Last week, US President Donald Trump signed the Guiding and Establishing National Innovation for US Stablecoins Act, abbreviated as the Genius Act, into law.
Cryptocurrency supporters may view this as a major victory for digital assets because they believe it signifies the US government’s recognition of cryptocurrency’s status.
However, the Genius act mainly establishes a federal regulatory framework specifically for stablecoins.
This means the “decentralization” concept often championed by crypto proponents essentially disappears under the Genius Act, as its original intent is to strengthen regulation on cryptocurrencies.
Moreover, one of the most important provisions in the Genius Act requires that all stablecoins must be fully backed 1:1 by US dollars, deposits in Federal Reserve accounts, or highly liquid assets such as US Treasury bills maturing within 93 days. In other words, all stablecoins deemed legal in the United States must be pegged to US dollar assets.
Therefore, Trump’s signing of the Genius Act does not mean the dawn of a great era for cryptocurrencies.
Instead, it reflects Trump’s move to further consolidate the US dollar’s position amid the rising crypto wave.
As estimated by The Economist, the total value of stablecoins circulating in the market is expected to surge from the current US$263 billion (HK$2.05 trillion) to US$1.8 trillion within three years.
This means the potential market demand for the US dollar will increase by US$2 trillion in three years, which is significant support for the greenback.
Anyone who thinks the Genius Act is a move by the Trump administration to weaken the US dollar or endorse cryptocurrencies simply hasn’t fully understood the content of the entire act.
Andrew Wong is a veteran independent commentator
