The Transformative Impact of Stablecoins

Four months after the passage of the GENIUS Act, the landscape for financial services has been fundamentally altered. This strategic briefing is intended for credit union leadership, providing a high-level analysis of the new realities emerging at the intersection of regulated stablecoins, the rapid tokenization of Real-World Assets (RWA), and the immediate competitive threat posed by Agentic AI.

I. The New Regulatory Mandate: Navigating the GENIUS Act Implementation

The passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law on July 18, 2025 ¹, represents the most significant event in U.S. financial regulation this decade. It has, in a single stroke, ended the era of regulatory ambiguity for digital money and initiated a high-stakes, time-compressed process to define the future architecture of payments.³ For credit union leadership, the Act is not a passive development but an active and contradictory force. It simultaneously provides a shield by granting new, explicit authorities to credit unions and their regulators, while also forging a sword for new fintech competitors by dramatically lowering their barriers to entry.

Understanding this dual nature is essential to navigating the immediate regulatory battlefield, the center of which is the U.S. Department of the Treasury's implementation process.

A. The Treasury's Rulemaking Gantry: The ANPRM Closes Today

On September 18, 2025, the Treasury Department issued its Advance Notice of Proposed Rulemaking (ANPRM) to begin implementation of the GENIUS Act.¹ This ANPRM is the foundational document upon which the rules for the entire U.S. payment stablecoin system will be built.

The public comment period for this historic rulemaking, originally scheduled to close on October 20 ¹, was extended following requests from industry stakeholders.⁹ That comment period closes today, November 4, 2025.¹⁰ The comments submitted by this deadline—from banking associations, credit union leagues, fintech firms, and consumer groups—will directly influence the regulations that determine market structure, competition, and systemic risk for the foreseeable future.

The ANPRM is exceptionally broad, soliciting public input on 58 distinct questions across six key domains ¹:

1. Stablecoin Issuers and Service Providers: Defining the scope of a "payment stablecoin" ¹⁰, establishing the capital, liquidity, and risk management requirements for issuers ¹⁰, and clarifying the treatment of stablecoins not issued by permitted issuers.
2. Illicit Finance: Detailing the Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and sanctions compliance obligations for issuers and service providers.⁵
3. Foreign Payment Stablecoin Regimes: Establishing the principles for determining if a foreign regulatory regime is "comparable" to the U.S. framework, a necessary step for allowing foreign-issued stablecoins to operate in the U.S..¹⁰
4. Taxation: Soliciting input on where Internal Revenue Service (IRS) guidance is needed, particularly regarding the classification of payment stablecoins for tax purposes.¹⁰
5. Insurance: Assessing the types and amounts of coverage issuers and custodians should be required to carry.¹⁰
6. Economic Data: Gathering estimates on the costs and benefits of the new regulatory framework, including the choice between state and federal charters.¹⁰

While all six areas are significant, a single provision buried within the Act, and now debated in the ANPRM, has emerged as the central, existential battleground for depository institutions: the prohibition on interest.

B. The Trillion-Dollar Loophole: The Battle Over the "Interest" Prohibition

A critical provision of the GENIUS Act is its explicit prohibition on permitted payment stablecoin issuers paying "interest or yield" to stablecoin holders.³ This provision was a cornerstone of the legislative compromise, intended to clearly distinguish payment stablecoins (for transactions) from bank deposits (for storing value).¹⁶ The legislative intent was to support stablecoins as a means of payment, not as an investment vehicle that would directly compete with and drain deposits from the traditional banking system.¹⁶

However, financial industry trade groups have identified a critical, and potentially catastrophic, loophole. The Act, as written, prohibits the issuer from paying interest, but it does not explicitly prohibit an affiliate of the issuer—such as a cryptocurrency exchange, a wallet provider, or a third-party fintech platform—from offering yield, rewards, or interest-like incentives to attract and hold stablecoin balances.³

This loophole is the primary focus of the banking and credit union industry's response to the ANPRM. In joint letters, the American Bankers Association (ABA) and other financial trades have urged the Treasury to interpret the interest prohibition broadly to close this affiliate loophole.¹⁶ They argue that failing to do so would render the Act's prohibition meaningless and "undermine the GENIUS Act's prohibition regarding payment of interest and yield".¹⁹

The stakes of this seemingly technical interpretation are existential. The Bank Policy Institute (BPI) has cited a study estimating that the proliferation of interest-bearing stablecoins could trigger as much as $6.6 trillion in deposit outflows from the traditional banking system.²⁰ This risk is not distributed evenly; a 2025 study noted that such deposit flight would hit community banks and credit unions—which rely more heavily on core deposits for lending—the hardest.²¹ The BPI warns this would lead to a corresponding reduction in credit supply, resulting in "higher interest rates, fewer loans, and increased costs for Main Street businesses and households".¹⁹

This regulatory fight is not a minor detail; it is the central conflict that will determine whether the GENIUS Act protects depository institutions or accelerates their disintermediation.

C. The NCUA's New Authority: A Seat at the Table

While the Treasury's rulemaking dominates the headlines, the GENIUS Act contains a provision of monumental importance for credit unions. The Act explicitly names the National Credit Union Administration (NCUA) as a "primary Federal payment stablecoin regulator".²²

For the first time, the NCUA is granted a clear statutory mandate, alongside the Federal Reserve and the Office of the Comptroller of the Currency (OCC), to implement and enforce rules for stablecoin issuers related to capital, liquidity, and risk management.²²

Most critically, the legislation provides a specific, unambiguous pathway for innovation within the cooperative model. The Act explicitly allows federally insured credit unions and their subsidiaries, most notably Credit Union Service Organizations (CUSOs), to issue and manage payment stablecoins.²⁴ This provision, which the industry successfully advocated for, creates a framework for credit unions to leverage the CUSO model to pool resources, share compliance burdens, and develop their own cooperative-branded stablecoins.²⁵

The credit union industry has moved with decisive speed to act on this new authority. On July 18, 2025—the very day the GENIUS Act was signed into law—America's Credit Unions (ACU) sent a formal letter to NCUA Chairman Kyle Hauptman.²⁷ The letter did not merely congratulate the agency on its new role; it urged the NCUA to immediately initiate rulemaking to grant credit unions the authority to provide digital asset custody for their members.²⁸

The ACU's argument is twofold ²⁸:

1. Competitive Parity: Banks have possessed regulatory clarity on cryptocurrency custody since 2021. This has placed credit unions at a significant competitive disadvantage.
2. Member Protection: Without a trusted custody option, credit union members are being forced to move their assets to "less consumer-focused providers" to engage with the digital economy. Granting this authority to prudently managed, member-focused credit unions is framed as a critical consumer protection measure.

The ACU has confirmed it will be submitting comprehensive comments to Treasury on both the GENIUS Act ANPRM and the separate Request for Comment on illicit finance.²⁹ This marks a clear and concerted effort to claim the industry's new seat at the regulatory table.

D. The New National Charter: Preempting the Patchwork

The final, and perhaps most disruptive, component of the GENIUS Act's regulatory architecture is the creation of new charters for nonbank issuers. The Act establishes two pathways ¹⁰:

1. Federal Qualified Payment Stablecoin Issuer (FQPSI): A new federal charter, regulated and supervised by the OCC.
2. State Qualified Payment Stablecoin Issuer (SQPSI): A state-chartered entity regulated under a state-level regime that the Treasury determines is "substantially similar" to the federal framework.³⁰

Legal and fintech analysts have described this as a "bespoke fintech license".³¹ Its true power lies in its preemption clause. Currently, a nonbank payment company (like a remittance provider or a mobile wallet) must obtain and maintain a complex, expensive, and duplicative "patchwork" of money transmitter licenses across 49 states and the District of Columbia.³¹ This is the single greatest barrier to entry for payment fintechs.

The GENIUS Act eliminates this barrier. Section 5(h) of the Act states that the provisions for FQPSIs "supersede and preempt any state requirement for a charter, license or other authorization to do business".³¹ An SQPSI, once qualified in its home state, receives similar preemption from host-state licensing requirements.³¹

This provision effectively creates a new national payments rail, regulated by the OCC, that nonbank fintechs can use to compete directly with depository institutions on a national scale, all while holding only a single license.³¹ This lowering of barriers for fintech competitors, combined with the "trillion-dollar loophole" on interest payments, represents the fundamental contradiction of the GENIUS Act: it is simultaneously a framework for stability and a catalyst for unprecedented competition.

II. The Great Re-Pegging: Market Structure and the "Flight to Quality"

The arrival of comprehensive regulation in both the U.S. (GENIUS Act) and the European Union (MiCA) has acted as a powerful sorting mechanism, triggering a "flight to quality" that is fundamentally reshaping the stablecoin market. For years, the market was defined by regulatory ambiguity, opacity, and first-mover advantages. Today, it is being redefined by compliance, transparency, and institutional trust.

This shift provides a clear blueprint for a credit union's "trust-based" competitive strategy. The market is not rewarding risk; it is rewarding regulation.

A. A Tale of Two Titans: USDC's Rise, USDT's Concession

The stablecoin ecosystem, valued at over $260 billion ¹³, has long been a duopoly. Tether (USDT) and Circle (USDC) together account for 93% of the total stablecoin market capitalization.³⁴ Historically, USDT, the market's first-mover, has dominated in total supply and is the primary trading pair on global (and largely unregulated) crypto exchanges.³⁵

However, the new regulatory paradigm has inverted this dynamic. Circle has pursued a "regulation-first" strategy, actively working to become compliant with frameworks like the EU's MiCA.³⁶ Its reserves, which are subject to regular audits and composed of cash and short-term U.S. Treasuries, are viewed as highly transparent and secure by institutional partners.³⁵

Tether, in contrast, has maintained a more opaque and diversified reserve strategy, which includes assets like gold and Bitcoin.³⁷ This approach, combined with its failure to achieve MiCA authorization, has resulted in USDT facing delistings from exchanges in regulated jurisdictions and a perception of higher regulatory risk.³⁵

The market data, as analyzed by JPMorgan in October 2025, shows a clear divergence ³⁵:

• USDC's market cap has climbed 72% since January 2025, driven by rising institutional adoption, on-chain activity, and integrations with payment giants like Visa and Mastercard.
• USDT's market cap grew only 32% in the same period, and its dominance is now largely confined to unregulated, offshore trading venues.³⁵

The most significant validation of this "flight to quality" came from Tether itself. Facing a future where regulated jurisdictions are closed to non-compliant assets, Tether announced in October 2025 that it plans to launch "USAT"—a new, separate stablecoin specifically designed to be fully compliant with the GENIUS Act—by the end of 2025.³⁵ This strategic concession is definitive proof that the era of unregulated, opaquely-backed stablecoins is over. The future of the market belongs to compliant, regulated, and transparent issuers.

B. The New Entrants: TradFi and Fintech Plant Their Flags

The regulatory clarity provided by the GENIUS Act and MiCA has opened the floodgates for a new wave of highly-capitalized, regulated issuers.

• The Fintech Entrant: PayPal (PYUSD) The most formidable new fintech competitor is PayPal. Its stablecoin, PYUSD (issued by the regulated trust company Paxos), has seen rapid adoption, surging to a $2.8 billion market capitalization.38 Like USDC, PYUSD is fully collateralized by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents.38 Its strategic power lies in its potential to bridge PayPal's massive, pre-existing ecosystem of millions of consumers and merchants directly into the on-chain economy.
• The TradFi Blueprint: The MiCA Model The "crystal ball" for the future U.S. market is the E.U., where MiCA's stablecoin rules have been in effect since June 2024.42 As predicted, traditional banks are already entering the market as issuers. The most prominent example is French banking giant Société Générale, which launched its EUR CoinVertible (EURCV), a MiCA-compliant, euro-pegged stablecoin now listed on public exchanges.44 Other bank-led entrants like Banking Circle (with its EURI stablecoin) and regulated e-money institutions like Monerium (EURe) are following suit.44 This provides a direct, proven model for how U.S. credit unions can and will leverage their CUSO authority to issue their own trusted, compliant stablecoins.

JPMorgan analysts caution that this new wave of U.S.-compliant issuers (PYUSD, USAT) will likely compete in a "zero-sum game" for market share unless the overall market for stablecoin use cases expands.³⁵ This suggests that the winning strategy is not to simply launch another stablecoin for crypto traders, but to create stablecoins that serve new markets—such as B2B payments and as the settlement layer for Real-World Assets (RWA).

C. Transaction Volume and Illicit Finance Context

It is crucial for executives to grasp the sheer scale of this new financial system. This is no longer a niche market.

• Total stablecoin transfer volume reached $27.6 trillion in 2024, surpassing the combined annual transaction volume of payment networks Visa and Mastercard.⁴³
• The market now supports over $1 trillion in monthly transactions ¹³ and an adjusted $9 trillion in annual on-chain transactions.⁴⁵

This explosive growth has, understandably, drawn intense scrutiny from regulators focused on illicit finance.⁷ However, it is essential to contextualize this risk. According to TRM Labs analysis, 99% of all stablecoin activity is licit.³⁴ The problem is that stablecoins' efficiency and speed also make them attractive for illicit actors; in the first quarter of 2025, stablecoins accounted for 60% of all illicit transaction volume.³⁴

This data does not invalidate the technology; it validates the necessity of the GENIUS Act. The Act's requirements for issuers to be regulated financial institutions subject to the Bank Secrecy Act (BSA) and robust AML/CFT programs ⁴ are precisely the tools needed to root out the 1% of illicit activity and provide the institutional confidence for the other 99% to scale.

III. The Strategic Frontier (1): Real-World Asset (RWA) Tokenization

While the regulatory debate focuses on payments, the most significant long-term opportunity for credit unions lies in the technology's next evolution: the tokenization of off-chain assets. This is the bridge that will bring trillions of dollars in traditional financial (TradFi) assets onto the blockchain, creating new products, new liquidity, and new sources of revenue.

For credit unions, Real-World Asset (RWA) tokenization provides a "non-crypto" crypto strategy—a way to meet member demand for digital assets using products that are familiar, compliant, and yield-bearing.

A. From Theory to Trillions: The RWA Market Explodes

RWA tokenization is the process of creating a digital representation (a token) of ownership rights to a real-world asset on a blockchain.⁴⁶ These assets can be tangible (like real estate or commodities) or financial (like private credit, U.S. Treasuries, or equities).⁴⁶

This market is moving from experimentation to institutional scale at a stunning velocity:

• Current Market Size: The value of tokenized RWAs on-chain has surpassed $30 billion as of Q3 2025.⁴⁷
• Recent Growth: This represents an approximately 10-fold increase from the $2.9 billion market size in 2022.⁴⁷
• The 2030 Horizon: Analyst forecasts are consistently bullish, projecting the RWA market will reach $3.5 trillion (baseline) to $10 trillion (bullish) by 2030.⁴⁸ Some projections go as high as $30 trillion.⁵⁰

This explosive growth is driven by the technology's ability to solve fundamental problems in traditional finance: illiquidity, high administrative costs, T+2 settlement delays, and limited accessibility.⁴⁹

B. The 'Killer Use Cases': Tokenized Treasuries and Private Credit

The RWA market's growth is not speculative. It is concentrated in high-quality, institutional-grade, yield-bearing assets.⁴⁷

1. Tokenized Private Credit: This is currently the largest RWA segment, with over $17 billion in tokenized assets.⁴⁷ Traditionally, private credit has been a highly illiquid asset class accessible only to the largest institutions. Tokenization changes this by "fractionalizing" these loans, lowering minimum investments from millions of dollars to as little as $25, and creating pathways for secondary market trading.⁵¹
2. Tokenized U.S. Treasuries: This is the most significant and fastest-growing segment for financial institutions. The market for tokenized Treasuries has exploded to over $8.7 billion, a 256% year-over-year increase.⁵⁴

C. TradFi's On-Chain Beachhead: BUIDL and FDIT

The most powerful signal of the RWA market's legitimacy is the arrival of the world's largest traditional asset managers. They are not "exploring" this technology; they are actively launching on-chain products:

• BlackRock (BUIDL): The world's largest asset manager launched the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) on the Ethereum network.⁵⁶ It is a tokenized money market fund that provides qualified investors with 24/7/365 access to U.S. Treasury yields.⁵⁴ In just over a year, it has attracted approximately $2.9 billion in assets.⁵⁵
• Fidelity (FDIT): In August 2025, Fidelity, a $12 trillion asset manager, quietly launched its Fidelity Digital Interest Token (FDIT). This token represents a share class of its Fidelity Treasury Digital Fund (FYOXX), also on Ethereum.⁵⁷
• Franklin Templeton (FOBXX): A pioneer in the space, Franklin Templeton's On-Chain U.S. Government Money Fund, launched on the Stellar network, holds over $852 million.⁵⁵

These products (BUIDL, FDIT, FOBXX) are the perfect "bridge" assets for a risk-averse institution. They are not speculative crypto. They are fully-regulated, 1:1 backed, bankruptcy-remote shares of U.S. Treasury funds that simply use the blockchain as a new, more efficient, 24/7 settlement and record-keeping rail.⁵⁴ They have become the base-layer "cash equivalent" and collateral asset for the entire on-chain economy.⁴⁷

D. The Credit Union Entry Point: A 'Non-Crypto' Crypto Strategy

RWA tokenization offers a powerful, low-risk, and high-value entry point for credit unions to engage with the digital asset ecosystem.⁵⁸ It directly addresses member demand for digital access and yield without forcing the credit union to custody speculative assets.

Instead of watching deposits "hemorrhage" to external crypto exchanges ⁵⁹, a credit union can adopt a "Posture 4" (Aggregator/Distributor) strategy. This involves partnering with regulated RWA platforms (like Securitize) to offer members fractionalized access to assets they already understand and trust:

• Tokenized U.S. Treasuries (e.g., BUIDL, FDIT).⁶⁰
• Tokenized Real Estate.⁶¹
• Pools of Tokenized Private Credit.⁵³

This strategy transforms the credit union from a passive victim of disintermediation into an active, trusted curator of high-quality, on-chain assets. This is not just a theory; the Defense Credit Union Council (DCUC) has already begun advocating for credit unions to be explicitly included in federal pilot programs for tokenized infrastructure.⁶² The CUSO model, in partnership with core technology providers like Fiserv, FIS, and Velera, is the logical framework for building or aggregating these RWA platforms and interfacing them with the credit union's core systems.⁵⁸

IV. The Strategic Frontier (2): The "End of Inertia" and the Agentic Commerce Threat

If RWA tokenization represents the greatest opportunity for credit unions, a new and converging technology—Agentic AI—represents the most profound threat. This threat is not from stablecoins themselves, but from the new, automated economy that stablecoins are being built to power.

This convergence signals what McKinsey analysts have called the "end of inertia"—a direct, automated assault on the fundamental business model of a community-based depository institution.⁶⁴

A. Disintermediation 2.0: "Agentic AI" is Here

For the past decade, AI in banking has been reactive (e.g., chatbots answering questions, fraud detection alerts). "Agentic AI," also known as "Agentic Commerce," is fundamentally different. It is proactive and autonomous.⁶⁴

An AI agent is a piece of software that can understand a user's complex goals, create a multi-step plan, and then autonomously execute that plan on the user's behalf, including navigating websites, making decisions, and initiating payments.⁶⁴

Consider these near-future (and in some cases, current) examples:

• The "ShoppingBot": "Hey TravelBot, book a 7-day trip to Paris for two in June, for under $2,000. Find refundable flights and a 4-star hotel. Pay for it using the credit card in my wallet that gives the absolute best travel rewards and has the lowest foreign transaction fees." ⁶⁴
• The "SaveBot": "Hey SaveBot, I want you to maintain my credit union checking account balance at exactly $1,000. At 5 PM every day, sweep any excess cash into whatever high-yield savings vehicle gives me the best return. If my balance dips below $500, top it up from that savings." ⁶⁴

B. The "End of Inertia": A Direct Attack on the CU Model

The traditional credit union business model relies heavily, and often implicitly, on "member inertia" and brand loyalty.⁶⁴ Its two primary revenue engines are net interest income from low-cost deposits and interchange fees from payments. Agentic AI is a precision-guided weapon aimed directly at both.

• Attack on Deposits: The "SaveBot" example is a direct threat to a credit union's low-cost funding base.⁶⁴ AI agents will not be brand loyal. They will be programmed for one thing: optimization.⁶⁴ An agent will logically and automatically sweep member deposits from a 0.1% APY checking account to a 5.0% APY on-chain, tokenized Treasury fund (like the BlackRock BUIDL product discussed in Section III).⁶⁴ This automates deposit flight, 24/7/365, without the member ever logging into their app.
• Attack on Interchange: The "ShoppingBot" example marks the "end of top-of-wallet".⁶⁴ The decades-long battle to be the default card a member pulls from their wallet becomes irrelevant when an AI agent makes the choice. The agent will algorithmically select a competitor's card (e.g., a PayPal, Amex, or Chase card) if it offers 1% more in rewards for a specific purchase.⁶⁴ This commoditizes the payment and systematically erodes interchange revenue.

C. The New Infrastructure Stack: AI + Stablecoins

This new, high-frequency, machine-to-machine economy cannot run on the existing financial rails. An AI agent cannot be told to "wait 3 business days for an ACH transfer to clear" or "wait until Monday morning when the wire room opens."

This autonomous economy requires a 24/7/365, programmable, near-instant, and low-cost settlement layer. Stablecoins are the native currency for Agentic AI.⁶⁷ AI agents will be given their own digital wallets, using stablecoins to autonomously pay for data, execute trades, subscribe to services, and manage liquidity on their user's behalf.⁶⁹

This is not a theoretical threat. This infrastructure is being built now by the world's largest financial and technology companies.

Proof Point: The Mastercard + PayPal Partnership (October 2025)

On October 27, 2025, Mastercard and PayPal announced a blockbuster partnership to build the infrastructure for Agentic Commerce at a global scale.72

• The Deal: Mastercard's "Agent Pay" platform will be integrated directly into PayPal's wallet and branded checkout experience.⁷⁴
• The Goal: To allow AI agents (like those from Microsoft, whom Mastercard partnered with in April 2025 ⁷⁵) to securely and seamlessly complete transactions on behalf of PayPal's hundreds of millions of users.⁷⁴
• The Mechanism: The "Mastercard Agent Pay Acceptance Framework" uses tokenization and secure protocols to allow AI agents to make trusted purchases on a user's behalf.⁷⁵

This partnership creates the "spending" rail for the agentic economy. The RWA products from BlackRock and Fidelity create the "saving" rail. Together, they form a complete, parallel financial system—a "brain" (AI), a "destination" (RWA), and a "settlement network" (stablecoins)—designed to sit on top of the traditional banking system and autonomously extract value from it.

While many credit unions are commendably deploying AI internally to improve member service, reduce call times, and enhance fraud detection ⁷⁶, this is a defensive posture. They are winning the internal efficiency battle while remaining largely unprepared for the external disintermediation threat from member-facing AI agents.

This convergence of a new regulatory landscape, a new infrastructure stack from BlackRock and PayPal, and a new disintermediation engine from Agentic AI creates an existential, time-sensitive challenge for every credit union. A passive 'wait-and-see' approach is a direct acceptance of this threat.

The question is, what is the specific, actionable response? In the final two sections, we provide the complete framework for strategic action.