Are Stablecoins Still Safe in 2025 Amid Regulatory Shakeups?

Stablecoins have become popular for cross-border payments because of their low volatility and fixed value to real-world assets like gold and the U.S. dollar. According to a 2024 a16z report, stablecoins were used to settle payment transactions totaling $8.5 trillion, more than double the transactions processed by Visa during that time frame. At the time of this writing, the stablecoin market cap is about $230 billion, with Tether USDT leading with $139.5 billion.

Although stablecoins have bridged the gap between traditional finance and crypto, they have caught the attention of malicious actors. A UNODC report reveals that USDT is often preferred for organized crime in Southeast Asia. Therefore, the safety of this asset class is questionable. Major industry players are calling for a tighter regulatory framework and compliance rules. Additionally, central banks are rolling out their digital currencies, CBDC, to mitigate this issue.

So, how will stablecoins fare in 2025 and beyond amid upcoming regulatory shakeups? Let’s take a deeper look.

Why Stablecoins Are Under Scrutiny

Stablecoins maintain a more consistent value than other crypto assets because they are backed by actual reserves held in banks or treasuries in gold and fiat currencies like USD and EUR. However, the lack of proper regulation has created a loophole for exploits, putting the future of stablecoins in jeopardy. 

The infamous Terra/LUNA crash that resulted in the loss of over $40 billion is a clear example of how stablecoins can be vulnerable. The algorithmic stablecoin lost its peg, which triggered a massive market loss. The collapse caused a ripple effect in the crypto market, causing the Bitcoin price to drop drastically.

Reserve transparency is another reason for the scrutiny. Some stablecoin issuers like Tether have often been accused of manipulating their reserve audits. Although Tether has cleared the air on numerous occasions, questions remain about whether all the USDT tokens are fully backed. 

Adding these concerns to the money laundering activities has seen a tremendous rise in oversight by regulatory agencies worldwide. The shakeups are evident.

What Regulatory Changes Are Being Initiated and Implemented in 2025?

Currently, regulatory agencies in different countries are busy developing new rules that will govern the issuance and trading of stablecoins. Since stablecoins don’t typically fit into a traditional asset class like securities, specific laws are being created to merge with existing financial laws to initiate proper oversight. So, what are regulators doing to tighten rules for stablecoins? Let’s take a look at some. 

The United States Introduced the Stablecoin Transparency and Resilience Act Bill in 2024

The Stablecoin Transparency and Resilience Act, also known as the GENIUS Act, is a bill that intends to create a framework for stablecoin issuers in the United States. The bill will properly define stablecoins, require stablecoin issuers to hold reserves equivalent to their supply, and mandate monthly audits and public disclosure of reserve assets by the payment issuer. While USDC has embraced this initiative, Tether faces mounting pressure to comply and may face delisting from exchanges operating in the United States.

The U.S. is expected to usher in more bills in 2025, aiming to strengthen the USD and support the development of dollar-backed stablecoins. 

European Union’s MiCA Tightens Rules on Non-EU Stablecoins

The EU under MiCA imposed rules on crypto-asset service providers (CASP) to delist non-compliant Stablecoins from their trading platforms. This means that CASP will stop offering non-compliant stablecoin services to users and ensure investors liquidate their holdings. Additionally, crypto payment issuers must be EU-licensed, and transaction volumes in stablecoin not denominated in EUR must not exceed a certain mark.

The United Kingdom Plans Amendments in Stablecoin Payment

The Financial Conduct Authority (FCA) has been on top of its game since February 2024, discussing the future of stablecoin. In 2024, the FCA laid the foundation for a legal framework for fiat-backed stablecoins. Amendments will also be made to enable stablecoin payment, including allowing overseas stablecoins for retail payments in the UK. 

Asian Countries Take Proactive Steps in Stablecoin Issuance and Reporting

While China is adamant about recognizing stablecoins, Japan and Singapore are leading the continent on the crypto front. The Monetary Authority of Singapore only issues licenses to stablecoin issuers with clear reserve backing rules. Japan has a similar rule, mandating daily reserve audits for stablecoin issuers. 

Are Stablecoins Still Safe?

Yes, they are, but their safety depends on how they are issued and backed. Stablecoins with a transparent reserve and that are regulatory-compliant will avoid the hammer from regulatory agencies. Trading these stablecoins is generally safe, and you don’t have to liquidate your holdings unexpectedly. 

We might also see the rollout of more CBDCs globally that may merge with stablecoins. Governments want more control over crypto, and may likely issue a hybrid model of CBDC and stablecoin in 2025. 

Final Say

2025 is the year of regulation for stablecoins. As they are becoming more embedded into the financial system, regulatory agencies are tasked with greater responsibility for providing oversight. Stablecoins are safe, but a stricter era awaits them.