US Government Plans to Promote Dollar-Backed Stablecoins Globally

The United States government is crafting a comprehensive strategy to promote dollar-backed stablecoins in international markets. This initiative is seen as a means to ensure that as the world transitions to digital currencies, the US dollar remains the dominant currency.

As of now, over 98% of the global stablecoin supply is pegged to the US dollar. The US aims to make this dominance permanent, using it as a tool to channel foreign capital into US Treasuries.

Regulatory Framework and Legislative Support

The groundwork for this initiative began with an executive order signed by President Trump on January 23, 2025, which emphasized the importance of dollar-backed stablecoins for maintaining US dollar sovereignty. This was followed by the enactment of the GENIUS Act on July 18, 2025, which established a federal regulatory framework for payment stablecoins, mandating issuers to maintain a 1:1 backing with high-quality liquid assets.

This requirement creates a structural demand for US government debt, as Treasury bills are the most viable means for issuers to meet their liquid-asset obligations. Currently, stablecoin issuers hold tens of billions of dollars in US Treasuries.

Involvement of Financial Institutions

In September 2026, a consortium of 21 global banks announced plans to launch a new dollar stablecoin in early 2027, marking a significant shift in how traditional financial institutions view stablecoins.

The Treasury Department is in the process of developing rules to implement the GENIUS Act, with a complete regulatory framework expected to emerge by 2028, coinciding with the banking consortium's planned launch.

Market Implications

For emerging markets, dollar stablecoins are increasingly being used as savings vehicles and payment systems, particularly in regions with unstable local currencies. For the US government, each dollar held in stablecoin reserves translates to increased demand for Treasuries, which is crucial given the government's ongoing borrowing needs.

However, there are risks associated with this concentration. A financial system reliant on dollar stablecoins could create vulnerabilities, as a run on a major stablecoin issuer might necessitate rapid liquidation of Treasury holdings. While the GENIUS Act's reserve requirements aim to mitigate these risks, the framework has yet to be tested under market stress.

Latest Developments in Stablecoin Payments

• Cloudflare has launched a new payments product called the Monetization Gateway, designed to facilitate stablecoin micropayments.
• The Monetization Gateway allows sellers to charge for web resources using USDC stablecoin payments, settled on Base and Polygon networks.
• Will Papper, the Director of Product at Cloudflare, is advocating for a payment layer capable of handling 5 to 50 million transactions per second.
• The product utilizes a revived version of HTTP’s 402 status code, optimized for stablecoin transactions with near-instant finality and negligible fees.
• Cloudflare's approach is inspired by Ethereum’s original sharding design, which aims to enhance scalability for machine-to-machine commerce.
• The target customers for this payment system are AI agents making numerous sub-cent payments for accessing APIs and computational resources.
• Cloudflare's entry into the stablecoin market is expected to increase on-chain volume for USDC, particularly benefiting the networks of Base and Polygon.

New Developments on the CLARITY Act

The White House has blamed major banks for the failure of the CLARITY Act, indicating that their influence has hindered the legislation due to fears that stablecoins could siphon off bank deposits.

This situation highlights a significant challenge in the legislative journey of the CLARITY Act, which aims to create a regulatory framework for digital assets, including stablecoins.

Market reactions suggest a decline in the likelihood of the CLARITY Act being passed this year, as the ongoing debate about the impact of stablecoins on traditional banking continues to escalate.

Key political figures, including President Donald Trump and Senate Banking Committee Chairman Tim Scott, are expected to play crucial roles in the bill's future, with observers closely monitoring any new developments.

New Insights from Coinbase CEO

In a recent interview, Coinbase CEO Brian Armstrong highlighted the fundamental differences between traditional banking and stablecoin operations. He emphasized that banks engage in fractional-reserve lending, where they lend out most of the deposits, whereas stablecoins like USDC are designed to be backed dollar-for-dollar by actual reserves.

The GENIUS Act, signed into law in July 2025, mandates that stablecoin issuers maintain at least a 1:1 reserve for every token in circulation and prohibits them from directly paying interest or yield to token holders.

Coinbase currently offers USDC rewards between 3.75% and 4.5%, funded through a revenue-sharing arrangement with Circle, the issuer of USDC. Armstrong argues that these rewards are fundamentally different from bank interest, as they derive from the yield on fully reserved assets.

Banking lobbyists are advocating for the CLARITY Act, which would impose stricter regulations on stablecoin rewards, classifying them similarly to bank deposit-taking activities.

While Armstrong challenges the banking industry's perspective on stablecoin rewards, Coinbase is also forming partnerships with 1,000 to 3,000 community banks and credit unions to implement stablecoin technology.

Consumers face a critical question: Are fully reserved stablecoins genuinely safer than bank deposits? While stablecoins backed by US Treasuries may reduce counterparty risk, they lack the FDIC insurance that protects bank deposits up to $250,000.