Current stablecoin regulations exclude Bitcoin from modern payment structures.
When Bitcoin was introduced in 2008, its creator envisioned a peer-to-peer electronic cash system that would bypass centralized financial intermediaries. For over a decade, Bitcoin was the primary focus of digital asset discourse, framed alternately as a revolutionary payment tool or a volatile speculative asset. Yet, by early 2026, a structural divergence has emerged in the digital monetary landscape. Although Bitcoin remains a dominant asset by market capitalization, it has been systematically sidelined as a functional payment instrument. This shift is not a failure of the technology itself, but rather an intentional outcome of U.S. regulatory design.
The enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 marked a definitive turning point. By establishing the first formal federal framework for dollar-pegged stablecoins, the U.S. Congress did more than just regulate a new asset class—it effectively “orphaned” Bitcoin from the modern payment architecture.
The GENIUS Act achieved this orphaning not through prohibition, but through the creation of a stringent “regulatory perimeter.” The Act defines a “Federal qualified payment stablecoin issuer” as a nonbank entity approved by the Office of the Comptroller of the Currency or a subsidiary of an insured depository institution. By mandating that “payment stablecoins” must have an identifiable, regulated issuer who maintains 1 to 1 reserves in liquid U.S. dollar-equivalent assets, the law creates a compliance standard that decentralized, permissionless protocols such as Bitcoin are structurally unable to meet. This legislative choice effectively grants stablecoins the “right of way” in the U.S. payment system by relegating non-issuer assets to the status of commodities, which are legitimate to hold but impossible to integrate into the regulated payment flow.
In my recent research, I define this phenomenon as “political orphanhood”—a state where a technology is neither prohibited nor institutionally supported. Unlike traditional regulatory exclusion through outright bans, political orphanhood emerges through a process of selective integration. Regulators have designed compliance, safety, and supervisory frameworks for programmable, dollar-linked instruments— including USDC, issued by Circle, and USDT, issued by Tether—while intentionally leaving decentralized, non-issuer-based assets such as Bitcoin outside the boundaries of functional institutional relevance.
This selective integration is visible in the empirical data. My analysis of on-chain transaction activity between 2022 and 2025 reveals that the “medium of exchange” role of blockchain technology has shifted almost entirely to stablecoins, cryptocurrencies whose value is tied to a fiat currency. Although Bitcoin’s market price reached historic highs in 2025, its utility as a currency moved in the opposite direction. By late 2025, stablecoins accounted for 93.2 percent of all transactional volume on public blockchains. More telling is the frequency of use: Monthly stablecoin transaction counts reached a record 217 million after the GENIUS Act, compared to a stagnant 12 million for Bitcoin. The data suggest that, as regulatory clarity arrived for dollar-linked assets, institutional and retail users alike shifted their “on-chain” activity to the instruments that regulators had effectively blessed.
This displacement is also mirrored in the language of policymakers. An analysis of U.S. regulatory and policy documents across three distinct eras, the COVID-19-era bull market, the post-FTX collapse, and the current institutional period, reveals a calculated shift in narrative.
In the wake of the GENIUS Act, regulatory discourse has increasingly converged on concepts of governability, programmability, and supervisory control. Within these frameworks, stablecoins are framed as essential components of a modern payment infrastructure. Conversely, official sources consistently reposition Bitcoin as a speculative commodity or a “digital gold” store of value. These labels provide a degree of legal legitimacy, but they also functionally exclude Bitcoin from the scope of payments policy.
The “governability” gap is the ultimate driver of this orphaning. In the post-FTX regulatory era, the supervisory posture of the Board of Governors of the Federal Reserve System and the U.S. Securities and Exchange Commission shifted toward “supervised innovation.” Regulators favor stablecoins because they are programmable and auditable within a centralized legal framework. A stablecoin issuer can freeze illicit funds or adjust reserve compositions under a lawful order; Bitcoin’s decentralized nature makes such interventions impossible. Consequently, regulators granted Bitcoin institutional access as a commodity-like exchange-traded product, an investment vehicle that tracks the price of an underlying asset like gold or oil. However, they denied Bitcoin access to the payment rails, the underlying technical systems that facilitate the movement of money between institutions. The state has effectively traded the permissionless promise of early crypto for a supervised, dollar-centric “hybrid” monetary ecosystem.
The marginalization of Bitcoin demonstrates that future debates over digital money will be shaped less by technical protocol design than by institutional compatibility. Policymakers have demonstrated a clear priority for instruments that can be audited, supervised, and integrated into existing monetary policy transmission channels.
Bitcoin’s political orphanhood serves as a case study for how regulatory design can reshape economic demand without the need for coercive measures. By privileging supervised, programmable instruments, policymakers have effectively determined which digital assets in the United States will function as money and which are relegated to the periphery as mere investment objects. This regulatory shift has some long-term proponents concerned that Bitcoin’s relevance hinges on its utility to serve as an everyday currency. For example, tech CEO Jack Dorsey recently contended that Bitcoin risks irrelevance if it remains only a passive store of value rather than evolving into a functional medium of exchange.
My research, which is supported by on-chain transaction volume tracked across major exchanges, finds the two dominant stablecoins capturing a 93 percent market share of payments-oriented activity. This market shift indicates that the current regulatory architecture, punctuated by the GENIUS Act of 2025, reinforces Bitcoin’s role as a digital commodity. Bitcoin remains a high-value asset that is legally and structurally orphaned from the high-speed rails of modern commerce. As the digital economy evolves, this dynamic suggests that any decentralized technology resisting incorporation into governable financial systems may face a similar fate. In this new era, regulatory architecture, not protocol design, will become the ultimate arbiter of monetary utility.
