Layer One: Wyoming launches the first US state-backed stablecoin

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by Steven Gates and Kelvin Sparks, Layer One brings you inside the conversations driving blockchain forward.

In this edition of the Layer One newsletter, we're looking the state of play in the stablecoin sector. With stablecoin yields back in the legislative spotlight this week, and a major exchange dramatically pulling its support for key legislation, we'll ask what's next in store for this cornerstone of DeFi.

Stablecoins in the spotlight as Senate negotiations hit turbulence

Last week the state of Wyoming became the first US public entity to launch its own stablecoin: the Frontier Stable Token (FRNT). This marks the culmination of a nearly three-year initiative by the state, beginning with the formation of the Wyoming Stable Token Commission in 2023.

Now the token has been rolled out to the public via Kraken, with deployment across seven total blockchains. Much of the core development took place on Avalanche, with a pilot scheme for contractor payouts run on the network in the middle of last year. A press release from Governor Mark Gordon’s office states the initiative’s goal is to “cement Wyoming at the forefront of digital finance and blockchain innovation.”

Although FRNT trading volume on Kraken appears modest, it’s nonetheless an interesting milestone to see a US public entity launching its own stablecoin, in contrast to the private issuers who dominate stablecoin volume. In recent months, those issuers have driven the total onchain stablecoin supply to over $300 billion.

The majority of this was issued by Tether (USDT, ~$185 billion) and Circle (USDC, ~$75 billion). Similarly, the stablecoin supply is primarily based on two main chains, Ethereum (56.6%) and Tron (27.3%), with a handful of other significant contributors making up the remainder.

With a US state issuing its own stablecoin, we're clearly in a very different environment from just a few short years ago. It wasn't long ago that crypto Twitter was awash with concerns about the opaqueness of the reserves backing major stablecoins, with some predicting catastrophic de-pegging events. Last month, Terraform Labs founder Do Kwon was sentenced to 15 years in prison by a US federal court for his role in the 2022 collapse of the algorithmic stablecoin TerraUSD, which wiped $40 billion of value from the markets almost overnight.

The stablecoin seas have calmed since then, driven in part by the passing of the GENIUS Act last year. This bill laid out a regulatory framework for stablecoin issuance in the United States, including a requirement that USD-backed stablecoins be at minimum 1:1 collateralized. However, some of the terms of the bill are still not entirely settled.

This week stablecoins were once again dragged back into the spotlight, during negotiations for the Senate Banking Committee’s ongoing crypto market structure bill. The conflict centers around an alleged ‘loophole’ in the GENIUS Act which prohibits stablecoin issuers from paying yield on their products, but leaves the door open for third-parties to do so.

This question of whether custodial platforms, such as exchanges, should be permitted to offer yield on stablecoin holdings has threatened at times to create a logjam in the negotiations. Pressure is being applied from both sides, by the banking and crypto industries respectively.

The former insists that allowing crypto exchanges to offer yield on stablecoins risks draining reserve liquidity away from local banks, thereby hampering their ability to offer mortgages and small business loans. Crypto industry figures, on the other hand, argue that it’s simply another ‘Uber moment’, wherein legacy companies seek to weaponise regulation to suffocate a newer, more efficient alternative.

It seems though, that the scales may be tipping in favour of the legacy banking institutions, at least temporarily. After a slew of 70 amendments were submitted this past Tuesday, the draft bill now explicitly prohibits third-party platforms from offering yield on idle stablecoin holdings. However, it does make exceptions for activity-based initiatives such as staking or liquidity providing.

Nonetheless, this has apparently proved a step too far for Coinbase. The exchange — the largest of its kind operating in the United States — pulled its support for the bill in a dramatic turn of events on Wednesday, citing stablecoin yields as one of several decisive issues. Other firms such as Ripple, however, remain optimistic that these issues can be ironed out through further revisions. 

Podcast Recap: How Arena outlasted rivals and built a real social crypto app

In the latest edition of the Layer One podcast. We were joined by Jason DeSimone, CEO of next-gen social media platform The Arena, to discuss the future of the creator economy and how he turned a struggling project into one of the longest-surviving social apps in Web3.

Subscribe to Layer One on Youtube, Apple, Spotify or wherever you get your podcasts.

In the Headlines: The stories driving the conversation this week

• Avalanche reported a dramatic drop in network fees over the year of 2025. The network's median transaction fee dropped to around $0.0015 from $0.065 the year prior, a slash of around -98%. This increased cost efficiency comes as the network aims to expand its integrations across more government, TradFi and commercial partners through 2026 and beyond. 
• The Bank of Thailand has placed USDT on its watchlist as part of its campaign against "gray money." It was found that around 40% of sellers on local exchanges are foreign nationals not permitted to trade in the country. Though these transactions are not necessarily related to illicit activities, Thailand's central bank plans to clamp down with stronger reporting and wallet identification requirements.
• Vitalik Buterin has argued that decentralized stablecoins would benefit from ditching the dollar entirely. In a post on X, the Ethereum founder argued that maintaining any fiat peg opens decentralized stablecoins up to risks associated with economic instability and currency debasement, undermining their fundamental purpose as assets independent from centralized control and risk.

Top of the Charts: USD stablecoin alternatives limited but growing

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