Outstanding USD stablecoins reached nearly $280 billion at year-end 2025 — up from roughly $25 billion in 2020 — according to a Brookings Institution analysis published March 3, 2026 that inventories four unresolved questions facing regulators implementing the GENIUS Act.

Congress enacted the statute in July 2025, requiring payment stablecoins to carry 1-to-1 reserves and directing U.S. bank regulators and Treasury to write prudential, AML/CFT, and operational rules.

Will interest rewards reshape deposit competition?

GENIUS bars stablecoin issuers from paying interest directly but leaves affiliates and third parties free to offer rewards. Coinbase rewards holders of Circle's USDC; PayPal rewards holders of PYUSD. The Independent Community Bankers of America has argued community banks could lose $1.3 trillion in deposits and $850 billion in loans if interest-style compensation broadens. U.S. commercial bank deposits exceed $18 trillion.

"We recommend enforcing restrictions on the payment of interest initially to gain time to assess the impact of stablecoin issuance and usage on the integrity of the payment system," the Brookings authors wrote. They argue that securitization and other intermediaries can absorb displaced credit, weakening the case that deposit migration will starve the economy.

Can regulators guarantee par convertibility?

GENIUS permits reserves beyond cash and Treasury bills, including uninsured bank deposits and repurchase agreements. The 2023 regional bank failures showed uninsured deposits can turn illiquid under stress. The paper recommends excluding collateral pledged under repo from the 1-to-1 backing calculation, since repo lenders would seize Treasury collateral ahead of stablecoin holders if an issuer defaulted.

Arbitrage structures vary sharply. Tether averaged six redeemers per month and imposed a $100,000 minimum plus the greater of $1,000 or 0.1%, per a 2025 NBER working paper cited by Brookings. Circle averaged 521 arbitrageurs per month.

Can a global AML registry work?

GENIUS subjects issuers to the Bank Secrecy Act and requires FinCEN to issue illicit-finance guidance and rules within three years. Treasury is seeking public comment on API-based monitoring, artificial intelligence tools, digital identity verification, and on-chain analytics. The Brookings researchers recommend evaluating a global registry of permitted counterparties, automatically queried at transaction initiation.

Such a registry would trim duplication in today's bank-by-bank AML/KYC vetting and would use smart-contract functionality. Tokenized bank deposits carry structurally less illicit-finance risk because they are not bearer instruments.

What governance can stop fraud and outages?

Circle is piloting a layer atop permissionless blockchain infrastructure to reverse fraudulent or hacked transactions. JPMorgan Chase runs a deposit token on a privacy-enabled public blockchain for corporate clients. Bank of New York has tokenized deposits for collateral workflows.

"We recommend that regulators create comprehensive standards to ensure operational resiliency and to encourage further innovation," the paper states, calling for proportional requirements, 99.999% uptime benchmarks, and periodic outside evaluations.

The Federal Reserve has separately proposed "skinny" master accounts letting federally chartered issuers settle directly in central bank money, with capped balances and no discount-window access. Brookings ties that access to convertibility-at-par rules. Treasury Secretary Scott Bessent has estimated the segment could expand tenfold to $3 trillion by 2030; the G20, under U.S. presidency this year, will weigh whether to coordinate that expansion or push back against it.