The regulatory environment for stablecoins is rapidly evolving. These are important legislative developments, but tremendous work still remains in both the United States and Hong Kong. These regulatory pushes are an attempt to catch up with the increasing relevance of stablecoins in the international financial system. Simultaneously, the United States is seeking to consolidate the dollar’s predominance with rigorous regulatory parameters. It’s important to note that Hong Kong has enacted sweeping legislation to establish the rules for stablecoin issuers operating in its territory. Regulatory actions are occurring as we speak as many experts believe the stablecoin market will soon see explosive growth. Trillions of dollars would be the effect in just a few years.
US Stablecoin Legislation: STABLE Act and GENIUS Act
In the United States, lawmakers have introduced two key pieces of legislation aimed at regulating stablecoins: the STABLE Act in the House and the GENIUS Act in the Senate. The STABLE Act is the House’s attempt to provide a comprehensive and clear regulatory framework for stablecoins. One key provision of the STABLE Act explicitly states that a payment stablecoin must be denominated in a national currency and reduces regulatory confusion.
Specifically, the STABLE Act amends the definition of “deposit” and “account” under current banking statutes to exclude payment stablecoins. This clarification, far beyond common law principles, is significant for determining what makes a stablecoin different from traditional banking products and sets forth a clear regulatory route. Specifically, the act requires that each issued payment stablecoin be fully redeemable on a one-to-one basis with high-quality, liquid assets. This is to ensure that each stablecoin is always redeemable for its full value in the underlying currency. These are high-quality, liquid types of assets and these would be US-Treasury Bills with maturities of under 93 days.
In May 2025, the Senate passed the GENIUS Act on the floor. This Act would define a payment stablecoin as a digital asset primarily intended for payment or settlement purposes. The US approach to stablecoin regulation reflects a strategic priority to maintain and extend the global role of the US dollar. By embracing privately-issued, dollar-backed stablecoins, the US seeks to make sure that its currency is at the core of the global digital economy.
Hong Kong's Comprehensive Stablecoin Bill
On May 21, 2025, Hong Kong’s Legislative Council adopted a wide-ranging Stablecoins Bill. This was a groundbreaking move in the region’s regulatory paradigm towards digital assets. This bill, in our view, strikes a sensible regulatory balance and provides an appropriate clear and structured framework for the issuance and operation of stablecoins within Hong Kong. The legislative package makes substantial efforts to address some of the most critical areas—licensing, reserve requirements and consumer protection.
Hong Kong’s forward-looking approach to stablecoin regulation highlights its goal of establishing itself as a leader in digital finance and innovation. By establishing a well-defined regulatory environment, Hong Kong aims to attract stablecoin issuers and foster the growth of the digital asset ecosystem. The Stablecoins Bill brings robust regulatory scrutiny to bear on stablecoins within Hong Kong. This is a net positive contribution to market stability and fosters greater trust and faith in the stablecoin market.
The Stablecoins Bill’s passage in Hong Kong is an encouraging development. More broadly, it shines a light on a worldwide movement toward more transparent rules and greater oversight of digital assets. As stablecoins gain wider adoption, jurisdictions around the world are recognizing the need for comprehensive regulatory frameworks to manage the risks and opportunities associated with these digital currencies. Hong Kong’s proactive, rulemaking first approach provides a blueprint for other jurisdictions aiming to create tailormade rules for stablecoin activities.
Regulatory Clarity and Market Growth
The US and Hong Kong regulatory moves come alongside greater regulatory clarity around yield-bearing stablecoins. In February 2025, the SEC proactively enforced rules to establish clearer regulations governing yield-bearing stablecoins. They greenlit these digital assets to be considered as “certificates” that was within securities regulation. As such, this decision has huge implications for the broader stablecoin market. Specifically, the proposal lays out the regulatory requirements for those stablecoins that offer and/or maintain a yield to their holders.
Unsurprisingly, the SEC has chosen to regulate yield-bearing stablecoins as securities. This decision subjects them to existing securities laws, thereby requiring such issuers to comply with registration and disclosure requirements. This regulatory certainty will help create a healthier environment for more confidence and participation in the stablecoin market. Second, it lays out a relatively clear path for issuers of yield-bearing stablecoins to offer them in compliance with US federal regulations.
Combined with this exciting regulatory progress, there have been stable developments in projected growth of the stablecoin market. Earlier estimates, in fact, predicted that the amount of stablecoins issued would more than double to reach $500 billion over the next 18 to 24 months. Furthermore, projections indicate that stablecoin issuance could reach $2 trillion by 2028, reflecting the growing adoption and integration of stablecoins into the global financial system.
