Mankiw Research | Interpretation of the US Stablecoin Bill STABLE Act, Web3 Dollar "Hegemony"?

Question

For decades, the global dominance of the US dollar has relied on the evolutionary mechanism of the "Bretton Woods System - petrodollar - US Treasury bonds + Swift system". However, entering the Web3 era, decentralized finance technology is gradually shaking the traditional clearing and payment paths, and stablecoins pegged to the US dollar are quietly becoming a new tool for "dollar offshore". In this context, the significance of stablecoins has long transcended the compliance of a single cryptocurrency asset; it may well be the digital vehicle for the continuation of "dollar hegemony" in the Web3 era.

On March 26, 2025, the U.S. Congress officially proposed the "STABLE Act" (Stablecoin Transparency and Accountability for a Better Ledger Economy Act), which systematically established the issuance threshold, regulatory framework, and circulation boundaries for U.S. dollar stablecoins for the first time. As of now, the bill has been reviewed by the House Financial Services Committee on April 2, and it awaits a vote in the House and Senate before it can officially become law. This is not only a response to the long-term regulatory vacuum in the stablecoin market but may also be a key step in attempting to create the next generation of the U.S. dollar payment network's "institutional infrastructure." So, what problems is this new bill trying to address? Do the differences from MiCA reflect the U.S. "systemic strategy"? And is it paving the way for Web3 dollar hegemony? In this article, Lawyer Mankun will share these issues one by one. What kind of dollar stablecoin does the STABLE Act aim to establish? According to the document, the newly launched stablecoin bill attempts to establish a clear compliance framework specifically applicable to "Payment Stablecoins." We have distilled its five core points:

Clarify the regulatory targets, focusing on "payment stablecoins" The first step of the STABLE Act is to clarify the core object of regulation: dollar-pegged stablecoins that are issued to the public and can be directly used for payment and settlement. In other words, it's the crypto assets that are being used as on-chain "alternatives to the dollar" that are really included in the regulatory framework, not all tokens that claim to be pegged to the dollar. In order to avoid risk contagion, the bill also explicitly excludes some high-risk or structurally unstable token models. For example, algorithmic stablecoins, partially collateralized stablecoins, or "pseudo-stablecoins" with speculative properties and complex circulation mechanisms are not covered by this Act. Only stablecoins that are fully backed by $1:1 assets, have a transparent reserve structure, and are open to the public for daily trading are considered "payment stablecoins" and are subject to regulatory arrangements under this Act. From this perspective, the STABLE Act is not truly concerned with the "technical carrier" of stablecoins, but rather whether it is constructing a "payment network on the dollar chain." What it aims to regulate is the issuance method and operational foundation of the "digital dollar," rather than all tokens with the USD label.
Establish a "redemption right" mechanism, pegged 1:1 to the US dollar. In addition to regulatory entry barriers and issuer qualification requirements, the STABLE Act specifically emphasizes the "redemption rights" arrangement of stablecoin holders, that is, the public has the right to redeem their stablecoins into US fiat currency at a ratio of 1:1, and the issuer must fulfill this obligation at any time. This institutional arrangement is essentially to ensure that stablecoins do not become "pseudo-anchored assets" or "system tokens with internal circulation". At the same time, to prevent liquidity crises or run risks, the bill also sets clear asset reserve and liquidity management requirements. Issuers must hold high-quality, easily liquidated dollar assets (such as government bonds, cash, central bank deposits, etc.) at a 1:1 ratio, and are subject to continuous review by the Federal Reserve. This means that stablecoin issuers cannot "use users' money to invest in high-risk assets," nor can they achieve "pegging" through algorithms or other derivative structures. Compared to some earlier "partially reserved" and "vaguely disclosed" stablecoin models in the market, the STABLE Act incorporates "1:1 redeemability" into federal legislation, representing a higher requirement for the underlying credit mechanism of the "digital dollar alternative" set by the United States. This not only addresses the public's concerns about stablecoins being "unpegged" and "exploding," but also aims to create an institutional guarantee + legal trust anchor system for the US dollar stablecoin to support its long-term use in the global clearing network.
Strengthen fund and reserve regulation to avoid "trust turnover" Based on the principle that "stablecoins must be redeemable 1:1", the STABLE Act further clarifies the types of reserve assets, management methods, and auditing mechanisms, intending to control risks from the source and avoid the hidden dangers of "superficial anchoring and substantial idling." Specifically, the bill requires all payment stablecoin issuers to: Must hold an equivalent amount of "High-Quality Liquid Assets," including cash, short-term U.S. Treasury securities, and Federal Reserve account deposits, to ensure users' withdrawal requests are met; Reserve assets must not be used for lending, investment, or other purposes to prevent systemic risks arising from "using reserve funds for returns"; Regularly undergo independent audits and regulatory reporting obligations, including reserve transparency disclosures, risk exposure reports, and asset portfolio descriptions, to ensure that both the public and regulatory agencies can understand the asset base behind the stablecoin. Reserve assets must be kept in accounts at FDIC-insured banks or other compliant custodial institutions to prevent the project party from mixing them with their own funds. The purpose of this institutional arrangement is to ensure that "anchoring" is real, auditable, and fully cashed, rather than "lip service, chain profit". Historically, the stablecoin market has had many credit crises caused by false reserves, misappropriation of funds, or lack of information disclosure. The STABLE Act aims to plug these risks at the institutional level and strengthen the "institutional endorsement" of the US dollar's anchoring. On this basis, the bill also gives the Federal Reserve, the Treasury Department and designated regulators the long-term supervision power of reserve management, including freezing illegal accounts, suspending issuance rights, compulsory payment and other intervention measures, constituting a relatively complete closed loop of stablecoin credit.
Establish a "registration-based system" and bring all issuers under supervision The STABLE Act does not adopt a "license classification management" approach in its regulatory path design, but rather establishes a unified registration system for access. The core point is: all institutions intending to issue payment stablecoins, regardless of whether they are banks, must register with the Federal Reserve and be subject to federal-level regulatory review. The bill establishes two types of legal issuer pathways: first, Insured Depository Institutions regulated by federal or state authorities can directly apply to issue payment stablecoins; second, Nondepository Trust Institutions can also register as stablecoin issuers as long as they meet the prudent requirements set by the Federal Reserve. The bill also specifically emphasizes that the Fed not only has the authority to approve registrations, but can also refuse or revoke registrations if it believes there is systemic risk. In addition, the Fed has been given the authority to continuously review the reserve structure, solvency, capital ratio, risk management policies, etc. of all issuers. This means that in the future, all USD payment-based stablecoin issuances must be included in the federal regulatory network, and it will no longer be allowed to bypass scrutiny through methods such as "only registered in the state" or "technological neutrality." Compared to the previously more lenient multi-path discussion scheme (such as the GENIUS Act allowing state-level regulation to take the lead), the STABLE Act clearly demonstrates stronger regulatory uniformity and federal leadership, aiming to establish the legal boundaries of the USD stablecoin through a "national registration regulatory system."
Establish a federal-level licensing mechanism and clarify multiple regulatory paths The STABLE Act also establishes a federal-level licensing system for stablecoin issuance, providing diversified compliance pathways for different types of issuers. This system arrangement not only continues the "federal-state dual track" structure of the U.S. financial regulatory system but also responds to the market's expectations for flexibility in compliance thresholds. The bill sets three optional paths for the issuance of "payment stablecoins": First, become a federally recognized payment stablecoin issuer, directly supervised and licensed by U.S. federal banking regulators (such as OCC, FDIC, etc.); Second, issuing stablecoins as a licensed savings bank or commercial bank can enjoy a higher level of trust endorsement, but must comply with traditional banking capital and risk control requirements. Thirdly, operate based on state-level licensing, but must comply with federal "registration + supervision" and meet unified standards for reserves, transparency, anti-money laundering, and so on. The intention behind this institutional design is to encourage stablecoin issuers to "register on-chain" in accordance with the law, bringing them into the view of financial regulation, but not to impose a "one-size-fits-all" requirement for banking, thus achieving controllable risks while protecting innovation. In addition, the STABLE Act also grants the Federal Reserve (FED) and the Treasury greater coordination powers to impose additional requirements on stablecoin issuance, custody, and trading based on the level of systemic risk or policy needs. In short, this system creates a multi-tiered, multi-path, and scalable regulatory compliance network for stablecoins in the United States, which not only enhances system resilience but also provides a unified institutional base for stablecoins to go abroad. Compared to MiCA, the United States has taken a different course In the global regulatory competition for stablecoins, the European Union is the region that started earliest and has the most complete framework. Its "MiCA Act," which officially came into effect in 2023, incorporates all asset-backed crypto tokens into the regulatory view through two types: "EMT" (Electronic Money Token) and "ART" (Asset-Referenced Token), emphasizing macroprudential oversight and financial stability, with the intention of building a "firewall" in the digital financial transformation. However, the "STABLE Act" of the United States has obviously chosen another path: instead of comprehensively regulating all stablecoins, nor building an all-encompassing regulatory system from the perspective of financial risks, it focuses on the core scenario of "payment stablecoins" and uses an institutionalized way to build a next-generation payment network on the US dollar chain. The underlying logic of this "selective legislation" is not complicated – the US dollar does not need to "dominate the world" in the stablecoin space; it only needs to strengthen the most critical scenario: cross-border payments, on-chain transactions, and global dollar circulation. This is also why the STABLE Act does not attempt to establish a comprehensive asset regulatory framework similar to MiCA, but rather focuses on a "on-chain dollar" that is 1:1 backed by the dollar, has actual payment functionality, and can be widely held and used by the public.

From the perspective of institutional design, the two present a stark contrast: The scope of regulation is different: MiCA tries to "catch everything" and covers almost all stablecoin models, including extremely high-risk reference asset-based products; However, the STABLE Act in the United States actively narrows the scope of application, focusing only on assets that are truly used for payment and can represent the "dollar function". Regulatory goals differ: the EU emphasizes financial order, system stability, and consumer protection, while the US focuses more on clearly defining which assets can be considered a legal form of "on-chain dollars" through legislation, thus establishing a systemic dollar payment infrastructure. Different issuers: MiCA requires that stablecoins must be issued by regulated electronic money institutions or trust companies, effectively locking the entry within the financial institution system; while the STABLE Act establishes a "new licensing mechanism" that allows non-bank entities to participate in stablecoin issuance in accordance with compliance review, thereby preserving the possibilities for Web3 entrepreneurship and innovation. Different reserve mechanisms: The United States requires 100% cash or short-term government bonds in USD, strictly excluding any leverage or illiquid assets; the European Union, on the other hand, allows various forms of assets including bank deposits and bonds, which also reflects different degrees of rigor in regulatory thinking. The adaptability to Web3 entrepreneurship varies: MiCA naturally creates higher barriers for crypto startups due to its heavy reliance on traditional financial licenses and auditing processes; whereas the US STABLE Act, although strict in requirements, leaves room for innovation in its framework, aiming to encourage the development of "on-chain dollars" through compliance standards. In short, what the United States has adopted is not a route of "comprehensive regulation," but a systematic path that filters "qualified dollar payment assets" through compliance licenses. This not only reflects the change in the United States' acceptance of Web3 technology, but also serves as a "digital extension" of its global currency strategy. That's why we say that the STABLE Act is not just a financial regulatory tool, but the beginning of the institutionalization of the digital dollar system. Mankiw's lawyer concluded making the U.S. dollar the benchmark unit for global Web3" may be the real strategic intent behind the STABLE Act. The U.S. government is trying to build a "new generation of digital dollar network" that can be identified, audited, and integrated by the program through stablecoins, so as to comprehensively lay out the underlying protocol of Web3 payments. It may not be perfect yet, but it is important enough at the moment. It is worth mentioning that at the international level, the seventh edition of the IMF's Balance of Payments Manual (BPM7), released in 2024, will include stablecoins in the international asset statistics system for the first time and emphasize their new role in cross-border payments and global financial flows. This not only lays the "global institutional legitimacy" for the sovereign compliance of stablecoins, but also provides institutional support and external recognition for the United States to build a stablecoin regulatory system and strengthen the significance of dollar pegging. It can be said that the global institutional acceptance of stablecoins is becoming a prelude to sovereign competition in the era of digital currency. As observed by lawyer Mankun, the compliance story of Web3 is ultimately a competition of institutional construction, and the US dollar stablecoin is the most meaningful battleground in this competition.

/ END. Author of this article: Iris, Lawyer Mankun