This week offered a glimpse of the all-at-once phase for stablecoins, the class of cryptocurrencies pegged to fiat currencies like the U.S. dollar.
Long the domain of crypto-native issuers such as Circle, Paxos and Tether, stablecoins are now drawing attention from the incumbents that once dismissed them as a speculative curiosity.
Zelle’s operator reportedly intends to explore stablecoin rails. The Clearing House (TCH), the banking consortium best known for running ACH and the RTP® network, is weighing its own approach. Meanwhile, across the crypto-native side, issuers are seizing on a legal nuance in the GENIUS Act to argue that they don’t need state-by-state money transmitter licenses. At the same time, balance sheets at some stablecoin firms are starting to show early signs of strain, raising questions about resilience.
The week’s news signals more than just a string of announcements. It suggests a reordering of how digital dollars might circulate. The optimistic read is that stablecoins are edging closer to mainstream adoption in payments and settlements. The cautious one is that the financial system in the United States is hurtling toward a collision between established institutions and crypto upstarts, each convinced that they alone hold the blueprint for digital cash.
Read also: Zombie Blockchains Are Coming Back From the ‘Dead’ as Crypto Rebounds
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Incumbents Make Their Move
For years, Zelle’s network has processed more than $500 billion annually in peer-to-peer transactions, all without touching blockchain rails. However, it was reported Thursday (Sept. 11) that Early Warning Services (EWS), the consortium behind Zelle, is investigating a stablecoin-based settlement layer. The move is a tacit acknowledgment that tokenized money has matured from curiosity to contender.
At nearly the same moment, TCH, a backbone operator of U.S. payments infrastructure, signaled similar intent.
For Zelle and TCH, the appeal is partly defensive, partly offensive. If consumers and FinTechs move toward stablecoins, incumbents risk losing relevance. However, if regulated, bank-backed stablecoins gain traction, they could undercut the likes of Circle or Tether, redirecting flows back into the banking system’s domain.
Meanwhile, in August, the state of Wyoming launched its own stablecoin. Dubbed the Frontier Stable Token (FRNT), the project is the first U.S. attempt at a state-backed digital instrument designed to compete with private stablecoins.
To learn more, PYMNTS interviewed Monday (Sept. 8) two of the executives involved in the project: Farooq Malik, co-founder and CEO of Rain, and Morgan Krupetsky, vice president of on-chain finance at Ava Labs.
“There are so many opportunities as it relates to wholesale finance and payments, especially in the cross-border space,” Krupetsky said. “B2B payments, intracompany treasury management and moving money across legal entities—we’ve seen a lot of interest there.”
“There’s an opportunity to build a more open internet and a more open money network,” Malik added.
See also: This Week in Stablecoins: The Dawn of Agentic Payment Ecosystems?
The Crypto-Native Counterargument
Circle, the issuer of USDC, struck a partnership Tuesday (Sept. 9) with Fireblocks, a digital asset custody and infrastructure provider, to expand stablecoin adoption among enterprises. USDC can serve as a settlement layer that reduces friction in B2B payments, cross-border transfers and treasury management.
Elsewhere, the GENIUS Act has given them an unexpected weapon. Section 5(C)(h) contains wording that, according to crypto lawyers, could exempt certain stablecoin activities from money transmitter licensing requirements.
Traditionally, companies facilitating the movement of money across state lines must secure licenses in each jurisdiction, a costly and complex process. But if stablecoin tokens are treated as direct representations of fiat currency, issuers may argue that licensing requirements no longer apply. That interpretation is contentious, to put it mildly.
Such a shift would erode a major compliance moat for traditional money transmitters, from remittance firms to digital wallets.
Even as the sector seizes on legal ambiguities, cracks are emerging in the economic foundation of some stablecoin issuers. Balance sheets reveal mounting exposure to short-term treasuries and other high-yield instruments. While this has been lucrative during an era of elevated interest rates, it leaves issuers vulnerable if liquidity conditions shift suddenly, and there remains a high-water mark of deposits that issuers must maintain to keep their own operational lights on.
With dozens of issuers competing for adoption, it’s unlikely that all will achieve the scale or trust required to survive.
This same question hovers over smaller lenders and community banks.
