S&P Global says regulatory gap hampers U.S. stablecoins adoption

S&P Global, an American financial research and analytics firm, revealed that gaps in regulation remained a stumbling block for the adoption of stablecoins. S&P noted that a regulatory framework could increase stablecoin adoption in the U.S. and help close the gap with Europe, where the markets in crypto-assets regulation came into force in mid-2024. 

The S&P report highlighted the details of three proposals that were currently under consideration as the debate on stablecoin regulation in the U.S. raged on. According to the report, each of the three proposals sets strict requirements for stablecoin issuers, including maintaining sufficient stablecoin reserves backed by cash and treasuries with maturity that is less than three months. The stablecoin reserves should also be backed by insured deposits and repurchase agreements (repos) with less than seven days’ maturity that are also backed by reverse repos, treasury bills with less than three months’ maturity, and central bank reserves.

Stablecoin issuers were also required to ‘segregate between the underlying assets of the stablecoin and their assets’, disclose the redemption policy, and publish monthly compositions of the reserves, which are to be examined by a registered public accounting firm. Other requirements include maintaining a certain capital level that will ensure sufficient liquidity and meeting certain standards when managing risks related to interest rates, operations, compliance, and information technology.

Report suggests regulation proposals differ on the State and Federal level

S&P reports steady growth of $USDT and $USDC in the crypto market but asserts U.S. stablecoin adoption is slowed by lack of regulation. A clear guidance is urgently needed for full potential unleashing.

— Alfa AI (@AlfaTerminal) February 20, 2025

The S&P Global report mentioned that the three proposals differed on whether and when an issuer was regulated at the federal level or the state level. As per the report, one proposal stipulated that the office of the comptroller of the currency should supervise stablecoins with underlying assets of at least $10 billion if the issuer was not a bank. However, smaller stablecoin issuers could opt for state regulations if they were closely similar to the proposed federal regulation. The report clarified that this would be subject to approval by the treasury secretary. 

S&P also disclosed that the other proposals required the treasury secretary and other regulators to conduct a study on endogenously collateralized stablecoins (ECS) and demand a ‘two-year moratorium’ for the issuance of ECS. The S&P team believes that stablecoins will play an increasingly important role in on-chain transactions to protect savings from local monetary instability in emerging markets or to receive remittances. 

The report claimed that USD-pegged coins continued to dominate the stablecoin industry, although tokenized money market funds with stablecoin subscription and redemption mechanisms had recently emerged. The market capitalization of stablecoins increased to $230 billion as of February 15th, up from about $160 billion six months ago. 

S&P expects increased stablecoins adoption among institutions

According to the S&P report, the lack of regulation and supervision in the U.S. has prevented a broader institutional adoption of stablecoins, especially for financial transactions and digital bond issuances. S&P forecasts that some users are likely to transition progressively from unregulated to regulated stablecoins, thus changing the current industry landscape. The study on ECS could also tighten regulations on the use of ECS once it is complete. 

The report stated that the role of stablecoins will continue to evolve and could eventually lead to more integration between traditional finance and decentralized finance. The lack of an agreement about the tools that should be used to bring money natively on-chain was among the main factors that hindered the development of digital bonds and RWA tokenization. 

S&P pointed out that jurisdictions like the EU, Hong Kong, and Singapore were leading with comprehensive approaches for their regions while the U.S. continued to deliberate on federal legislation. Important matters such as reserve transparency, issuer solvency, and the ability to redeem stablecoins for their pegged value were critical to safeguarding consumers.

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