, legal, investment, accounting, or other financial advice. You should consult your own tax, legal, financial, and accounting advisors before engaging in any transaction. Asset allocation and diversification do not guarantee a profit or protect against a loss. All references to potential future developments or outcomes are strictly the views and opinions of Richard W. Paul & Associates and in no way promise, guarantee, or seek to predict with any certainty what may or may not occur in various economies and investment markets. Past performance is not necessarily indicative of future performance.