U.S. banks are being told the competitive dynamics around regulated stablecoins have shifted sharply since the GENIUS Act rewrote the ground rules in 2025.
Paxos challenges long-held banking assumptions
Paxos, the regulated blockchain and tokenization platform, has issued a blunt warning to traditional lenders: the old stablecoin playbook is obsolete. In a post shared on X, the company listed four common industry beliefs about stablecoins and argued that each one is now out of date.
The immediate catalyst is the GENIUS Act, signed into law by President Trump in July 2025. The legislation introduced clear federal rules for stablecoin issuance in the United States, reshaping how banks should think about this fast-growing market. Moreover, Paxos stressed that the opportunity set is already large.
“Stablecoins are already a multi-trillion-dollar market and banks that can accept them into their business stand to benefit greatly,” the firm stated, highlighting the potential revenue and efficiency upside for early adopters.
From unregulated perception to formal oversight
The first myth Paxos targets is the idea that stablecoins operate outside the regulatory perimeter. According to the company, that assumption no longer holds. Under the GENIUS Act, issuers must maintain 1:1 reserve backing with liquid assets such as U.S. Treasuries, provide monthly public disclosures, and obtain explicit approval to operate in the U.S. market.
Outside the United States, regulators have moved in a similar direction. Singapore’s MAS framework and the European Union’s MiCA rules establish comparable standards, creating a more consistent global stablecoin regulatory framework. Paxos said it already complies with these regimes, arguing that the robust oversight banks once claimed was missing is now firmly in place.
That said, the company implied that banks which cling to outdated assumptions about oversight risk misjudging both the risks and the upside of working with these digital instruments.
Do stablecoins really threaten bank deposits?
Banks have long feared that stablecoins might drain deposits and weaken their capacity to lend, but Paxos disputes this narrative. “Stablecoins serve as rails for payments, settlement and capital efficiency in ways that deposit accounts cannot,” the company stated, drawing a sharp line between traditional deposits and on-chain payment infrastructure.
Moreover, Paxos argued that lenders can choose to issue or custody stablecoins themselves, turning what they view as a competitive threat into a fresh line of products and services. The firm compared the current shift to the arrival of electronic payments, which initially alarmed banks but ultimately became a core part of their business models.
In Paxos’s view, stablecoins will follow a similar trajectory, moving from perceived disruption to embedded financial plumbing for both retail and institutional clients.
From crypto niche to global payments and markets
Stablecoins initially emerged as liquidity tools for crypto exchanges, facilitating rapid trading between tokens without touching fiat rails. However, Paxos stressed that this early chapter is now only a small part of the story. Global companies already rely on these assets to move millions of dollars in minutes across borders, bypassing slower legacy systems.
Use cases now span cross-border payments, on-chain capital markets, and tokenized asset settlement. Furthermore, Paxos highlighted that on-chain stablecoin transactions can be publicly audited in real time, offering a level of transparency that traditional payment networks typically cannot match.
The firm added that reserves held in short-term U.S. Treasuries are, in its view, “safer than many bank assets,” underlining its argument that the core backing of these digital dollars can be highly conservative.
Strategic risk for banks that choose to wait
Paxos closed its message with a clear warning for financial institutions that remain on the sidelines. The company said that banks willing to integrate regulated stablecoins into their operations could unlock faster settlement cycles, improved liquidity management, and entirely new product categories for clients.
However, it cautioned that institutions that continue to reject these instruments are likely to cede market share to fintech firms, blockchain-native platforms, and more forward-thinking banking peers. In other words, the risk for incumbents may now lie more in inaction than experimentation.
In summary, Paxos argues that the GENIUS Act and parallel global rules have transformed the landscape for stablecoins, moving them from a loosely governed crypto tool to a tightly defined financial infrastructure layer that banks can no longer afford to ignore.
Source: https://en.cryptonomist.ch/2026/02/17/regulated-stablecoins-banking-genius-act/
