Why The Trump Administration Is Taking Aim At Stablecoins To Jumpstart Its Pro-crypto Push

Crypto and AI czar David Sacks

Tom Williams/CQ-Roll Call, Inc via Getty Images

• The Trump administration is pushing for stablecoin regulation as the opening move of its pro-crypto push.
• Stablecoins, which are cryptos pegged to fiat currencies, are viewed as a way to ensure dollar dominance.
• "This could cement the US dollar's supremacy in a digital age," a crypto expert told BI.

The White House could soon take action in a key corner of the cryptocurrency market as it aims to deliver on promises made during the campaign to make digital assets a focus for the administration.

Stablecoins, which are cryptocurrencies pegged to fiat money, can expect transparent regulation from Washington in the coming months.

That's according to AI and crypto czar David Sacks, who announced on Tuesday that the Trump administration has prioritized a federal stablecoins bill. One, introduced by Republican Senator Bill Hagerty the same day, gives an idea of what's taking shape.

Investors have eagerly looked forward to Washington's embrace of crypto-friendly policies, and Hagerty's stablecoin bill may be just what the market wants to see: clear issuance procedures and "light-touch" regulatory standards.

But the federal government also has reason to be excited about stablecoins.

About 98% of the stablecoins —which are meant to be less volatile and used when swapping crypto into fiat— are tied to the US dollar. As stablecoins account for over two-thirds of cryptocurrency transactions worldwide, ensuring they prosper is seen by the administration as a clear way to cement American leadership in global finance.

"Stablecoins really have the potential to ensure American dollar dominance internationally; to increase the usage of the US dollar digitally as the world's reserve currency; and, in the process, create, potentially, trillions of dollars of demand for US Treasuries, which could lower long-term interest rates" Sacks said on Tuesday.

Alice Liu, research lead at CoinMarketCap, told BI that turning stablecoin proposals into reality would make certain that Washington doesn't fall behind the competition, keeping the greenback in command.

"If the administration follows through, this could cement the US dollar's supremacy in a digital age, countering threats from alternative systems like China's digital yuan," Liu said.

She also said she sees merit in the idea that US Treasurys will get a boost. Chainalysis data shows that the issuer of Tether, the largest stablecoin, holds almost $100 billion in US Treasury bills. If improved regulation unleashed new stablecoins that use US debt as backing, this trend could accelerate.

There is anticipation that a wave of new stablecoin liquidity will come online if the US creates the right environment for them to thrive. Some of this should also come from Wall Street, Zack Shapiro, head of policy at the Bitcoin Policy Institute, said.

"The business of issuing a stablecoin is to collect the float on Treasurys while you issue non-yield-bearing stablecoins," he told BI. "I'm sure that the traditional Wall Street firms want to get in on this, and having stablecoin regulations or legislation would provide the regulatory clarity that Wall Street would need to get in on this game."

To be sure, Hagerty's bill isn't Washington's first go at stablecoin legislation. The Lummis-Gillibrand Stablecoin Act has been under debate since May 2024, and would create a regulatory framework that ensures stablecoins are backed by one-to-one reserves.

Eli Cohen, General Counsel at Centrifuge, told BI that Hagerty's bill seems set to garner bipartisan support, and is likely to move forward quickly — easy passage could also contribute to why stablecoin legislation is top of mind for the White House compared to loftier agenda items like a bitcoin national reserve.