Stablecoins Over CBDCs: Will Australia Follow the US Regulatory Drift?
By Shane Neagle | July 8, 2025
In recent years, the role of digital assets in global finance has been evolving rapidly. Among these, stablecoins—cryptocurrencies pegged 1:1 to fiat currencies and backed by liquid assets—have emerged as a crucial component in bridging traditional finance with the blockchain world. As the United States shifts its regulatory stance to favor stablecoins over Central Bank Digital Currencies (CBDCs), questions arise about whether Australia will follow suit, adapting its regulatory framework accordingly.
The Rise of Stablecoins: A New Financial Paradigm
Stablecoins offer a psychologically accessible entry point into the crypto ecosystem. Unlike volatile altcoins, they maintain stable value through backing by tangible assets—most commonly US Treasuries—enabling seamless redemption. This stability makes them popular as base trading pairs on both centralized and decentralized cryptocurrency exchanges. Additionally, stablecoins serve as more reliable collateral for borrowing on decentralized finance (DeFi) applications and provide faster and cheaper cross-border remittance options than traditional banking systems, eliminating multiple layers of costly intermediaries.
This resurgence of stablecoins compels stakeholders to understand not only which stablecoins and blockchain networks best suit particular financial applications but also how stablecoins integrate within the broader global financial system.
Contrasting US Approaches: Biden vs. Trump
A significant catalyst for the renewed stablecoin momentum lies in the contrasting regulatory philosophies between former President Joe Biden’s and current President Donald Trump’s administrations.
From its peak market capitalization of approximately $187.58 billion in April 2022, the stablecoin sector endured a multi-year slump triggered by tightening monetary policy and a series of high-profile crypto failures—including Terra (LUNA), Celsius, Three Arrows Capital, BlockFi, and FTX—that shook investor confidence. The concurrent rise in interest rates by the Federal Reserve led to reduced risk appetite, particularly impacting leveraged DeFi platforms.
Moreover, the Biden administration maintained a largely restrictive stance on cryptocurrency through regulatory bodies. The Securities and Exchange Commission (SEC) initiated contentious lawsuits against leading crypto exchanges Coinbase, Binance, and Kraken. Banking regulators such as the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and the Federal Reserve began limiting banking services to crypto startups, effectively “debanking” the sector. At the same time, speculation surrounding a potential US CBDC introduced uncertainty that clouded the stablecoin market’s future.
However, with Trump’s second term commencing in early 2025, substantial policy shifts have taken place. Notably, the SEC dropped its lawsuits against top crypto exchanges, signaling regulatory easing. Federal Reserve Chair Jerome Powell publicly dispelled expectations of a US CBDC launch, clarifying that the focus would now fall on stablecoins as digital representations of the US dollar. Powell described forthcoming stablecoin regulation, particularly the proposed GENIUS Act, as a constructive step forward.
Why the Shift to Stablecoins?
Central to the stablecoin resurgence is their role in supporting US Treasury demand. Major stablecoin issuers such as Circle (USDC) and Tether (USDT) hold large reserves of short-dated US Treasury bills to underpin their dollar pegs while earning interest yields. The Bank for International Settlements (BIS) confirmed in May 2025 that this growing demand effectively lowers US government borrowing costs by compressing Treasury yields—a mechanism akin to a specialized form of quantitative easing.
This development positions stablecoin firms on a financial footing comparable to sovereign entities, offering the Federal Reserve a cost-effective tool to manage liquidity and interest rates. Furthermore, stablecoins’ blockchain transparency rivals that of theoretical CBDCs, with established issuers complying with regulatory demands such as asset freezes.
In practical terms, stablecoins have become de facto CBDCs—digital dollars enabling global financial transactions with the benefits of blockchain technology but without the political and international sensitivities associated with government-issued digital currencies.
Australia’s Position Amid US Monetary Influence
Australia maintains close monetary ties with the US, a relationship strengthened following the 2020 establishment of a reciprocal currency swap line between the Reserve Bank of Australia (RBA) and the US Federal Reserve. Thus, shifts in US monetary and regulatory policies often reverberate through Australian financial markets.
While Australian authorities have previously discussed launching a wholesale CBDC, retail-focused digital currencies have been deprioritized. As the US signals a clear regulatory preference for stablecoins combined with fragmented oversight across multiple regulated entities, Australia faces a critical decision point: whether to align with US policy or pursue an independent CBDC path.
The Emerging Stablecoin Ecosystem
Within the crypto market, Tether’s USDT dominates stablecoin transactions, accounting for roughly 62% market share, followed by Circle’s USDC. Each stablecoin’s utility varies by blockchain network:
- USDT on Tron: Tron blockchain excels in frictionless money transfers, boasting over 10.7 billion transactions and minimal fees, making USDT on Tron the preferred medium for cross-border payments.
- USDT and USDC on Ethereum: Ethereum hosts the largest total stablecoin market cap (~$126.35 billion), though USDT’s share is just about 50%, reflecting a more diversified stablecoin presence.
- USDC on Solana: Solana, known for its speed and low fees, holds predominantly USDC (~70%) valued around $10.5 billion.
- USDT on Binance Smart Chain: Binance Smart Chain also heavily utilizes USDT (~60%) with a stablecoin valuation near Solana’s.
Investors largely trust stablecoins with backing in US Treasuries due to their creditworthiness, a faith bolstered following the collapse of Terra’s unbacked algorithmic stablecoin, UST, which eroded confidence in riskier stablecoin models.
Additionally, certain over-collateralized stablecoins like rUSD, tied to staked assets yielding high annual percentage returns (up to 24% vAPR on platforms like Convex Finance), attract advanced DeFi users through complex yield strategies. Nevertheless, these niche offerings carry elevated depegging risks compared to mainstream, institutionally backed stablecoins.
Financial technology firms such as Fiserv, with its FIUSD stablecoin, and consortia like Global Dollar Network—featuring partners like Robinhood—are positioning themselves to replicate Tether’s success by offering regulated, asset-backed stablecoins in the global market.
The Road Ahead for Australia
Australia’s Treasury continues to monitor developments but has yet to formalize stablecoin issuance policies. Last year’s discussions emphasized wholesale CBDCs, but the recent clear policy direction from the US towards stablecoins—backed by regulatory clarity—could influence Australian regulators toward alignment.
Adopting a harmonized regulatory framework might accelerate stablecoin inflows into Australian and global DeFi platforms across Ethereum, Solana, Cardano, and others. This growth would be propelled by the appeal of frictionless transfers, enhanced financial inclusion, and incentives for hedging and speculation.
Conclusion
As the global financial ecosystem incorporates digital currencies more fully, stablecoins are establishing themselves as pivotal instruments—not only technologically, but also as monetary policy tools with real-world sovereign impacts. Australia, closely linked to US monetary policy, stands at a crossroads. Its next steps in stablecoin regulation will shape the future of digital asset adoption domestically and influence its standing within the broader international financial architecture.
About the Author:
Shane Neagle is Editor in Chief of The Tokenist, a digital publication dedicated to exploring the intersection of finance and technology. Based in Maine, USA, Shane brings a unique perspective shaped by his service in the U.S. Army before transitioning to digital finance journalism.