Cryptocurrency as a speculative instrument has delivered extraordinary returns to the bold and devastating losses to the incautious. As a medium of exchange, however (the thing money is actually for) it has been, by and large, a disappointment. Nobody prices their groceries in Bitcoin after all.

Following crypto's grander ambitions, a more interesting technology is emerging. Stablecoins, the digital tokens pegged typically one-for-one to a reserve currency such as the dollar or euro, have become one of the more consequential innovations in global finance. They retain the speed, programmability and global reach of blockchain rails while shedding the volatility that makes conventional cryptocurrencies useless as money. In the process, they are beginning to do what crypto always promised: make payments faster, cheaper, and more accessible, particularly across borders.

The numbers are by any measure striking. The total supply of stablecoins has grown to more than $305 billion by late 2025, while banks and institutions such as Pay Pal, Stripe and JP Morgan are rolling out the technology and accounts within their own structures and ecosystems. Even SWIFT itself, that most venerable of legacy payment networks, has been running trials involving digital currencies.

And yet the technology's potential remains, in the precise sense of the word, latent. Despite the volume figures, stablecoins still process less than one per cent of the world's daily money transfers. Regulatory uncertainty – or, in some jurisdictions, regulatory paralysis – has been the principal constraint. Banks, understandably, have been reluctant to commit to infrastructure when the legal ground beneath their feet remains unstable, and whether the frameworks now being assembled will allow them to be deployed at scale. Stablecoins are not just a technology story – they are a payments story.

To understand what stablecoins can do, it helps to appreciate what the incumbent system cannot. International payments, in 2026, still largely travel through correspondent banking networks whose architecture was designed in the mid-20th century. Settlement routinely takes two to five business days, while the average cost of sending $500 internationally remains above four per cent, according to the World Bank.

Remittances from migrant workers to their families in developing economies cost, in the worst cases, close to 20% of the sum transferred. That is a levy on the disadvantaged that no serious economist would design, and that no serious policymaker can defend.

Stablecoins address this, moving value across public blockchains rather than through chains of correspondent banks, and settling in seconds rather than days. Transaction fees typically run to a few cents rather than a few per cent. The rails never close for weekends or public holidays, nor do they observe the business hours of Frankfurt or New York.

The use cases extend beyond remittances. Corporate treasury management (the unglamorous business of moving liquidity between subsidiaries across time zones) benefit with institutions such as Australia’s ANZ Bank launching an AUD-pegged stablecoin for real-time institutional settlement, and France’s Société Générale becoming one of the first major banks to issue a euro-backed stablecoin compliant with European rules.

For retailers operating across multiple currencies, stablecoins offer the prospect of bypassing the interchange fees of card networks and the opacity of foreign-exchange spreads. In emerging markets the appeal is even more visceral, as dollar-denominated stablecoins offer a refuge from local currency volatility and capital controls. In Latin America ordinary people have been purchasing stablecoins as a hedge, not as a speculative punt, but as a rational response to unreliable monetary systems.

The most consequential development of 2025 was the passage of the GENIUS Act in the United States (the Guiding and Establishing National Innovation for US Stablecoins Act) in July of that year. The legislation established the first federal framework for payment stablecoins, defining them clearly as neither securities nor commodities. Banks, credit unions and specially licensed non-bank issuers may now issue dollar-backed stablecoins under federal or state supervision. The act, passed with Congress support, was widely described as the most significant piece of financial legislation since Dodd-Frank.

Elsewhere, the regulatory tide has been similarly, if unevenly, turning. The European Union's Markets in Crypto-Assets regulation (MiCA) came into full force across all 27 member states in 2025, Hong Kong enacted its Stablecoin Ordinance in May that year, and the UAE, through its central bank and a thicket of Dubai and Abu Dhabi free-zone regulators, has approved major stablecoins and expanded licensing for crypto firms.

The year 2026 is, in the language of one analyst, the year where stablecoin regulation moves from theory to practice.

The United Kingdom, characteristically, has been somewhat slower. Draft legislation emerged in April 2025, and the Financial Conduct Authority's detailed rules are expected to follow. Critics in the payments industry have complained, with some justice, that the City's traditional strengths in financial services are being squandered through bureaucratic caution. Ministers, for their part, note that arriving after Washington and Brussels may be advantageous: the UK can learn from others' early mistakes and, in Lord Livermore's rather optimistic formulation, lead through trust and standards rather than speed.

Three principal tensions remain in the sphere of in stablecoin regulation, however.

The first is fragmentation. Common policy goals ensuring reserve quality, protecting consumers, preventing money-laundering, coexist, across jurisdictions, with divergent approaches to licensing, prudential standards, custody requirements and market conduct. Even within these frameworks, practical implementation diverges. A2025 PwC analysis of MiCA noted that differences in national implementation are already affecting market access and operational strategy. The sharing of originator and beneficiary data on crypto transfers does not always flow smoothly across borders. The global payments system is, in short, only as coherent as its weakest regulatory link.

The second tension is between consumer protection and market access. Reserve requirements, capital standards and disclosure obligations serve genuine purposes, but set them too high, and the market consolidates around a handful of incumbents such as Tether and Circle. As issuers of the two largest stablecoins, they already account for most of the supply, making it difficult for smaller and more innovative issuers to compete. There is also a concern that tighter reserve and disclosure rules may simply push non-compliant issuers offshore, and beyond the reach of the regulators trying to govern them.

The third, and perhaps the most intellectually interesting tension, concerns macroeconomic sovereignty. Dollar-denominated stablecoins are, in effect, a highly efficient mechanism for the global dollarisation of savings and transactions. This is positive for those individuals in countries with unstable currencies, but for central banks trying to manage monetary policy in those countries, it is considerably less welcome. Currency substitution (the informal replacement of a national currency by a foreign one) has been limited by the practical difficulties of holding and using foreign cash. Stablecoins remove these frictions. The IMF and the Financial Stability Board have both sounded this alarm, though neither has suggested a coherent remedy beyond the usual invocations of international cooperation. Regulation can moderate this, but not dissolve it entirely.

The existing regulatory frameworks are a still significant achievement, and my view is that the direction of travel is correct, even if the pace is maddening. The emergence of a rough global consensus around reserve requirements and consumer protections, however imperfectly implemented, represents genuine progress from the enforcement-first, rules-never approach that characterised American crypto policy for most of the previous decade.

Good intentions do not, by themselves, create coherent infrastructure. Three things are needed if stablecoins are to fulfil their potential as a mainstream payments instrument:

• Regulatory interoperability
  A version of mutual recognition is required for stablecoin regimes that meets common minimum standards. The European Union's passportable Markets in Crypto-Assets Regulation (MiCA) licence is a model worth emulating. A payment stablecoin authorised under the GENIUS Act should, in principle, be acceptable in jurisdictions whose frameworks meet equivalent prudential standards, without the issuer being required to re-licence in every market. This requires diplomatic effort and institutional trust, and the IMF and the Bank for International Settlements to be more forthright in setting minimum global standards, not as aspirations, but as conditions of access.
  
• Clearer guidance
  Interoperability between stablecoin rails and legacy payment infrastructure also has to be prioritised. SWIFT's trials with digital currencies are promising, but tentative. Without deliberate policy intervention, a global payment system will fragment into competing stablecoin networks that cannot communicate with one another or with existing fiat rails, exacerbating the correspondent banking inefficiencies they were meant to replace. Regulators should require, as a condition of authorisation, that major stablecoin issuers support common technical standards for cross-chain and cross-rail settlement.
  
• Time
  The GENIUS Act's implementing regulations are not due until July 2026, with a six-month grace period before they take effect. MiCA's early implementation has been uneven, while the UK framework may not be finalised before the end of the year. Some businesses will wait until stablecoin’s foundations are more secure; others will build offshore. The optimal policy would accelerate the rulemaking while preserving its quality. It is an ambition that regulatory agencies, staffed by careful lawyers rather than payment engineers, do not always find it easy to fulfil.

The geopolitical dimension of all this should not be underestimated. Dollar-denominated stablecoins are, in effect, a mechanism for extending the dollar's global monetary dominance into the digital age. America's legislators, rare in their bipartisan enthusiasm for the GENIUS Act, understood this clearly: a well-regulated dollar stablecoin ecosystem, accessible globally, reinforces the dollar's reserve currency status in multiple ways. The Trump administration's declaration that US leadership in digital assets was a strategic priority was, in this context, a statement of straightforward national interest.

China, whose central bank has been advancing its own digital renminbi for years, is watching. So are the Gulf states, some of which have been notably hospitable to stablecoin issuers in ways that reflect their own ambitions as financial centres. The contest for the architecture of global digital payments is also a contest for economic influence. The countries that write the rules, and the institutions that operate within them, will have structural advantages that will last for decades.

For the billions of people who simply want to send money home without paying a usurious fee, or hold their savings in something that will be worth roughly the same tomorrow as today, the geopolitical calculus is secondary. What matters is whether the technology works, whether it is trustworthy, and whether the institutions responsible for overseeing it will allow it to function. The first two conditions are, increasingly, met. The third remains a work in progress.

Bitcoin was never going to replace the dollar. Stablecoins might just become the dollar – or at least the most practical way of using it, anywhere in the world, at any time, for a fraction of what it currently costs. That would be no small thing. The regulatory frameworks now being finalised will determine whether the promise is kept.