U.S. banks are being instructed the aggressive dynamics round regulated stablecoins have shifted sharply because the GENIUS Act rewrote the bottom guidelines in 2025.
Paxos challenges long-held banking assumptions
Paxos, the regulated blockchain and tokenization platform, has issued a blunt warning to conventional lenders: the outdated stablecoin playbook is out of date. In a submit shared on X, the corporate listed 4 frequent business beliefs about stablecoins and argued that every one is now outdated.
The quick catalyst is the GENIUS Act, signed into regulation by President Trump in July 2025. The laws launched clear federal guidelines for stablecoin issuance in the US, reshaping how banks ought to take into consideration this fast-growing market. Furthermore, Paxos careworn that the chance set is already massive.
“Stablecoins are already a multi-trillion-dollar market and banks that may settle for them into their enterprise stand to profit enormously,” the agency said, highlighting the potential income and effectivity upside for early adopters.
From unregulated notion to formal oversight
The primary delusion Paxos targets is the concept stablecoins function outdoors the regulatory perimeter. In line with the corporate, that assumption not holds. Underneath the GENIUS Act, issuers should preserve 1:1 reserve backing with liquid property corresponding to U.S. Treasuries, present month-to-month public disclosures, and acquire specific approval to function within the U.S. market.
Exterior the US, regulators have moved in the same course. Singapore’s MAS framework and the European Union’s MiCA guidelines set up comparable requirements, making a extra constant world stablecoin regulatory framework. Paxos mentioned it already complies with these regimes, arguing that the strong oversight banks as soon as claimed was lacking is now firmly in place.
That mentioned, the corporate implied that banks which cling to outdated assumptions about oversight danger misjudging each the dangers and the upside of working with these digital devices.
Do stablecoins actually threaten financial institution deposits?
Banks have lengthy feared that stablecoins would possibly drain deposits and weaken their capability to lend, however Paxos disputes this narrative. “Stablecoins function rails for funds, settlement and capital effectivity in ways in which deposit accounts can not,” the corporate said, drawing a pointy line between conventional deposits and on-chain fee infrastructure.
Furthermore, Paxos argued that lenders can select to concern or custody stablecoins themselves, turning what they view as a aggressive menace right into a contemporary line of services and products. The agency in contrast the present shift to the arrival of digital funds, which initially alarmed banks however in the end turned a core a part of their enterprise fashions.
In Paxos’s view, stablecoins will observe the same trajectory, transferring from perceived disruption to embedded monetary plumbing for each retail and institutional shoppers.
From crypto area of interest to world funds and markets
Stablecoins initially emerged as liquidity instruments for crypto exchanges, facilitating speedy buying and selling between tokens with out touching fiat rails. Nonetheless, Paxos careworn that this early chapter is now solely a small a part of the story. International firms already depend on these property to maneuver tens of millions of {dollars} in minutes throughout borders, bypassing slower legacy programs.
Use circumstances now span cross-border funds, on-chain capital markets, and tokenized asset settlement. Moreover, Paxos highlighted that on-chain stablecoin transactions will be publicly audited in actual time, providing a degree of transparency that conventional fee networks usually can not match.
The agency added that reserves held in short-term U.S. Treasuries are, in its view, “safer than many financial institution property,” underlining its argument that the core backing of those digital {dollars} will be extremely conservative.
Strategic danger for banks that select to attend
Paxos closed its message with a transparent warning for monetary establishments that stay on the sidelines. The corporate mentioned that banks keen to combine regulated stablecoins into their operations may unlock sooner settlement cycles, improved liquidity administration, and completely new product classes for shoppers.
Nonetheless, it cautioned that establishments that proceed to reject these devices are prone to cede market share to fintech corporations, blockchain-native platforms, and extra forward-thinking banking friends. In different phrases, the danger for incumbents might now lie extra in inaction than experimentation.
In abstract, Paxos argues that the GENIUS Act and parallel world guidelines have remodeled the panorama for stablecoins, transferring them from a loosely ruled crypto device to a tightly outlined monetary infrastructure layer that banks can not afford to disregard.