Not like the Mega Bank experiment! The U.S. Federal Reserve: Stablecoins can significantly reduce cross-border payment costs, but there’s also a concern

The Federal Reserve is conducting its first systematic assessment of the impact of payment stablecoins, noting that they can improve cross-border efficiency while also reshaping the space for reserve flows and monetary policy operations.

Three economists at the Federal Reserve (Fed)—Kyungmin Kim, Romina Ruprecht, and Mary-Frances Styczynski—published a research note on March 30 on the Fed’s official website titled “Payment Stablecoins and Cross-Border Payments: Benefits and Implications for Monetary Policy Implementation.” This marks the Fed’s first comprehensive analysis of the overall economic effects of stablecoins following the passage of the GENIUS Act in July 2025.

The stablecoin regulatory framework after the GENIUS Act

The study first clarifies the regulatory background: in July 2025, the U.S. Congress passed the GENIUS Act, establishing a regulatory framework for payment stablecoins. Under the law, stablecoin issuers must comply with the following core requirements:

• Stablecoins must maintain a 1:1 peg to the U.S. dollar
• Reserve assets are limited to low-risk assets: deposits at depository institutions, short-term U.S. Treasury bills, or balances in Federal Reserve accounts (i.e., central bank money)
• Direct payment of interest is prohibited; indirect reward mechanisms are outside the scope of the prohibition

The study indicates that subsequent implementation details from federal and state regulators will determine the actual scale of stablecoin adoption among wholesale and retail customers.

The “chronic problem” in cross-border payments: why correspondent banking is costly and slow

The core issue the study focuses on is: where exactly does the inefficiency in the current cross-border payment system originate?

The answer is the correspondent banking intermediary chain. Because cross-border payments involve high fixed costs—such as establishing overseas branches and building AML/KYC compliance capabilities—only large international banks can afford it. Smaller and medium-sized banks must route payments through this chain, leading to:

• Slow processing speeds: funds must pass through multiple intermediaries sequentially
• Low transparency: payment status is difficult to track and may get stuck at any intermediary
• Message distortion risk: each intermediary uses different systems, so accompanying messages may be altered
• Repeated compliance costs: AML/CTF reviews are performed independently at each node

The situation is worsening. According to SWIFT data, over 60% of wholesale payments require at least one intermediary; over the past decade, the number of active correspondent banks has decreased by about 30%. Market concentration has increased, and a few large banks may extract economic rents through high fees or outdated infrastructure.

How stablecoins can “break the bottleneck”: direct settlement models bypass the intermediary chain

The study envisions a scenario where stablecoin-driven cross-border payments occur: individuals, businesses, and small to medium banks conduct cross-border transfers directly using dollar-pegged stablecoins, while large international banks act as market makers, trading stablecoins to maintain liquidity. This structure can:

• Shorten the intermediary chain, reducing costs and delays
• Improve payment transparency (on-chain traceability)
• Enable small and medium banks to complete cross-border transactions without relying on correspondent banking

The study also notes that because holding dollar assets abroad inherently involves exchange rate and geopolitical risks, the analysis focuses on “local currency economies with stablecoin value,” and does not discuss the potential of dollar stablecoins as a store of value offshore.

• Further reading: Mega Bank tests stablecoins in practice: large banks still hold an advantage for high-value cross-border remittances! The application scenarios of stablecoins in New Taiwan Dollar remain to be clarified

Three reserve strategies, three paths of monetary policy impact

The most critical finding of the study is that the impact of stablecoins on the Federal Reserve’s balance sheet largely depends on the asset management strategies of the issuers. The study considers three scenarios:

1. Bank deposit reserves: issuers hold reserves in the form of equivalent bank deposits. Large stablecoin flows trigger significant movement of interbank reserves, requiring the Fed to adjust reserve supply
2. Short-term Treasury bill reserves: issuers hold T-bills. As stablecoin scale expands, demand for T-bills increases, affecting short-term interest rates and the Fed’s open market operations
3. Banks as issuers, funded directly with central bank reserves: funds are deposited directly into the Fed, causing the central bank’s balance sheet to expand directly, with the most immediate impact on reserve management

The common conclusion across all three scenarios is that once stablecoins are adopted at a large scale, the Fed may need to recalibrate its reserve management policies to respond to potentially large and rapid fund flows between banks and stablecoin issuers.

Why this research warrants attention

The timing of this research note’s release is noteworthy—coming as the U.S. Congress is actively advancing stablecoin legislation and as markets closely monitor the progress of the GENIUS Act’s implementation. The analysis by Fed economists represents the first systematic assessment at the central bank level: stablecoins are not just payment tools but a structural variable that could alter the monetary policy transmission mechanism.

For the crypto industry, this study affirms the efficiency advantages of stablecoins in cross-border payments, while also clearly indicating that larger scale will deepen the impact on traditional financial systems and lead regulators to scrutinize asset management structures more strictly.

• This article is reprinted with permission from: 《Chain News》
• Original title: 《Fed study: stablecoins can significantly reduce cross-border payment costs, but large-scale adoption will impact monetary policy implementation》
• Original author: Elponcrab