Robin Newnham, Head, Policy Analysis & Guidance, Alliance for Financial Inclusion

On 18 July 2025, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was signed into law in the United States. It represents a dramatic ‘coming in from the cold’ for stablecoins, compared with the fierce backlash to the Libra proposal in 2019, and one of the most striking narrative reversals in recent financial history. It also signals that stablecoins are now an established part of the financial ecosystem. For emerging markets and developing countries (EMDCs), where crypto-asset usage is already highest, this shift could have far-reaching and potentially transformative implications.

Why the volte face on stablecoins?

Libra’s bold 2019 announcement reflected Facebook’s ‘move fast and break things’ philosophy, but it met strong resistance from global and national policymakers who viewed it as a threat to financial stability, consumer protection, and monetary sovereignty. By contrast, today’s stablecoin issuers have followed a ‘gradually, then suddenly’ path, quietly building adoption through real-world use cases, while skilfully assembling a political coalition. This ultimately paved the way for acceptance of privately issued stablecoins, with appropriate regulation and guardrails built in, as an inevitable part of the financial system, at least for now.

What are stablecoins used for?

Stablecoins now meet a range of day-to-day use cases across EMDCs. In countries with high inflation and limited access to foreign currency, USD-pegged stablecoins (which make up more than 98% of total stablecoin activity) offer a practical way to preserve savings. For migrants, they also provide a here-and-now option for faster and sometimes cheaper remittances compared with traditional options, while more ambitious cross-border payment innovations – such as interconnecting fast payment systems or central bank digital currencies – are still coming onstream.

For gig-economy workers, receiving payment in USD stablecoins makes international task-based work viable where fees would otherwise be prohibitive. In Africa, where stablecoins now account for 43% of all crypto-asset transaction volume, they have become an important tool for small businesses and households facing foreign-exchange shortages, enabling them to pay suppliers and hedge against devaluation.

Impact of the Genius Act

The GENIUS Act brings US stablecoin issuers under formal regulation for the first time. It establishes requirements for the safeguarding of customer assets and mandates 1:1 backing of liabilities with high-quality liquid assets. It also requires full anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance, and introduces licensing standards for both bank and non-bank issuers. The Act leaves open the possibility that the Federal Reserve could offer accounts to approved stablecoin issuers in the future. While it prohibits interest payments on customers’ stablecoin balances, users may still earn yield through exchange reward programmes, or other off-chain products. By clearly defining the rules of the game, the legislation, and ensuing regulation, may promote greater competition in a sector currently dominated by a few large players, although network effects and other barriers to entry remain substantial.    

Policy Options for Central Banks

For many EMDCs, the GENIUS Act effectively externalises the regulatory perimeter for assets that are widely used within their own markets. Consumers stand to gain from stablecoin issuers being subject to more stringent regulation and consumer protection measures in their home markets. They may have better recourse if things go wrong and, depending on market dynamics and competition effects, potentially a broader choice of providers. But this is only part of the story.

For EMDC central banks, beyond concerns around consumer protection and illicit financing risks, USD stablecoins also pose challenges to monetary sovereignty by contributing to dollarization and potentially weakening monetary policy transmission. For this reason, several jurisdictions outside the US have been keen to support the development of local currency pegged stablecoins as they design and roll out regulatory frameworks for crypto assets. The European Union’s Markets in Crypto-Assets Regulation (MiCA), for example, limits the volume of USD stablecoins in circulation in the euro area and encourages issuance of euro-denominated alternatives.

In the Philippines, Bangko Sentral ng Pilipinas worked with crypto remittance provider Coins.ph to oversee the development of a peso stablecoin (PHPC), fully backed by pesos in bank custody, within its regulatory sandbox. The pilot met all benchmarks, and PHPC was approved for broader rollout earlier this year.

Stablecoins and the Future of Money

Ultimately, time will tell whether stablecoins represent an imperfect but practical solution to consumer pain points at a particular moment, while the mainstream financial system plays catch-up through tokenization and other efficiency-enhancing improvements, or whether they will become a permanent feature of the future digital money landscape. The Bank for International Settlements (BIS) has cautioned that, while stablecoins may address certain frictions in the current financial architecture, they do not meet the core tests to be considered money: singleness, elasticity and integrity. Instead, the BIS proposes a unified ledger as a means of harnessing the efficiency enhancing benefits of technological innovation, while preserving monetary sovereignty and the role of central banks.

Stablecoins may therefore, in time, be phased out, just as private banks ceased issuing their own currencies in the 19th century. Alternatively, as policy and regulatory approaches evolve, they could become increasingly indistinguishable from CBDCs. Until then, consumers will continue to choose the products that best meet their here-and-now requirements.