Date

March 18, 2025

Introduction

We will provide a brief clarification about the administration’s stance on financial regulation, which is expected to have a significant impact on crypto assets. In the first report, we covered the main movements of the administration from its inauguration to early February and an overview of various issues related to crypto assets.

In this second report, we will focus on the regulations surrounding stablecoins, which have been strengthening their presence among crypto assets in recent years, summarizing past movements and future outlook.

What are Stablecoins?

First, I would like to review the definition of stablecoins.

Stablecoins are crypto assets with the following characteristics, serving as a bridge between fiat currencies and crypto assets. In global blockchain projects, USD-pegged stablecoins are commonly used to pay contributors instead of project-specific tokens.

Issuance Method	Digital currency using blockchain and cryptographic technology
Price	Designed to be pegged 1:1 with fiat currencies or commodities (such as gold). For this reason, they tend to be more price-stable than other crypto asset tokens
Advantages	• Low transfer costs and fast transfer speeds (compared to fiat currency bank SWIFT transfers) • Can be seamlessly exchanged with other crypto asset tokens (although there are issues with chain and protocol compatibility) • Also widespread as a means of exchange for digital assets such as NFTs • Ability to incorporate payment execution into smart contracts
Challenges	Expanding adoption as a payment method in the real world • Payment method for businesses • Peer-to-peer transfer method • Integration with credit card payments, etc.

Most stablecoins currently issued are pegged to fiat currencies, with USD-pegged stablecoins having a particularly high share (estimated to be over 95% from major market information media).

Top Stablecoin Tokens by Market Capitalization (CoinMarketCap) 2025/3/12 The top 10 stablecoins are all USD-pegged coins. https://coinmarketcap.com/view/stablecoin/

Additionally, the overall market is said to have grown to more than 16 times its size in the four years from 2020 to 2024, with the total market size reaching 1.68 trillion dollars as of April 2024. (CoinTelegraphJapan https://jp.cointelegraph.com/news/stablecoin-transfer-volume-16x-increase-4-years)

I would like to delve deeper into the characteristics of stablecoins and what differences arise between different coins.

As mentioned in the first report, stablecoins are privately issued crypto assets, and various types exist. Even among USD-pegged stablecoins, there are USDT, USDC, DAI, etc., each operated by different issuing companies. Also, like other tokens, there is the concept of “supported networks,” and the range of coverage differs by stablecoin.

	USDT	USDC	DAI
Overview	• Centralized fiat currency-backed stablecoin • Maintains an exchange rate of 1USDT = 1USD • Tether company manages the reserves	• Centralized fiat currency-backed stablecoin • Maintains an exchange rate of 1USDC = 1USD • Backed by reserves jointly operated by Circle and Coinbase	• Decentralized crypto asset-backed stablecoin • Maintains 1DAI = 1USD through algorithms and over-collateralization of backing assets • Automatic price stabilization mechanism via smart contracts (liquidation system)
Composition of Backing Assets	• Compound of cash, short-term US Treasury bonds, corporate bonds, and other assets • Began disclosing reserve composition quarterly to improve transparency, but detailed breakdown is limited • Concerns have been expressed in the past about the composition of reserves	• Reserves primarily consisting of US dollar cash and short-term US Treasury bonds • Regular publication of reserve audit reports • Transparent reserve composition (approximately 80% in short-term US Treasury bonds, the rest in cash or equivalents)	• Primarily uses ETH, other crypto assets, USDC, etc. as collateral • Always maintains over-collateralization ratio of more than 150% • Collateral composition is completely transparent on the blockchain
Supported Chains	• Ethereum, Tron, Solana, Polygon, Binance Smart Chain, and many others • Supports the most extensive blockchain networks	• Ethereum, Solana, Avalanche, Polygon, Algorand, Stellar, Tron, and many others • Actively expanding to multiple chains	• Primarily operated on Ethereum • Also expanded to L2 solutions such as Arbitrum, Optimism, Polygon • Cross-chain deployment is relatively limited

Tips: Impact of Supported Chains

Stablecoins and other tokens within the same network have a certain degree of compatibility, making it relatively easy to swap tokens with each other, and there are abundant means to do so.

Conversely, when wanting to exchange tokens between different networks, a process called Bridge is required to cross networks, and this part is prone to security vulnerabilities and can be a target for hacking.

Also, operations such as transfers, swaps, and bridges incur fees each time they occur. If there is no direct means to exchange a token you hold with a certain token and you need to go through intermediate tokens, the number of swaps and bridges increases, resulting in more protocol fees and potential losses from exchange rate differences each time, which greatly affects convenience.

Additionally, when exchanging stablecoins back to real fiat currency (known as off-ramping), you generally need to use an exchange. Stablecoins not handled by the exchange cannot be off-ramped, which greatly impacts convenience. (In Japan, the circulation of stablecoins has been regulated since 2022, but in June 2023, a legal framework for handling stablecoins was established, and in March 2025, SBI CV Trade was registered as the first registered business operator and began handling USDC.) Also, services that allow the use of custodied crypto assets directly for debit card payments, provided by custody service providers, have been increasing year by year.

Previous Developments Regarding Stablecoins (US)

As mentioned in the first report, the movements related to stablecoins after the inauguration of the Trump administration are roughly as follows:

Announcement of a bipartisan crypto asset committee and legislative initiatives (February 4, 2025) naming stablecoin legislation as a priority for consideration
Draft proposal of the stablecoin bill (GENIUS Act) by Chairman Hill and others (February 6, 2025)
Revision of the GENIUS Act (March 13, 2025)

Overview of the Stablecoin Law (GENIUS Act) Proposal

💡

This explanation is based on the draft published in early February 2025. The bill may be modified successively.

Next, I will introduce the specific bill being discussed for legislation.

This bill, proposed as the “Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act),” aims to regulate the following elements based on discussions that had been ongoing before the administration took office:

Regulating stablecoin issuance under federal law

However, providing an option for small business operators to choose state law regulation

Clarifying that stablecoins are not securities (exempt from securities law)
Imposing regulations similar to banking laws and prohibiting the domestic issuance of stablecoins other than those permitted:

Registration system for issuers
Requirement to hold reserves at 1:1 or greater for money received from users for issuance (means also specified: US dollars, short-term Treasury bonds, central bank deposits, etc.)
Obligation to publish redemption policies
Obligation to establish redemption flows for outstanding stablecoins
Monthly disclosure obligations for total issuance amount, reserves, etc.
Monthly audit obligations by certified public accountants
Obligation to comply with capital requirements, liquidity requirements, and risk management requirements specified by authorities
Concurrent business regulations (regulating businesses that can be conducted by the same entity through an exhaustive list method)
Anti-money laundering obligations, etc.
Very strong priority rights for creditors (prioritized over all other claims)

Additionally, the following types of operators are envisioned as issuers:

Subsidiaries of insured deposit-taking institutions (banks and credit unions)
Other entities subject to federal law
Other entities subject to state law (small business operators)

Due to concurrent business regulations, existing financial operators such as banks are expected to conduct business by establishing new subsidiaries dedicated to stablecoin business.

The Federal Reserve Board (FRB) will be the supervisory authority for stablecoin operators under federal law, while state authorities will have jurisdiction over operators under state law. In the current proposal, small business operators with less than $10 billion are allowed to choose state law. (Incidentally, there don’t seem to be any specific corresponding state laws yet.)

Unlike decentralized blockchain tokens, stablecoins are expected to be regulated by regulations similar to banking laws to ensure transaction safety as a payment method akin to legal tender. However, the bill explicitly denies the application of the so-called Collins Amendment (Section 171 of the Financial Stability Act of 2010), which is a significant difference from banking regulations. The Collins Amendment is a law aimed at strengthening capital regulations for financial institutions and protecting consumers, and it has been clarified that stablecoin issuers will not be required to meet such stringent standards.

On the other hand, as a consumer protection measure, there is the establishment of priority rights, and it is characteristically explicit in the text that the priority of stablecoin creditors (holders) in bankruptcy is superior to all others.

Definition of Stablecoins

And for the crucial definition of stablecoins, the current bill envisions the following definition:

It is a digital value recorded by an encrypted distributed ledger (defined as a digital asset in this bill)
It is designed for the purpose of payments or settlements
It is designed with certain redemption conditions or to maintain a stable value compared to a certain monetary value
It is not a national currency or an investment security issued by an investment company

For stablecoins, “sufficient decentralization” as required for blockchain tokens to be exempt from securities laws (as introduced in the first report) is not demanded; the technical requirement is simply that they are managed using cryptographic technology and distributed ledgers. This is the difference from blockchain tokens.

In fact, major market players like USTD and USDC are managed and operated by a single company or a limited group of companies.

On the other hand, how decentralized stablecoin projects like DAI, which are operated by decentralized communities, will be treated is a point to watch going forward.

Relationship with Stablecoin Trading Operators

So far, I’ve introduced issuers, but now I’ll introduce the planned contents for regulations on trading operators.

Unlike issuers, trading operators in the GENIUS Act seem to have certain obligations imposed on them, but no registration system is planned. Also, as introduced in the first report, exemptions for stablecoin handling operators are envisioned under securities laws (making dealer registration unnecessary), and the regulatory scope is being considered in a limited direction.

Regulations for trading operators are mainly specified in the consumer protection part of the GENIUS bill, with the main regulatory contents as follows: (Note that services that exclusively provide self-custody are further exempt from the following regulations)

Subject to existing financial consumer protection laws (Dodd-Frank Wall Street Reform and Consumer Protection Act)
Subject to supervision by federal or state authorities
Subject to anti-money laundering laws
Obligation for segregated management and security measures when holding property or private keys
Reporting obligations to authorities

While system development centered on anti-money laundering measures is required, the absence of strict capital requirements that are particularly harsh on small and medium-sized operators is a very significant benefit for those conducting real business.

For trading operators as well, the unclear legal handling so far has been criticized as hindering industry development. With the enactment of the GENIUS bill, the application of securities laws will be denied, and it is expected that a foundation will be established for stablecoin operators to safely conduct business ahead of blockchain-related businesses.

Previous Developments Regarding Stablecoins (Japan)

In terms of legal frameworks for stablecoins, I also want to briefly touch on the current situation in Japan. Actually, Japan is ahead in terms of the speed of legal development for stablecoins, with the following definitions and distinctions made in the Payment Services Act in June 2022 (implemented in June 2023):

Issuance is limited to fund transfer operators, banks, and trust companies (regulated by respective laws)
For handling, electronic payment means handlers have been newly established in the Payment Services Act

The regulation of issuers is similarly strict in both Japan and the US. On the other hand, Japan’s distinctive feature is that it is also strict on handling operators.

The main characteristics imposed on trading operators are as follows:

Registration system
Obligation to establish domestic offices
Capital regulation (but no trust obligation like crypto asset exchange businesses)
Various disclosure, display, and prior explanation obligations
Obligation to join certified associations and establish systems
Obligation for segregated management of held assets
Obligation to conclude liability contracts with issuers

Given the current market environment where major stablecoin issuers are overseas, overseas operators face high entry barriers in terms of system development, while domestic operators face hurdles not only in terms of systems and capital but also in negotiating contracts with issuers. (I would like to hear opinions from actual operators on this point. Please contact us through the contact form at the end of this article!)

Additionally, this regulation also targets exchange operators conducting transactions through wallet connections without holding assets and self-custody type wallet operators, and in recent years, the problem of excessive regulation has been pointed out. Regarding this point, there are plans to establish an “intermediary business” within 2025, which would reduce some obligations for business models where customer asset protection responsibilities are considered relatively low.

It has been two and a half years since the amendment and one and a half years since implementation, but as of March 2025, operators related to stablecoins are limited to just two companies:

Issuer: JPYC (however, the scheme uses prepaid payment instruments, so its usage is limited)
Trading operator: SBI VC Trade (registered in February 2025, started beta service in March)

Stablecoin Regulations: Japan-US Comparison

Finally, I am summarizing the regulatory situations surrounding stablecoins in Japan and the US that I introduced today.

	Japan	US
Stablecoin Issuance	Covered by each of the following existing regulations depending on the scheme: • Banking Act • Trust Act • Payment Services Act - Fund Transfer Business	Planning to legislate the federal Stablecoin (GENIUS) Act, to be overseen by the FRB ※If similar state laws are established in the future, small business operators may opt for state-level regulation, which is expected to reduce compliance burdens.
Stablecoin Trading	• Regulated as electronic payment means handlers under the Payment Services Act • Products with schemes that correspond to securities under the Financial Instruments and Exchange Act (if they emerge in the future) will also be subject to the FIEA (treated as securities)	• Permitted payment stablecoins are excluded from securities law regulation, excluded from securities exchange law regulation, and generally excluded from commodity trading law that covers digital commodities (not subject to registration) • Subject to consumer protection regulations and AML measures imposed on financial operators, but no registration system • Existing registered operators (dealers and custodians) handling permitted stablecoins will be subject to regulation by the competent authorities

The U.S. is introducing stricter regulations for issuers while allowing more flexibility for trading operators, whereas Japan enforces stringent rules for both. These differences look well reflecting the differences in legislative policies between the two countries.

Future Outlook

The US Stablecoin Law (GENIUS Act) is still at the stage where the bill was just published in February 2025, and it is aiming for enactment after deliberation in the Senate and House. Based on reports and statements immediately after the Trump administration took office, the priority of this law’s enactment is high, and regular information updates are expected. We plan to continue following developments in this report series.

For Japan as well, there are movements to amend the Payment Services Act in 2025, which we would also like to monitor.

About Tané

Tané believes that "credible neutrality" made possible by decentralization is the source of innovation and the essence of crypto. We will continue to actively contribute to the ecosystem from both investment and business perspectives.

For those interested in Tané's activities: Follow us on Twitter Tané (@tanelabs) on X