Stablecoins are portrayed as the safer, less volatile entry point in crypto, with Bitcoin viewed as a speculative asset rather than a stable store of value.

The GENIUS Act, enacted in 2025, sets a framework requiring issuers to hold liquid asset reserves and prohibits issuer-paid yields, differentiating stablecoins from more volatile assets.

Regulators should evaluate who promises returns, where funds are held, who controls assets, who bears losses, and whether redemption at par remains possible as yield products stay active or incur losses.

Investors should look at real-world usage across networks like Ethereum, Solana, and Avalanche rather than assuming a single standard will prevail.

Bank-connected infrastructure clarifies fund custody and customer obligations, reinforcing the separation between payment tokens and yield products.

A regulatory dilemma exists: stricter backing may curb innovation if it fosters complacency; a hybrid model could balance risk and creativity.

The SEC applies the Howey test to determine if a digital asset is a security, assessing investment of money in a common enterprise with profit expectations from others.

A shift in regulation is emerging to separate stablecoins used for payments from yield-bearing products, shaping future oversight.

In March, the SEC and CFTC clarified that payment stablecoins issued by permitted issuers are not securities, while other stablecoins may be securities depending on circumstances.

The GENIUS Act establishes baseline reserves for payment stablecoins and bans issuer-paid yields, but leaves questions about third-party yield arrangements and potential gaps.

Brazil’s central regulatory example shows how clear responsibility and settlement mechanisms matter when stablecoins move across networks and payment systems.

Ongoing questions remain about how stablecoins will be treated under federal securities laws amid an active regulatory debate.