Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—Report: Greater adoption of USD stablecoins offers benefits, but risks linger, (Aug 20, 2026)

By A. Bryan Gerepka

Policymakers need to recognize that what makes stablecoins attractive for money and payments also can reduce protections for users.

Greater adoption of USD stablecoins, underpinned by the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, could deliver significant value to the United States in the near- to medium-term, according to Nellie Liang and Brent Neiman, authors of an article highlighting the economic benefits of broader stablecoin adoption in the U.S. However, the authors warned of several risks over the medium- to-long-term that may undermine stablecoin acceptance, including lack of consumer protections, potential disintermediation of bank deposit funding, and risks of liquidity mismatches at maturity.

The article titled Stablecoins After GENIUS: Private Money, Public Debt, and the Global Dollar was published in the August 2026 issue of the Aspen Economic Strategy Report.

Stablecoins can deliver economic benefits, including greater efficiency in domestic and cross-border payments—faster speeds and lower costs, 24/7 transfers, and programmable payments via smart contracts. The benefits also include enhanced competition and innovation in financial services and, most importantly, support U.S. economic and national security interests by reinforcing the dollar’s global role and its value as a reserve currency. Stablecoin growth could also increase demand for short-term U.S. Treasury bills, potentially lowering government borrowing costs, they added. However, the authors cautioned that many of these benefits may not be achievable, as stablecoins do not yet have sufficient protections for users against illicit finance. Moreover, any additional costs required to add these protections could reduce the net value they create, they stated.

Background. The GENIUS Act, which was signed into law in July 2025, established a comprehensive US regulatory framework for payment stablecoins, aiming to foster innovation and reduce risks. USD-backed stablecoins are privately issued digital assets, typically pegged 1:1 to the US dollar and backed by liquid reserve assets, primarily short-term US Treasury bills.

Impediments to stablecoin adoption. The authors highlighted additional challenges to more widespread stablecoin adoption and offered a series of recommendations to mitigate the risks.

1. Undermining AML/CFT laws. What makes stablecoins attractive for money and payments can also reduce protections for users, make them more attractive for illicit finance, and weaken the existing financial connections that give sanctions and anti-money-laundering and countering the financing of terrorism (AML/CFT) laws their force, the authors wrote.

2. Financial stability risks: Rapid growth could increase the risk of runs, especially if stablecoins are not fully backed by safe, liquid assets, and could concentrate demand in short-term government debt, raising rollover and interest rate risks.

3. Impact on banks and credit: Like many market observers, the authors acknowledged the potential for disintermediation of traditional bank funding, as stablecoin adoption may draw deposits away from community banks, potentially reducing credit to small businesses and impacting local economies.

4. Loss of seigniorage: As stablecoins substitute for physical currency, the U.S. Treasury loses seigniorage revenue—its ability to make a profit by issuing currency.

5. International concerns: Widespread use of USD stablecoins abroad could undermine other countries’ monetary sovereignty and complicate cross-border regulatory coordination.

Policy recommendations. To that end, the authors offered the following policy recommendations:

• Regulators should set robust capital, liquidity, and risk management standards for stablecoin issuers, especially regarding reserve asset quality.

• The Fed should require strong convertibility standards for stablecoin issuers seeking access to payment accounts, to guard against a repeat of the “wildcat” banking period in the US in the 1800s—when banks issued their own demand notes without ways to ensure convertibility, resulting in a series of bank failures.

• Tokenization of T-bills should be evaluated to address liquidity mismatches. Tokenization could allow stablecoin issuers to match the liquidity profile of their liabilities (stablecoins) with their assets (tokenized T-bills), reducing operational risk and settlement delays.

• Treasury and financial regulators should finalize rules imposing bank-like AML/CFT standards on stablecoin issuers, including for secondary market transactions.

• US policymakers should engage with foreign authorities to minimize negative spillovers and coordinate on cross-border stablecoin regulation.

• Restrictions on paying interest on stablecoins should be maintained in the near term to slow deposit outflows from banks and allow time to assess impacts.

Companies: Aspen Economic Strategy Group

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