How stablecoins are reshaping U.S. banking

Stablecoins have moved from crypto niche to a regulated part of the U.S. financial system. On July 17, 2025, Congress cleared the Guiding and Establishing National Innovation for U.S. Stablecoins Act, known as the GENIUS Act, and the White House announced the law’s signing the next day. It is the first federal legislation that specifically regulates payment stablecoins in the United States, and it puts clear guardrails around issuance, backing, supervision, and redemption.

The timing reflects the simple fact that stablecoins have become large in economic terms. By mid-2025, U.S. dollar-backed stablecoins surpassed two hundred and thirty billion dollars in combined market capitalization, led by Tether’s USDT and Circle’s USDC, which together hold the bulk of the market. That scale makes the instruments relevant for payments and for short-term funding markets that depend on Treasury bills.

What changed with the law is straightforward. The GENIUS Act defines payment stablecoins and requires full, high-quality liquid reserves, audits, and redemption at par. It sets up federal and state licensing paths, with nonbank issuers supervised at the federal level by the Office of the Comptroller of the Currency and insured depository subsidiaries overseen by their primary regulators. In parallel, the U.S. Treasury has opened a public request for comment to translate statute into operational rules.

The law does not turn banks into bystanders. It offers banks multiple on-ramps. A bank can issue its own payment stablecoin through a supervised subsidiary. It can also provide custody of reserves and act as an intermediary for fiat settlement and redemptions. These roles fit existing compliance infrastructure and can generate service fees without forcing a bank to reinvent its core deposit product on day one. The policy direction is explicit enough to encourage planning but still leaves room for supervisory detail as agencies write implementing guidance over the coming months.

For citizens and businesses, the headline benefit is speed. Stablecoin transfers settle near real time across supported networks at lower observed costs than traditional rails. That advantage is most visible in cross-border payments and marketplace transactions that span time zones and banking holidays. The payments industry was already moving in this direction. The law formalizes it, which should reduce legal uncertainty for mainstream firms that wish to embed stablecoins in treasury, payout, or checkout workflows.

The pressure point for banks is deposits. Stablecoins are a small slice of U.S. bank balance sheets in aggregate, but they are not trivial. Recent analysis by the Bank for International Settlements estimates that stablecoin supply is roughly one and a half percent of U.S. bank deposits. If households and businesses move more operating cash into tokenized dollars for programmability, settlement speed, or rewards, banks will face gradual erosion of low-cost funding and will need to consider how to replace it without overpaying.

Lending capacity is the second-order issue. The Kansas City Fed notes that funds flowing from deposits into stablecoins would increase demand for Treasury bills, because issuers hold reserves in cash and T-bills, but the same flow could reduce the pool of deposits that historically funded loans. That is not a crisis scenario by itself. It is a funding mix shift with familiar consequences for net interest margins, duration risk, and loan pricing.

Payment fees are also in play. Stablecoin rails bypass legacy networks for certain use cases, compressing the time between payment initiation and finality. If more bill payments, marketplace payouts, and international transfers settle on tokenized dollars, banks will see less activity on traditional wires and some ACH categories. The response will likely be product design rather than resistance. Banks can bundle on-chain settlement with risk screening, chargeback support, and account reconciliation that enterprises still value.

Short-term markets are already feeling stablecoin footprints. A 2025 BIS study finds that flows into stablecoins are associated with modest declines in three-month Treasury yields within days, and outflows are linked to sharper yield increases. The effect concentrates at the short end, which is precisely where stablecoin issuers park reserves. A larger regulated market would therefore become one more structural buyer of Treasury bills, with direct implications for money funds, bank treasury portfolios, and the Treasury’s own bill issuance strategy.

This shift explains why banks are not waiting on the sidelines. Several of the largest U.S. banks have been exploring either their own tokens or a consortium model to ensure interoperability and scale at launch. The strategic logic is to defend payments relationships, preserve data visibility, and price services around compliance, onboarding, and treasury integration rather than compete only on the base transfer.

The concentration of the stablecoin market matters for risk supervision. USDT and USDC account for a dominant share of outstanding supply. Concentration makes supervision more tractable, but it also raises questions about operational resilience and diversification of custody, market-making, and redemption channels under stress. The law’s insistence on high-quality liquid assets and audits is designed to make reserve quality verifiable rather than assumed.

Consumers and businesses should read one detail carefully. Redemption at par is a legal promise backed by reserves, not a deposit insurance guarantee. When a bank issues a stablecoin through a subsidiary, questions can arise about whether token liabilities are treated like insured deposits. Regulators have flagged that distinction because flows between deposits, money-like tokens, and funds can be fast in stress. Clear disclosures and simple redemption mechanics will be essential for public confidence.

The policy process now moves into implementation. Agencies will translate statute into supervisory manuals, licensing standards, and examination procedures. Treasury’s comment process will shape details that matter in practice, including eligible reserve instruments, audit cadence, wallet and network standards for compliance checks, and how to coordinate oversight for issuers that operate across states and across multiple blockchains.

In parallel, market scale will keep growing. The IMF’s mid-2025 monitor places the stablecoin market comfortably above the two hundred and thirty billion dollar mark, with institutional interest broadening as legal clarity improves. That size does not rival the deposit base of the banking system, but it is large enough to influence fee pools in payments and demand for T-bills on the margin. The combination of formalized reserves, faster settlement, and mainstream adoption is likely to turn stablecoins into an infrastructural tool rather than a speculative topic.

So what does this mean in real terms for the banking sector over the next year. First, expect a wave of bank-issuer partnerships around reserve custody, audits, and fiat on-off ramps. These services are regulated, repeatable, and close to existing competencies. Second, watch for a handful of bank-branded tokens or a multi-bank token that rides on public chains but comes with bank-grade onboarding and dispute resolution. That model tries to keep clients in the bank’s ecosystem while honoring the speed and programmability that users now expect. Third, plan for treasury portfolios to live with a larger and more price-sensitive cohort of bill buyers whose mandates are tied to redemption risk rather than carry.

The signal from Washington is not a push to disintermediate banks. It is a push to codify how tokenized dollars can operate at scale, including the quality of the assets that back them and the supervisors that keep watch. For banks, the choice is less about whether stablecoins will matter and more about where to participate in the value chain. The opportunity lies in custody, compliance, and corporate integration. The risk lies in assuming deposits will remain immune to faster, programmable money. The prudent path is to treat stablecoins as part of the payments and funding mix and to design products accordingly. The framework is now in place. What happens next depends on how banks use it.