India, July 31 -- Last month, I met two Lebanese women at a conference overseas. They were accompanying their businessmen husbands. We got talking and I found that they keep their money mostly abroad or in dollars and euros in cash at home. In 2019, the Lebanese government froze bank accounts, effectively locking over $93 billion of citizens' money and making it inaccessible. Therefore, when I read that the US has given stablecoins a formal legal backbone, it seemed that a giant step has been taken in legitimising a particular form of crypto currencies that finally have a use case, especially for people in countries with unstable governments and those with hyper-inflation. Let's get the basics out of the way first. A cryptocurrency is a specific type of digital token that is designed to function as a medium of exchange or store of value using blockchain to record transactions. Bitcoin is the most well-known example. Cryptocurrencies have two major problems. One, there is no underlying asset. Remember that a fiat currency has the promise of the government to honour the value as an underlying asset. Stocks have businesses and bonds have a loan contract as underlying assets with a value. But cryptocurrencies have no asset or promise that gives them value. Two, there are no rules of the game as these have been outside the regulatory gaze. This has encouraged all kinds of frauds to perpetuate. Over half the cryptocurrencies have failed since 2021, with billions of dollars lost by people gambling on a quick return. The emergence of stablecoins over the past few years solved the first problem. A stablecoin is a type of cryptocurrency that has an underlying asset - typically the dollar or a US government bond. The second problem is bad faith actors, like exchanges and issuers of these coins who can either embezzle customer money (like FTX did) or simply not buy the required asset causing an asset liability mismatch in the future. In the absence of road rules, the market has been the Wild West revisited. The GENIUS Act that US President Donald Trump signed into law on July 18, 2025, attempts to put down some rules of the game. It mainly solves for customer protection through three key provisions. One, stablecoin issuers must have a 100% reserve backing with liquid assets (like US dollars or short-term treasuries). Two, they must make monthly public disclosures about their reserves. Three, they are forbidden from making misleading claims that their stablecoins are backed by the US government or are federally insured or are legal tender. A privately issued stablecoin is not a fiat currency. So, what's the use-case? The Lebanese women I met might be among the first to begin using a dollar-backed stablecoin to hold their money because they no longer trust banks in their own country. They might not know it today, but in a year, they will be using some form of a stablecoin to keep their money safe in their home country. Expand this story to countries with weak governance, weak macros, hyper-inflation, dictatorships, and persistent political instability, and you see a huge market for a trusted stablecoin. While distressed-country use of stablecoins will be the first large customer base, a widening ripple will be in international money transfers and remittances. Personal international remittances are a $740 billion a year flow. Business flows are a multiple of this. These are expensive given the global average cost for retail of sending remittances is just over 6% as of March 2025. While this is the average, in some places, the costs can be as high as 20% for small amounts. When the time taken to do the paperwork is included, the costs of using banks and other safe ways to transfer money abroad are very large. A trusted, low-cost stablecoin issuer backed either by the dollar or US government bonds will slowly replace other ways of moving money across borders. Safety, trust and cost will be the three variables that will make regular remitters change over to the use of stablecoins over time. So, will banks lose all this business? I'm going to make some predictions here. I see some banks and other trusted names in global finance using their trust to set up global payment systems based on a stablecoin framework. They will either buy out the existing players - Tether being the largest today - or issue their own coin with their own branding. Banks that are forward looking will do it fast and though it will cut their margins, they will at least still be in the game. I also see the demand for the dollar and US government bonds stabilise over time as the US asset-backed coins gain acceptance reinforcing the dollar-first global payment system. It will be imperative in the first few years that there are no major blowouts of a global stablecoin issuer. What does it mean for you and me? At the moment - nothing. India is not a country that is at risk of hyper-inflation. Nor will private assets be frozen unless there is a drastic change in the political viewpoint where private assets are at risk of being shared for a more "equal" country. Our use case for stablecoins will be purely cheaper and faster remittances and not as a distress store of value. And even then, the use-case is only after a trusted name has proven its track record over time. I would not rush into using it just yet. Should you invest in these stablecoins? Unless you invest today in the foreign exchange markets, there is no justification to do so in a stablecoin. We need to understand that the global financial system is changing. As tiny retail users, we should wait for the rules of the game to settle down before we enter this digital financial superhighway....