A Quiet Revolution: How Hagerty’s Stablecoin Law Rewrote the Rules for Digital Cash

A new federal rulebook, and a real-world shift

Congress has passed the first U.S. law directly about stablecoins, and it is already changing how crypto markets will work. The measure, championed by Sen. Bill Hagerty, moves stablecoins out of legal limbo and forces most issuers to operate under a bank-like framework. For digital-asset traders and policy watchers, that is a short, sharp pivot: the market now has clearer rules — and new winners and losers are starting to emerge.

From state fundraising to a seat on the Senate floor: Hagerty’s path to this moment

Bill Hagerty is a Republican senator from Tennessee who until now was better known for his private-sector ties and for a foreign-policy focus. He was an early backer of trimming red tape for technology and finance, and he used that posture to sell this idea to colleagues across the aisle: stablecoins need a single federal home.

That pitch landed partly because major banks and some conservative lawmakers saw a chance to turn an unruly corner of crypto into something more like traditional finance. Hagerty’s political standing — tied to a business-friendly approach and a willingness to court both industry and bank lobbyists — helped push the bill into law. The result is a compromise: stablecoin issuers will live under tighter rules, but they will also get legal certainty they have lacked for years.

What the new law does in plain language

At its heart, the law sets a federal path for stablecoins. It does three big things.

First, it creates a formal charter for stablecoin issuers that looks a lot like a bank charter. Issuers that want to operate at scale will need to organize under that federal framework or risk losing access to U.S. markets. That takes the question of whether stablecoins are securities or commodities and moves it into a banking and payments context.

Second, the law forces clearer custody and reserve rules. Issuers must hold their backing assets in ways that meet common-sense safety tests — for example, reserves held at regulated financial institutions and subject to higher transparency and reporting standards. The goal is to make redemptions reliable and to reduce runs.

Third, the law hands concrete roles to federal regulators. Agencies that oversee banks and deposits get the lead on making sure issuers follow the rules. Securities and commodity regulators retain oversight over trading and fraud, but the big day-to-day supervision sits with banking regulators.

Those elements together mean stablecoins are now treated more like bank deposits for regulatory purposes — not exactly the same, but close enough that large banks and regulated firms will play a much bigger part in the market going forward.

How markets, issuers and exchanges are likely to react

This law is most bullish for stablecoins that are already run by regulated or semi-regulated firms and for banks that will handle reserves and custody. For investors, that narrows the field.

Expect a consolidation. Small, lightly supervised issuers face two bad choices: reorganize as a bank-style entity and accept far higher compliance costs, or cede market share to firms that can meet the new rules. That favors well-capitalized players and large custodians — a familiar pattern in finance where scale buys safety.

For exchanges, the law reduces a major regulatory wild card. U.S.-listed platforms such as Coinbase (COIN) can lean into the new clarity: regulated stablecoins are easier to list and to use for on- and off-ramps. That should help trading volumes in regulated venues and make compliance simpler. But it also gives exchanges an incentive to favor the new, compliant stablecoins — leaving older or offshore projects marginalized.

Banks, including big names like JPMorgan (JPM), stand to gain new fee revenue from holding reserves, providing custody and settling payments. That is a straightforward, banking-style business built on crypto rails. The flipside is that the market will likely see fewer small issuers and less of the maverick innovation that exists on the fringes today.

On asset prices, the law is a mixed signal. Regulated stablecoins should trade with tighter spreads and fewer liquidity shocks, which is good for crypto traders who use them as base currency. But risk assets that thrived on the old model — think new tokenized products and some so-called algorithmic stablecoins — will lose runway. For shareholders of companies positioned to service regulated stablecoins, the outlook is positive. For pure-play issuers that can’t meet the new standards, it is negative.

Voices from industry, regulators and politics

Supporters of the law quickly called it a victory for market stability. Senator Hagerty framed the measure as providing legal clarity that protects consumers while letting financial innovation continue. Industry groups that had pushed for a federal framework welcomed the end of state-by-state patchwork.

Some crypto companies and libertarian-leaning groups sounded a warning. They argued the law shifts power to large banks and could smother permissionless innovation. In public statements, trade groups said the framework reduces fraud risk but also forces a form of banking into an ecosystem that grew up as an alternative to banking.

Bank regulators signaled they are ready to move. Expect guidance from agencies in the coming weeks on how issuers should apply for charters, what counts as acceptable reserves, and how to report. Those rulings will decide how quickly new market structure settles.

What investors and policy watchers should track next

The next few months will be about rules and race dynamics. Watch three things closely.

1) Rulemaking timelines. The agencies that now oversee stablecoins must write detailed rules. Faster, clearer guidance will help regulated players and lift confidence in the market. Delays or vague guidance will raise costs and slow adoption.

2) Who seeks a federal charter first. The identities of early filers matter more than headlines. If major stablecoin issuers or large asset managers throw their weight behind the new framework, the market will consolidate quickly. If smaller players try and fail, it will open space for banks and custodians instead.

3) Market shifts in liquidity and spreads. Trading behavior will show where liquidity lands. If regulated stablecoins tighten spreads and become the dominant base for trading, exchanges and service providers tied to them will get a long-term boost. If liquidity fragments between onshore regulated coins and offshore alternatives, markets could stay messy for longer.

Bottom line: the law removes a long-standing source of uncertainty. That is a win for stability and for firms that can play by bank-like rules. It is a loss for unregulated projects that thrived in the legal fog. For investors, the new regime tilts toward scale, compliance and bank partnerships — and away from the purely rebellious spirit that built crypto’s early stablecoin market.

Photo: RDNE Stock project / Pexels

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