Stablecoin Stalls in the US Amid Regulatory Uncertainty

Stablecoin growth in U.S. markets has stalled as regulatory delays push activity toward non-U.S. exchanges, reflecting challenges that threaten the country’s leadership in the digital asset space.

Until 2023, U.S.-regulated exchanges saw steady growth in stablecoin transactions, driven by rising global adoption of digital currencies. However, in 2024, this trend reversed, with more stablecoin activity occurring on non-U.S. exchanges. Experts believe this shift signals not a sharp decline in U.S. market participation but rather the rapid rise of stablecoin usage outside the U.S.

graph showing share of stablecoin inflows to US regulated and non-US regulated exchanges

Emerging Markets Drive Stablecoin Adoption as U.S. Risks Losing Global Influence

The surge in global stablecoin adoption is especially strong in emerging markets, where local currencies face volatility. These regions increasingly turn to stablecoins, like USDC and Tether, to preserve value and make fast, low-cost transactions. In contrast, U.S.-regulated platforms are growing at a slower pace, reflecting missed opportunities due to a lack of clear regulatory guidance.

According to Circle, the issuer of USDC, the global demand for U.S. dollar-backed stablecoins is strong, especially in areas where access to stable currency is limited. “One way to think about the near-term opportunity for USDC is to look at the global demand for fiat dollar cash,” a spokesperson from Circle explained.

“The Federal Reserve estimates that nearly $1 trillion in U.S. banknotes — 45% of all banknotes outstanding — are held outside the U.S., with two-thirds of all $100 bills in circulation abroad. This demand exists despite the difficulty people outside the U.S. encounter when trying to source U.S. dollars through their local banking systems,” the Circle spokesperson said. The company emphasized the benefits stablecoins bring to those seeking alternatives to traditional banking.

The decline in U.S. stablecoin growth is not just about missed profits; it also impacts U.S. influence in the global financial landscape. Historically, the U.S. dollar played a dominant role in global commerce, but that leadership could erode if stablecoin markets continue to grow outside the country. The situation echoes the rise of Eurodollars, which initially grew with little attention from U.S. lawmakers but later helped solidify the dollar’s role in international markets.

Europe Advances with Clear Regulations, U.S. Scrambles to Keep Up

In contrast, Europe has made significant progress with its Markets in Crypto-Assets Regulation (MiCA), which began to take effect in June 2024. MiCA provides clear legal and regulatory guidelines for stablecoins and other digital assets. This framework is attracting more stablecoin activity to the region, leaving the U.S. at a disadvantage.

Circle warned that the U.S. risks falling behind if it does not implement clear regulations soon. “The absence of a U.S. regulatory framework for dollar-referenced stablecoins represents a threat to American interests,” the company noted.

However, Circle remains optimistic about the future of USDC in the U.S. market. “The U.S. is the home of the dollar, and we are bullish on USDC’s potential here,” the spokesperson concluded.

Gairika holds positions in BTC. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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