Regulations Become Crucial as Stablecoins Push Payments Frontier

The stablecoin market is positioning itself as at the forefront of payments innovation, and that forefront is at an inflection point.

On Tuesday (Feb. 25), Bank of America’s CEO Brian Moynihan said in an interview that the bank would “go into” stablecoins if regulation were passed in the U.S., signaling a potential strategic pivot by one of the nation’s largest banks toward digital assets. Bank of America already holds over 80 blockchain-related patents, making it a banking leader in terms of blockchain IP.

But the second part of Moynihan’s commentary was crucial: there exist a number of issues that need to be resolved from a regulation standpoint for banks to be comfortable with embracing stablecoins and other on-chain — particularly public chain — solutions.

On Wednesday (Feb. 26), stablecoin regulation took center stage during the U.S. Senate Committee on Banking, Housing, and Urban Affairs subcommittee hearing titled “Exploring Bipartisan Legislative Frameworks for Digital Assets.”

“We have seen stablecoins being used as fast and efficient tools for corporate treasury management,” Jai Massari, the co-founder and chief legal officer at Lightspark, said during her witness testimony at the hearing. “We are starting to see how stablecoins can lower payment frictions and transaction costs, spur new kinds of payments, and, crucially, unlock new kinds of economic activity. We expect access to instant, secure, interoperable communications like email and messaging globally; we should demand the same from payments.”

“For stablecoins to support more mainstream payments use cases, users must be able to think of stablecoins as digital cash. This requires users having confidence that stablecoins are protected by a strong legal framework and operational infrastructure,” Massari added.

This is as true for banks as it is for consumers.

Read more: 5 Blockchain Projects the World’s Biggest Banks Are Behind

Why Regulated Stablecoins Matter

Stablecoins, which are digital assets pegged to stable fiat currencies, offer the benefits of cryptocurrency — such as fast transactions and borderless transferability — but without the volatility. However, until now, regulatory uncertainty has hindered their adoption, particularly among institutional use cases.

Risks for security-critical sectors like financial services remain despite marketplace advances.

According to data from Chainalysis, stablecoins are involved in 63% of illicit crypto transactions, by far the most popular digital asset, having taken the top place from bitcoin in recent years as the tool of choice for criminal activities, including laundering stolen funds and evading sanctions. The 2025 crypto crime report data excludes revenue from non-crypto native crime such as drug trafficking or money laundering, where crypto could be used as a means of payment.

2024 was a landmark year for on-chain crime, with illicit cryptocurrency transactions likely exceeding $51 billion. On Monday (Feb. 24), a judge fined the operator of the OKX cryptocurrency exchange more than $504 million for breaking anti-money laundering (AML) laws. As the payments industry continues to innovate, with cryptocurrencies playing an increasingly central role, balancing innovation with security is critical.

That’s because any maturation of the stablecoin market is likely to be one where compliance and transparency are as important as technology and innovation. This is what could drive continued adoption among banks, corporations and governments.

Read more: What a B2B Stablecoin Strategy Looks Like

Staying Smart About the Road Ahead

The interest from traditional banking players like Bank of America potentially signals not just validation of stablecoin technology but also a strategic shift where banks may eventually use stablecoins for internal liquidity, cross-border transactions and even consumer-facing products.

Other stakeholders within the financial services space are also laying claim to stablecoin’s white space opportunity. PayPal Holding’s senior management laid out a strategy at its annual Investor Day on Tuesday (Feb. 25) and included crypto in its “PayPal 2.0” vision.

The company plans to integrate its PYUSD stablecoin into more of its products this year, including as an option for its more than 20 million small- to medium-sized merchants to pay their vendors, with a focus on cross-border B2B transactions — a market plagued by high fees, slow settlement times and limited transparency.

For businesses with international operations, this development is particularly compelling. Multinational corporations often face the challenge of managing cash flow across different currencies and jurisdictions. A stablecoin could serve as a bridge asset, something PYMNTS explored at the end of last year with Ran Goldi, senior vice president, payments and network at Fireblocks, and Nikola Plecas, head of commercialization, Visa Crypto.