Stablecoins Achieve Market Fit in the West: The Impact of the GENIUS Act
Over the past few years, stablecoins have made significant strides in establishing product-market fit in Western economies. While they have gained traction in developing regions, the U.S., U.K., and Europe have traditionally been slower to adopt these digital currencies, primarily due to regulatory uncertainties and the robustness of existing digital payment infrastructures.
However, recent legislative progress has paved the way for stablecoin integration. In July 2025, Congress passed the GENIUS Act, followed by the launch of Tempo, a payment-centric blockchain developed by Stripe and Paradigm in September. This pivotal law creates the first federal licensing framework for dollar-pegged tokens and positions Tempo as a network tailored for stablecoin applications in payroll, remittances, and machine-to-machine transactions.
According to legal analyses from Latham & Watkins and WilmerHale, the GENIUS Act mandates full-reserve backing with cash and short-term Treasuries, necessitates monthly reserve disclosures, and clarifies that licensed stablecoins are not classified as securities under federal law. This oversight is administered by bank regulators and the Office of the Comptroller of the Currency (OCC) for non-bank entities.
While the law prohibits issuers from paying interest to users, the idea of implementing a “rewards” system at distribution points is gaining attention, raising potential regulatory concerns highlighted by sources like WIRED and industry organizations such as the Bank Policy Institute and the ABA Banking Journal. The GENIUS Act prioritizes holder protections during issuer bankruptcies, a provision that safeguards redemptions but may complicate reorganizations.
Research from McKinsey estimates that stablecoin transactions currently average $20 to $30 billion daily, with projections potentially reaching $250 billion in the next three years as businesses increasingly accept these currencies and benefit from low-cost transaction networks.
Stablecoin Adoption Trends
An S-curve model for stablecoin adoption suggests a rapid evolution in the next 12–36 months. In 2024, the U.S. recorded a carded purchase volume of $11.9 trillion, incurring merchant processing fees of $187.2 billion, averaging about 1.57 percent according to the Nilson Report and CSP Daily News.
By redirecting just 5% of this expenditure to stablecoin checkouts at an all-in cost of 10 basis points, annual savings for merchants could approach $8.8 billion. In a more optimistic scenario, with a 10% transition and a reduced fee of 2 basis points, the savings could exceed $17 billion yearly. These figures do not even account for the benefits derived from lower latency and foreign exchange optimization in international transactions.
From a liquidity perspective, the yield generated in the Treasury market offers insights into issuer profitability in light of the interest restrictions. With current three-month bill yields hovering around 4%, a projected $2 trillion stablecoin market by 2028 could yield roughly $80 billion in gross returns on reserves, based on Treasury’s TBAC materials. While issuers cannot pay interest outright, these yields can subsidize compliance, operational costs, and incentivize partnerships. Reward programs at exchanges are testing how much of this yield can be shared with consumers, insinuating a potential net interest margin for issuers ranging from $20 to $40 billion annually if the float reaches $2 trillion.
Future Projections for Stablecoins
Looking ahead, throughput models indicate that if stablecoin settlement reaches $250 billion daily by 2028, yearly settlement volumes could surpass $90 trillion. Based on a 1 to 3 basis-point transaction fee, this could lead to annual revenues ranging from $9 to $27 billion. A fee structure at 10 basis points might escalate revenues to approximately $91 billion, although present settlement costs are typically in the low single-basis point range, as highlighted by McKinsey and Visa’s analysis of Solana.
This discrepancy suggests that value may be retrieved through enhanced services focused on account management, fraud protection, and compliance rather than solely through transaction fees.
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The competitive landscape for stablecoins will depend heavily on regulatory alignment, fiat backing, and integration within enterprises. Established tokens like USDC and EURC stand to benefit from their existing networks, while PYUSD may find a niche in consumer-oriented payments.
Bank-initiated tokens could streamline B2B transactions, addressing the necessities of treasury departments looking for guaranteed same-day cash transactions. However, they must overcome hurdles related to cross-border operations and development tools.
Tempo aims to address enterprise payment scalability by collaborating with notable design partners across sectors such as AI, banking, and e-commerce. Simultaneously, protocols like Solana and Base have captured rising market shares attributed to their cost-effective transactions and user-friendly tools, as indicated in data from Artemis and Chainalysis.
The Broader Implications
In the larger context, the demand for stablecoin reserves will likely increase, following the TBAC’s July findings, which suggest that stablecoins will augment the market for short-term Treasuries. GENIUS’s reserve rules mandate that most assets remain in liquid cash or sub-93-day government bills.
As the stablecoin market capitalization has already surpassed $285 billion according to DeFiLlama, and daily usage continues to expand through card network settlements and pilot programs for on-chain payroll, the trajectory for stablecoin liquidity growth now transcends mere crypto trading cycles.
The European Central Bank’s recent advocacy for regulatory safeguards concerning foreign stablecoins underscores that global policies will shape the distribution of stablecoin liquidity and dictate which currencies will gain traction.
Nonetheless, inherent risks are significant. Critiques regarding the “rewards” system point to potential regulatory actions that could reshape user incentives and diminish competitiveness. Additionally, the superpriority protections established for bank holders during issuer bankruptcies may reduce risks for consumers, but could simultaneously escalate the costs of resolving issuer issues.
Compliance requirements surrounding sanctions and anti-money laundering obligations will contribute to fixed overhead expenses, which will disproportionately favor larger issuers and networks, suggesting a potential consolidation within the stablecoin ecosystem.
To summarize, the crucial near-term indicators to watch include stablecoin settlement advancements via Visa and Mastercard beyond initial pilots, the rollout of Tempo’s merchant services, and the Treasury’s guidance on implementing the GENIUS Act’s provisions concerning licensing and reserve requirements.
If the throughput potential outlined by McKinsey proves accurate, both the fee structure and liquidity projections imply that stablecoins are poised to competitively challenge traditional banking methods on speed and cost efficiency, with a vision of achieving $250 billion in daily settlement volume by 2028.
