Last week, in a rarity for a deeply polarised Washington, large bipartisan majorities of Congress passed the Genius Act, creating a legal framework for US dollar-denominated privately issued stablecoins, or blockchain-based tokens of a fixed monetary value. It brings the US and the world one step closer to the digitisation of national and cross-border payment systems — and to the conflict over who will dominate these systems and the risks they will pose to the real economy.
Like it or not, the regulatory imprimatur of the Genius Act sets stablecoins on a path to play a big role in the future of money globally. Like the EU’s Mica regulation, the law requires stablecoins to be fully backed by safe reserves such as cash or short-term US Treasury securities. It imposes some regulatory supervision, financial reporting, and compliance with certain anti-money laundering and sanctions laws. It only allows foreign companies operating under similar rules to offer stablecoins in the US.
All this goes at least some way towards protecting against the worst abuses. It will no doubt, as the sponsors of the law intend, accelerate dollar stablecoins’ adoption at home and abroad. Granting stablecoins a secure space in the regulated financial system puts US issuers in pole position to maintain the greenback’s dominance of cross-border payments.