Back to the future of decentralized money emission
When new ideas emerge, the U.S. with its permissive legislation sets the global tune, while the EU focuses on mitigating the effects. In 2025, EU regulation was already in place, but markets proved to follow the dollar when it comes to embracing financial innovation. This time it was stablecoins.
Stablecoins are cryptocurrencies designed to maintain a stable value that tracks the price of a low-volatility asset, like a currency. For this purpose, they are backed by reserve assets, unlike many other cryptos. Reserve assets are liquid, like cash and short-term government bonds1. Since Bitcoin’s launch in the wake of the global financial crisis, cryptocurrencies have been portrayed as an alternative to traditional finance and banking. Bitcoin evolved from a medium of exchange to a medium of speculation due to its inherent volatility as its value is based only on supply and demand. With a few early adopters as exceptions, merchants remained skeptical of cryptocurrencies, still paying a percentage of revenue to Visa and Mastercard2.
Stablecoins, mostly used to move funds between different cryptos, could act as a bridge between crypto and traditional currencies. Available for everyone with an internet connection, they would allow for near-real-time settlement around the clock and cheaper cross-border payments3. Such payments, as currently handled by traditional banks, remain expensive as they require multiple steps. Quite literally: clerks still occasionally use pen, paper, and printers to execute them.
Anyone can issue stablecoins if they comply with regulation. In a futuristic scenario, Nokia employees could receive their salary in stablecoins of technology firms, and trade them in the market for stablecoins issued by international retailers. After consumers buy fruits, the stablecoins - accepted across the supply chain - could be used to pay Brazilian producers directly. Corporations would be keen to reduce payment costs, but even if you lost €3,50 in money transfer fees when buying a €750 boat from a peer, consumers benefiting from stablecoins would mostly be those sending large sums to other individuals or across borders, or those from countries with less-developed banking systems or hyperinflation. Current limited use of stablecoins is restricted by high costs of transferring them to fiat currency3. Also, currently two stablecoins account for over 80% of the whole stablecoin market cap. However, the industry is evolving.
In 2025, Visa launched stablecoin-linked cards4, PayPal adopted crypto for cross-border transactions5, Mastercard initiated stablecoin settlement6 and JPMorgan expanded access to its stablecoin-like token for institutional clients7. Even a manager at a large German bank mentioned during an economics-student excursion that he participates in a workshop studying cryptocurrencies. After being asked about stablecoins, he suggested that blockchain technology behind them is more interesting, but banks must be able to accept payments in all forms to avoid losing customers. For perspective, some debit cards issued a few years ago blocked purchases of cryptocurrencies the same way they don’t by default allow for online gambling.
“Seems like a scam,” said the president of the United States about Bitcoin in 2021, before launching his own cryptocurrency in 2025 and founding World Liberty Financial, a crypto venture with its own dollar-pegged stablecoin8. The venture attracted investors all the way from the United Arab Emirates, and Trump faced allegations of corruption after he showed favorable policies toward the country afterwards9. Reportedly he has profited around $1.8 billion from cryptocurrencies in total10.
Last summer, Trump also signed the GENIUS Act into law, requiring payment stablecoins to be backed one-to-one by U.S.-centric liquid assets. Because reserves are held in dollars, T-bills, or repo, greater stablecoin use also increases demand for those assets, enhancing the dollar’s role as the reserve currency and possibly lowering the government’s borrowing costs. An increase in demand for U.S. debt is already visible11. For other ways the U.S. could leverage the reserve currency status, see the Mar-a-Lago accord, a blueprint for dollar devaluation.
Legislation is believed to be crucial to make the crypto industry mainstream. U.S. regulation is the standard due to the country’s role in global finance. Roughly 99% of stablecoins are pegged to the dollar, and around three-quarters backed by U.S. dollars, T-bills and Treasure repos. Europe’s leaders appear concerned. The ECB President warned that stablecoins could reintroduce old risks through the back door. Greece’s former Minister of Finance referred to stablecoins as a time bomb. The Bank for International Settlements argued that stablecoins undermine the singularity of currency. In the recent Eurogroup meeting, eurozone finance ministers discussed the risks of foreign-currency-backed stablecoins and the possibility to boost the euro and Europe’s economic security with euro-denominated stablecoins and more jointly issued EU debt3.
Naturally stablecoins may never fully reach mainstream. Yet the arrangement already resembles the Free Banking era of the 19th century U.S., when commercial banks were allowed to issue notes as private liabilities, while the Treasury minted coins and central banking didn’t exist. The notes traded at a discount depending on cost of redemption, distance to issuer bank and reputation of issuer, as each bank was responsible for pegging their own notes to the dollar. Tightness of the peg depended on the bank’s ability - and perceived ability - to exchange reserves for notes. Bank runs were common. Notes with the same face value but different valuation, co-varying even with your location in the country, plausibly challenge the singularity of money and create unnecessary friction. The Panic of 1907 paved the way for the creation of a lender of last resort, and eventually a central bank emerged to solve these problems. Of course, nowadays merchants would not need to read bank note reporters to keep up with price fluctuations, technology allows trade anywhere and stablecoins can be redeemed faster than a horse can run. Also, if a stablecoin faces a bank run, its issuer would just sell the backing t-bills. But if that happens with multiple coins, the price of short-term U.S. debt, foundational to the global finance system, could collapse and the system would face an extreme stress test, to say the least. So, will stablecoins challenge monopolistic currency issuers or prove that our current system with its faults is the best we have? The writing is on the wall, but maybe this time is different11.
1: Adrian, T., Miccoli, M., & Sugimoto, N. (2025, December 4). How stablecoins can improve payments and Global Finance. IMF.
2: Financial Times. (2025, November 10). Visa and Mastercard forge deal to end long-term dispute with merchants.
3: European Commission, Directorate-General for Economic and Financial Affairs & Directorate-General for Financial Stability, Financial Services and Capital Markets Union. (2026, February 13). Strengthening the international role of the euro [Note to the Eurogroup]. Council of the European Union.
4: Reuters. (2025, April 30). Visa, Bridge partner to launch stablecoin-linked cards.
5: PayPal. (2025, June 11). PayPal USD (PYUSD) plans to use Stellar for new use cases [Press release]. PayPal Newsroom.
6: Mastercard. (2025, August 26). Mastercard expands partnership with Circle to transform digital settlement for merchants and acquirers in region [Press release]. Mastercard Newsroom
7: J.P. Morgan. (2025, November 12). JPM Coin (JPMD) USD deposit token available for institutional clients [Press release]. J.P. Morgan Payments Newsroom.
8: Binance Academy. (2025, May 23). What is World Liberty Financial USD (USD1)? Binance Academy
9: The Guardian. (2026, February 2). Trump accused of ‘corruption, plain and simple’ after UAE invested in family firm.
10: Sillanpää, S. (21.2.2026). Presidentin bisnekset. Helsingin Sanomat https://www.hs.fi/tutkiva/art-2000011791441.html
11: Reinhart, C. & Rogoff, K. (2009). This time is different. The Financial Times.
This Time is Different by Carmen Reinhart, Kenneth Rogoff
