In July 2025, Congress passed the GENIUS Act with the aim of ensuring that stablecoin issuers are not denied licenses solely because they propose using a permissionless, open, and public blockchain — such as Ethereum.
At the same time, the Federal Reserve’s Policy Statement 9(13), issued in January 2023, remains in effect. The policy advises that state member banks should avoid certain activities involving open blockchains, stating that the issuance of tokens on such networks “is highly likely to be inconsistent with safe and sound banking practices.”
This regulatory tension has emerged as major financial institutions announce new blockchain infrastructure projects, raising questions about the future role of public networks like Ethereum in institutional finance.
Current Stablecoin Market Reality
Ethereum currently dominates the stablecoin market, holding approximately 49-54% of the $271.1 billion global stablecoin supply as of August 2025. USDC processes over $20 billion in daily transfers on Ethereum alone, significantly outpacing other networks. Combined with TRON’s 35% market share, the two networks control nearly 84% of all stablecoins.
While TRON has gained ground in USDT transactions—processing over 1 million weekly transactions—Ethereum remains the primary network for DeFi-integrated stablecoins and institutional tokenized assets, including BlackRock’s $2.3 billion BUIDL treasury fund.
Policy Background
Policy Statement 9(13) was developed following concerns about anti-money laundering, operational risks, and cybersecurity vulnerabilities on public blockchains during the Biden Administration. The Federal Reserve policy states: “Issuance of tokens on open, permissionless blockchains is highly likely to be inconsistent with safe and sound banking practices.”
The GENIUS Act takes the opposite approach, specifying that “a primary Federal payment stablecoin regulator shall only deny a substantially complete application if the regulator determines that the activities of the applicant would be unsafe or unsound. The issuance of a payment stablecoin on an open, public, or decentralized network shall not be a valid ground for denial of an application.”
Policymaker Positions
In the White House’s July 2025 Digital Assets Report, President Donald Trump stated that “the Federal Reserve must rescind Policy Statement 9(13) immediately,” adding that regulatory prejudice against permissionless blockchains could damage U.S. competitiveness and “advances only the interests of legacy institutions.”
During a June 2025 Senate Banking Committee hearing, Senator Cynthia Lummis (R‑Wyo.) questioned Federal Reserve Chair Jerome Powell directly: “Chair Powell, your guidance should now serve the GENIUS Act, not obstruct it. Will the Federal Reserve rescind Policy Statement 9(13) and let American banks lead in permissionless innovation, or will we keep protecting incumbents at the cost of progress?”
Powell responded that the Fed welcomes Congressional action but that its “first responsibility remains safety and soundness.” He said the central bank continues to evaluate the policy “in light of new legislation” while maintaining “appropriate caution with respect to permissionless platforms.”
New Blockchain Infrastructure Projects
Suddenly over the last couple of days, there are at least two new blockchains in the ecosystem that appear to be permisssioned and designed for stablecoin use in regulatory environments.
Circle’s Arc: On August 12, 2025, Circle announced plans to launch Arc, an EVM-compatible layer-one blockchain designed for regulated stablecoin finance. The network will enter public testnet in fall 2025, with Arc positioned as a compliance-focused platform that can bridge to public networks like Ethereum.
Stripe’s Tempo: According to Fortune on August 11, 2025, Stripe is building a blockchain called Tempo in partnership with Paradigm, though the company has not officially confirmed the project. The effort reportedly involves a five-person team working on payments infrastructure.
Regulatory Impact Assessment
The divergence between Congressional intent and Fed guidance creates uncertainty for institutions considering stablecoin projects. Under current Policy Statement 9(13), banks seeking to issue dollar-backed tokens on permissionless networks must demonstrate comprehensive compliance with safety and soundness requirements—a process that many find prohibitively complex.
Circle’s decision to build Arc and the Stripe ‘Tenor’ development suggest that institutions are opting for permissioned or semi-permissioned approaches that can later bridge to public networks rather than launching directly on Ethereum or similar platforms.
Market Implications
Despite regulatory uncertainty, Ethereum continues to process the majority of stablecoin volume and remains the primary platform for institutional DeFi applications. The network’s dominance in tokenized treasury products—such as BlackRock’s BUIDL fund and other real-world asset tokens—indicates that institutional adoption is proceeding, albeit through structured, compliance-focused vehicles.
The key question is whether future bank-issued stablecoins will launch directly on Ethereum under revised Fed guidance, or whether the two-step model of permissioned issuance followed by public network bridging will become the standard approach for regulated institutions.
Future Outlook and Pathways Forward
The regulatory direction set in the coming months will play a decisive role in shaping how stablecoins interact with open blockchain platforms like Ethereum. Reconciling the GENIUS Act’s mandate for open network access with the Federal Reserve’s emphasis on safety and soundness could lead to a balanced framework that fosters both innovation and risk management.
For institutions, hybrid approaches—combining permissioned infrastructure with the ability to bridge to public networks—may offer a practical path forward. This model allows issuers to meet compliance requirements while still tapping into Ethereum’s scale, liquidity, and interoperability.
Advances in blockchain analytics and regulatory technology (RegTech) could also make it easier for issuers to satisfy anti-money laundering, cybersecurity, and prudential oversight standards without sacrificing the transparency and programmability that public ledgers provide. These tools may help reduce friction in regulatory approvals, improve trust, and broaden institutional participation in blockchain-based finance.
If policymakers and regulators can align on a shared vision, the United States could set a global benchmark for integrating permissionless blockchain technology into a regulated financial system—potentially reshaping digital asset markets for years to come. The question for now is whether regulatory policy by the Federal Reserve is potentially picking winners and losers in the future design of blockchain platforms.
