Everyone Needs a Stablecoin Strategy

Justin Levine is counsel in Davis Polk’s Financial Institutions practice. He advises major U.S. and international banks, fintechs and cryptocurrency firms on a wide range of financial regulatory matters and is experienced in advising on the full range of regulatory requirements for digital asset and cryptocurrency activities, including securities and derivatives, banking, money services and cryptocurrency specific laws such as the BitLicense. 

The GENIUS Act is not about crypto. It is about money. Specifically, it sets the necessary legal framework for payment stablecoins, a new kind of fast transaction money: fully reserved, programmable dollars that are designed to move outside the account-based banking stack that has dominated payments for more than a century.

If your business sends, receives, holds, or reconciles payments in dollars, this is squarely your concern. Every company that touches money — which is to say every company — needs a strategy to prepare for it. It will have consequences for your distribution, customer ownership, payments revenue, and competitive position. You need a plan.

Issuance Is Only One Seat At the Table

Stablecoin issuance gets most of the attention, and for some firms it will be the right strategic move. At its core, issuance is a distribution play: an issuer captures a new channel for moving dollars, a new surface for product integration, and a direct relationship with holders. For a bank with an existing retail or institutional base, a fintech or neobank already inside the regulated perimeter, or a payments company whose business is built around distribution, issuance can be a natural extension of an existing franchise.

But issuance is also a commitment to operating a regulated financial services business, with the capital, compliance, and operational obligations that come with it. And once every issuer is required to meet the same reserve, redemption, disclosure, and compliance standards under GENIUS, the product becomes hard to differentiate.

There are many other important strategic options. You can white label another issuer’s coin or join a consortium. You can custody reserve assets, offer a wallet, or provide on- and off-ramps to fiat. You can provide identity, compliance, reporting, or liquidity services. You can integrate stablecoin rails into treasury products, merchant acquiring, payroll, remittances, or capital markets workflows. Many firms will occupy more than one role.

Each role deserves attention because value in a stablecoin-enabled payments stack likely will not all accrue to the issuer. An open network redistributes where the economics sit: the wallet that holds the customer relationship, the infrastructure that makes the money usable, the integrations that embed it in real products, and the services alongside the rails can all capture meaningful parts of the value chain.

What Makes Stablecoins Interesting 

Much of the discussion around stablecoins has focused on their potential as a faster, cheaper payment option. That undersells the innovation. Stablecoins uniquely combine three related features: they live on open networks, are inherently programmable, and are transferable peer-to-peer. 

As a consequence, they change how payments are intermediated. For over a century, the dominant payment instrument has been the deposit account: a liability of a bank, moved across closed rails controlled by banks. A stablecoin is a bearer asset that sits in a wallet — software that lets the holder move value on an open network without asking permission from the issuer. That does not mean the customer relationship disappears; it means the relationship moves to whichever firm controls the wallet experience. For banks, payments companies, and software platforms, the strategic question is whether they intend to be that firm.

Another consequence is the efflorescence of payments that become possible. A concrete illustration comes from the changing economics of the internet. Some of the most profitable businesses ever built — search engines and social platforms — depend on an advertising model that routes human eyeballs to web pages. 

That model is under pressure from users who increasingly get answers from AI rather than clicking through to sources. Advertising and the paywall were both imperfect responses to the same underlying problem: the early internet had no efficient way to charge for resources directly, so publishers either erected a binary gate or got disintermediated by large tech companies that aggregated demand and monetized their attention. 

The next phase of the internet may instead have AI systems pay content sources with low-transaction cost stablecoins for the material they draw on¹ — access priced not at a paywall but at a turnstile, with a small fare settled at each passage. That would require very small payments, settled continuously, across a vast number of counterparties — precisely the use case that is ill-suited for humans transacting on legacy rails. Card networks have minimum fees that make microtransactions uneconomic, bank payment systems often have limited operating hours, and humans do not want to approve thousands of sub-penny transactions. The friction that would make a turnstile model intolerable for a person could become invisible if an AI agent passes through on the person’s behalf. Always-on, programmable digital dollars are what could allow the agent to pay the fare.

Whether that particular vision materializes, it illustrates the broader point: the most consequential use cases for stablecoins may be ones that look unfamiliar today because no payment infrastructure could previously support them. The possibility of new kinds of payments can spur new economic activity.

The Window is Open Now, Not Later

The consequential questions are being decided right now. The OCC and FDIC have each issued comprehensive proposed rules implementing GENIUS, and the Treasury just issued a significant proposed rule on AML, CFT and sanctions compliance. Capital and reserve diversification requirements, yield structures, permissible activities, treatment of foreign-issued coins, illicit finance screening obligations, and the interaction with state law are all live areas of interpretation, with comment periods open and final rules unfolding over the months ahead. 

Firms that engage in the rulemaking process now have an opportunity to shape the rules they will operate under. Firms that sit it out will live with whatever others negotiated.

Now is also the time to start building. Potential issuers should take advantage of a safe harbor in the GENIUS Act that authorizes regulators to waive certain requirements for up to twelve months after the effective date for applicants with pending applications. More broadly, firms that begin the internal strategic work now — identifying use cases, evaluating partners, mapping legal requirements, scoping product builds — will be ready to move when the perimeter settles.

Stablecoins are Part of a Broader Tokenization Story

Payment stablecoins are not the only tokenized form of money being built. They will share the field with tokenized bank deposits or similar products, tokenized money market fund shares, and instruments that fall outside the GENIUS definition altogether. Each has a fundamentally different legal character: a deposit is a bank liability with FDIC insurance and particular capital treatment; a money market fund share is a security; a GENIUS payment stablecoin is a new statutory category with its own reserve, redemption, and supervisory regime; and instruments outside the definition may be governed by state money transmission law, securities law, or both.

Experts have published strong arguments that stablecoins will prove useful and impactful, and strong arguments that they will not. That debate will keep unfolding, and not in isolation — it will play out alongside parallel debates about tokenized deposits, tokenized money funds, and the broader question of what tokenized money should look like in the U.S. financial system. The most sophisticated treasury and product organizations will not pick one of these and ignore the others; they will move between them depending on the purpose at hand, much the way today’s treasurers move between cash, money funds, and short-term paper. Figuring out how they fit together is the point of having a stablecoin strategy at all.

What’s Your Stablecoin Strategy?

First, avoid a category mistake. A stablecoin strategy is a strategy about money and payments — not necessarily a crypto strategy. A firm can be skeptical of crypto and still conclude that stablecoins matter a great deal.

After that, a serious strategy begins with four questions. 

Where is the economic exposure? Firms should identify which fee streams, funding assumptions, or customer relationships become less defensible if stablecoin rails become material in their business. 

Where is the edge? Charters and licensing, distribution, liquidity, user experience, software tooling, and compliance infrastructure are not interchangeable, and stablecoins will reward firms that pick a defensible layer.

What optionality is worth preserving? Even if the answer today is not to issue, the right answer may still be to build partnerships, test use cases, or engage with regulators so your firm can move later without starting from zero. 

What are the legal and regulatory requirements for the role you are choosing? Requirements vary dramatically across the stack — from full issuer obligations to little or no direct regulation for some infrastructure roles — and federal and state regimes can interact in ways that further shift the analysis. 

Stablecoins may or may not upend banking as completely as either evangelists or critics predict. But even a much more modest outcome — stablecoins becoming a standard option for cross-border movement, treasury settlement, platform payments, or merchant disbursements — would reshape profit pools, customer expectations, and control points across financial services. That is enough to require a strategy now.

The firms that will do best will be the ones that look at the stack honestly, pick the seat that fits their business, and start building toward it even while the rules are still being written. In a market transition like this, the riskiest position is not choosing wrong. It is declining to choose until the market has chosen for you.

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

^[1]  See Ben Thompson’s Stratechery article, “The Agentic Web and Original Sin,” for a further discussion of this argument.

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