It has become increasingly apparent that the Trump administration represents a major shift in how digital assets are integrated into both institutions and daily life. And stablecoins represent the first line of digital assets. 

From a psychological standpoint, stablecoins are easiest to understand in the crypto world – tokenised currency existing on the blockchain in a 1:1 ratio, typically backed by highly liquid assets for seamless redemption. This is why stablecoins are often found on both centralized and decentralized exchanges (DEXes) as base pairs instead of fiat currencies.

Likewise, the stability of stablecoins represents sounder collateral within borrowing dApps than altcoins. It is also much easier and cheaper to transfer money globally with stablecoins, through a single blockchain network, rather than through multiple costly and time-consuming banking barriers.

If it is the case that stablecoins are seeing a revival, it is important to understand which stablecoins and blockchain networks are the most useful for particular purposes. But before delving into that, how best to understand the emerging stablecoin role in global finance?

Biden vs Trump: A Contrast in Crypto Approaches

As a proxy for altcoin market activity, from crypto-centered companies to general-purpose smart contract platforms, stablecoins had their peak at the end of April 2022, holding a $187.58 billion USD market cap. It took until late 2024, when President Trump was declared the winner for his 2nd term, for stablecoins to rise above that level.

Total stablecoin market cap between 2018 through 2025. Image credit: DeFiLlama

It bears remembering the sequence of events that led to such a prolonged crypto market slump:

Just as the crypto market began to evolve and mature into an alternative financial ecosystem, the Federal Reserve started an interest rate hike cycle in March 2022. This triggered a risk-off behavior, as borrowing costs started to rise.

Consequently, investors began to pull out from DeFi platforms as well. Unfortunately, many such platforms were overleveraged. The first on the chopping block was Terra (LUNA), its collapse triggering widespread anxiety and pulling others into the bankruptcy vortex – from Celsius, Three Arrows Capital and BlockFi to FTX.

Concurrently, the entire Biden administration turned anti-crypto through all of its regulatory nodes. Through the Federal Reserve, FDIC and OCC, the banking sector started to debank crypto startups. Likewise, the Securities and Exchange Commission (SEC) began to implement suppressive tactics against the largest crypto nodes.

Perhaps most importantly, during this suppressive period, it was unclear if the US is in the process of issuing a central bank digital currency (CBDC), which would’ve rendered stablecoins redundant. 

Following President Trump’s second term during the first half of 2025, everything changed. The SEC dropped its lawsuits against Coinbase, Binance and Kraken – the world’s top crypto exchanges serving as primary channels for capital inflow. Simultaneously, Fed. Chair Jerome Powell explicitly stated that a CBDC is not happening.

Instead, the shift will be on stablecoins as tokenised dollars. Most recently at the ECB Forum, Powell noted that stablecoin regulation is a “positive step” and likely to go in effect with the GENIUS Act. The primary reason for this U-turn is simple.

The Shift to Stablecoins Explained

Large stablecoin companies, such as Circle (USDC) and Tether (USDT), are driving up the demand for US Treasuries. Stablecoin companies buy these short-dated T-bills as reserve assets to maintain the 1:1 dollar peg, while earning interest.

The Bank for International Settlements (BIS) had already confirmed in May that stablecoin demand for short-term Treasuries compresses Treasury yields equivalent to “small-scale quantitative easing on long-term yields”.

In short, big-name stablecoin issuers may be helping lower the US Government’s borrowing costs on longer-term debts. 

Stablecoin reserves (dark blue) compared against other large holders of US short-term securities. Image credit: BIS

In effect, stablecoin issuers are now on par with sovereign nations, which is a remarkable achievement. With lower yields, the Federal Reserve has to pay less whenever there is a need to inject liquidity. In turn, this could help the central bank manage interest rate targets more cost-effectively.

Furthermore, being on a blockchain – verifiable digital ledger – stablecoins are as transparent as a theoretical CBDC. Both Circle and Tether have demonstrated numerous times they comply with asset-freezing requests from federal agencies.

In the end, stablecoins act as de facto CBDC, but without the controversy baggage. 

Stablecoins represent the penetration of USD – world reserve currency – into the digital sphere. Even before Howard Lutnick became the US Secretary of Commerce, he noted being a “fan of properly backed stablecoins” because “dollar hegemony is fundamental to the United States of America.”

Paolo Ardoino, the CEO of the largest stablecoin company Tether, is fully aware of his role, having said they are “decentralizing the US debt as well, basically pushing for dollar hegemony.” After all, it is much easier to maintain the US dollar’s ascendancy with non-sovereign assets like stablecoins than with direct CBDCs which could rile up other countries, such as China.

Of course, Australia is tightly connected to the US monetary system, even more so after the Reserve Bank of Australia (RBA) established a reciprocal currency swap line with the Fed in March 2020. 

Emerging Stablecoin Ecosystem

Now that it is clear why the stablecoin revolution is happening anew, let’s examine how to best utilise stablecoins. A beneficiary of the network effect, Tether (USDT) stablecoin still reigns supreme at 62% dominance, followed by Circle’s USDC.

When we look at different blockchain networks, it is immediately apparent that USDT is mostly used for money transfers. Tron (TRX) is by far the most frictionless way of transferring money between addresses, typically at a $0.30 transfer fee.

Although Tron supports other stablecoins such as USDC and USDD, nearly all Tron traffic (over 10.7 billion transactions) is done with USDT. Accordingly, this is why Tron ranks first in blockchain fee revenue.

Revenue from L1 blockchain fees over 12 months. Image credit: TokenTerminal

As the largest smart contract platform for decentralized applications (dApps), Ethereum (ETH) is more diversified, with USDT holding market share at only 50%. However, against Tron’s $80.8 billion in stablecoin value, Ethereum holds the majority of stablecoin market cap, at $126.35 billion.

The increasingly popular Solana (SOL), currently ranked as one of the fastest blockchain networks, holds mostly USDC at nearly 70% share, at around $10.5 billion. This is nearly equal to Binance Smart Chain (BSC), holding mostly USDT at 60% share.  All other blockchain platforms have under $5 billion worth of stablecoins, starting with Coinbase’s Base at $4.2 billion, mostly in USDC.

The trend is clear – people mostly trust stablecoins that are heavily exposed to T-bills as reserve assets. This stands to reason as T-bills represent the full faith and credit of the US, which is secured by the world’s largest and most advanced military.

It also bears remembering that Terra’s algorithmic stablecoin experiment (UST) left people with considerable anxiety. Even so, lesser-known stablecoins generated within dApps have higher potential pitfalls – due to depegging risk – often leading to double-digit APY yields. 

Case in point, the over-collateralised stablecoin rUSD, generated from staked assets that also earn staking yields, can earn 24% vAPR on Convex Finance. Typically, such stablecoins have low capital inflows, as they are reserved for advanced users who deploy multi-pronged DeFi strategies. 

Instead of such complexity, it is most likely that people will partake in institutionally backed stablecoins. Fintech firm Fiserv with its FIUSD stablecoin is only one of many that will try to replay the highly profitable Tether playbook, as well as USDG from the Global Dollar Network consortium, of which Robinhood brokerage is a revenue-sharing member. 

The Bottom Line

Waiting for the signal from its big American brother, Australia’s Treasury has yet to formalise stablecoin issuance. In 2024, there was much talk of a wholesale Australian CBDC, with retail CBDC pushed out of focus. The signaling from the US is now firmly in the stablecoin direction, fragmented across many regulated stablecoins.

If the US proceeds with comprehensive stablecoin regulation, the Reserve Bank of Australia may benefit from aligning, given the global monetary entanglements with the Federal Reserve. 

Such regulatory clarity could catalyse stablecoin inflows into DeFi platforms on Ethereum, Solana, Sonic, Cardano and other public blockchains – driven by both frictionless transfers and DeFi participation incentives spanning hedging and speculation.

The post Stablecoins Over CBDCs: Will Australia Follow the US Regulatory Drift? appeared first on Crypto News Australia.

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Filed under: Bitcoin - @ July 8, 2025 6:20 am