This year, the U.S. government has demonstrated unprecedented support for stablecoins. From political and industry-wide acceptance of these assets to the GENIUS stablecoin bill progressing through the Senate, 2025 marks a significant turning point.
U.S. Treasury Secretary Scott Bessent has even assigned stablecoins a vital mission: ensuring the U.S. dollar retains its status as the world's primary currency. "As directed by President Trump, we will ensure the dollar remains the world's leading reserve currency, and we will use stablecoins to achieve this," he stated at a digital asset summit in March.
It's somewhat ironic, then, to realize that stablecoins are descendants of Bitcoin. Bitcoin is a decentralized currency designed to level the playing field in a world dominated by central bank manipulation and government overreach. At first glance, stablecoins and Bitcoin appear to have irreconcilable goals—the former supports the existing fiat-based financial system, while the latter seeks to overturn it.
So, what will happen once the GENIUS Act is passed? Will it trigger a direct showdown between stablecoins and Bitcoin?
According to David Lawant, Head of Research at FalconX, this might not be the right way to frame the issue—at least not in the short term.
"Rather than competing with each other, they are complementary," Lawant explains. "As finance becomes increasingly digital, it makes sense to have both digital fiat currency for transactions and a digital gold equivalent for storing value."
Bitcoin and Stablecoins Occupy Different Niches
Zack Shapiro, Policy Director at the Bitcoin Policy Institute, agrees. He states that Bitcoin and stablecoins are "fundamentally different" with non-competing value propositions.
"Stablecoins are dollar-denominated assets built on blockchains, enabling fiat to move more efficiently on the internet, similar to digital cash with fast, low-cost settlement," Shapiro elaborates. "They solve inefficiencies in the traditional banking system, where settlement can take days and involve multiple intermediaries."
He adds that while they share blockchain infrastructure with Bitcoin, the similarities end there.
Bitcoin is a novel form of money—decentralized, scarce, censorship-resistant, and governed by code rather than policy. It is better understood as a digital commodity or a gold-like monetary asset. Stablecoins, in contrast, are simply tokenized forms of fiat currency; they function more as payment infrastructure than a new asset class.
Stablecoins Could Even Boost Bitcoin Adoption
The Clarity for Payment Stablecoins Act, commonly known as the GENIUS Act, is advancing through the U.S. Congress. According to Alex Thorn, Head of Research at Galaxy, the bill aims to establish a clear legal framework for stablecoins and is expected to reach President Trump's desk by August.
The bill lays the groundwork for a comprehensive regulatory system for stablecoins pegged to the U.S. dollar. A key feature is its strict standards for issuance: only federally or state-approved qualified entities, or subsidiaries of insured depository institutions, can issue stablecoins.
The bill mandates that stablecoins must be backed one-to-one by U.S. dollars or similar liquid assets. Notably, stablecoins under this act are not considered securities.
"The GENIUS Act is a sensible, bipartisan bill that reflects a pragmatic step forward in digital asset regulation," says Shapiro.
While stablecoins are already legal under current U.S. law, the bill would strengthen consumer protections and provide long-term regulatory clarity for institutions looking to use stablecoins as payment infrastructure.
Shapiro notes that the bill won't directly impact Bitcoin. "But its passage could reinforce the perception, both domestically and internationally, that the U.S. is embracing digital assets in a bipartisan, rules-based manner," he says. This perception could provide a slight tailwind for Bitcoin, further legitimizing the entire crypto space.
Lawant believes Bitcoin and stablecoins will grow together. He points specifically to the development of Taproot Assets as something to watch closely. Taproot Assets are a way to use non-Bitcoin tokens, like stablecoins, on Bitcoin and the Lightning Network. It's worth noting that Tether first launched its USDT stablecoin on Bitcoin's Omni Layer back in 2014.
At the Bitcoin 2025 conference in Las Vegas in May, Tether CEO Paolo Ardoino argued that channel-based systems like the Lightning Network, rather than Layer 2 networks on alternative blockchains like Ethereum, are the correct path to scaling.
"Stablecoins also play a key role in expanding Bitcoin's reach," Lawant adds. "For many users, the lack of fiat price volatility in stablecoins makes them a more familiar entry point into digital wallet infrastructure and even blockchain-based finance. This could ultimately lead them to explore Bitcoin."
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Tether's Strategic Adaptation to the GENIUS Act
As Paolo Ardoino revealed in May, major stablecoin issuers like Tether—whose USDT has grown to a market cap exceeding $150 billion—are adapting to the GENIUS Act. Tether may launch a U.S.-based branch to ensure compliance with the bill's requirements.
Tether serves as a prime real-world example of how Bitcoin and stablecoins can not only coexist but thrive together. The company allocates a portion of the interest earned from its holdings of U.S. Treasuries and other profits into purchasing Bitcoin.
A Tether spokesperson stated the company "views Bitcoin as a cornerstone of the decentralized financial future," noting that it has accumulated 100,000 BTC for its corporate treasury and operates sustainable Bitcoin mining initiatives.
"In many emerging markets, USDT has become a vital tool for navigating economic instability and currency devaluation, often serving as a reliable hedge against inflation," the spokesperson said.
Shapiro sees a similar dynamic playing out. "In the U.S., stablecoins will likely be used behind the scenes by banks, fintech companies, and payment processors for efficiency gains, while end-users may not even know they're interacting with blockchain technology."
Stablecoins could even act as a transitional currency, leading users toward Bitcoin. As consumers gain direct exposure to stablecoins and digital wallets, it can serve as a gentle on-ramp to broader adoption of digital assets, including Bitcoin.
"We view stablecoins not as an end goal, but as a foundational step toward broader adoption of decentralized assets like Bitcoin," Tether's spokesperson explained. "This is why we invest in Bitcoin and support educational programs designed to empower communities worldwide with the knowledge to use digital assets wisely and confidently."
Outside the U.S., particularly in developing nations, stablecoins—primarily USDT—are often the key method for obtaining U.S. dollars where physical cash or bank accounts are inaccessible.
There, they function as short-term, low-volatility stores of value, while Bitcoin acts as a long-term hedge against local currency collapse or political turmoil. In this context, stablecoins and Bitcoin serve complementary roles as "safe haven" and "risk-on" tools for achieving greater financial sovereignty.
What Is the Ultimate Outcome for Bitcoin and Stablecoins?
As Bitcoin and stablecoins continue to evolve side-by-side, opinions on the final outcome vary.
Over a decade ago, the idea was proposed that Bitcoin could serve as a standard or ideal base unit—akin to John Forbes Nash Jr.'s concept of an ideal currency—against which fiat currencies could be measured and incentivized to improve.
But according to Michael Saylor, Bitcoin super-bull and founder of MicroStrategy, the end game is not Bitcoin replacing the dollar.
At a speech during the 2025 Bitcoin Conference, Saifedean Ammous, author of The Bitcoin Standard, outlined a potential scenario where Tether's Bitcoin reserves could eventually surpass its holdings of dollars or dollar equivalents.
From this perspective, Tether begins to resemble the type of Bitcoin bank once envisioned by cypherpunk Hal Finney—issuing its own notes backed by a reserve asset—rather than merely being a vehicle for distributing dollar IOUs.
This also echoes the original vision behind Meta's Diem (formerly Libra) stablecoin, which proposed a digital currency backed by a basket of fiat currencies rather than a simple dollar peg.
"At Tether, we place Bitcoin at the core of our strategy because we believe in its long-term value," the company's spokesperson said. "As the hardest form of money ever created, Bitcoin has outperformed all asset classes over the past decade, and its adoption as a reserve asset is only accelerating."
They added, "Its ability to act as a hedge against inflation and economic uncertainty makes it a natural complement to traditional reserves like gold and U.S. Treasuries."
"Saifedean presents a compelling vision for the direction of global finance, and we agree that Bitcoin will play a central role in the future."
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Frequently Asked Questions
What is the GENIUS Act?
The GENIUS Act, formally known as the Clarity for Payment Stablecoins Act, is proposed U.S. legislation to create a federal regulatory framework for stablecoins. It sets standards for issuance, requiring full backing by liquid assets and limiting issuance to approved entities.
How do stablecoins and Bitcoin differ?
Stablecoins are digital assets pegged to a stable reserve asset like the U.S. dollar, designed for low-volatility transactions. Bitcoin is a decentralized cryptocurrency with a fixed supply, functioning primarily as a store of value and hedge against inflation, akin to digital gold.
Could the GENIUS Act negatively impact Bitcoin?
Most analysts believe the act will not directly impact Bitcoin. Instead, by providing regulatory clarity for stablecoins, it could lend legitimacy to the broader digital asset ecosystem, which may indirectly benefit Bitcoin adoption and perception.
Why is Tether investing in Bitcoin?
Tether views Bitcoin as a foundational asset for the future of decentralized finance. By allocating profits to Bitcoin, it aims to diversify its reserves and align with what it sees as a superior long-term store of value, strengthening its own position.
How are stablecoins used in developing countries?
In regions with volatile local currencies or limited banking access, stablecoins like USDT provide a accessible way to hold U.S. dollars digitally. They are used for remittances, savings, and as a hedge against hyperinflation and economic instability.
Will stablecoins lead to more people using Bitcoin?
Many industry experts believe so. Stablecoins act as an accessible entry point into the crypto world due to their price stability. Once users are comfortable with digital wallets and blockchain transactions, they are more likely to explore other assets like Bitcoin.