The GENIUS Act promises safer, fully reserved dollar stablecoins and faster payments, but by steering issuers toward T-bills and cash, it may also hardwire a new demand engine for US debt.
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The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, signed into law on July 18, is billed as the statute that finally drags dollar‑pegged tokens out of the regulatory gray zone into a supervised, payments‑first framework.
Supporters say it offers legal clarity, consumer protections and a path for programmable money. Critics say it raises a deeper question:
If issuers are tightly steered into holding cash and short‑term Treasurys, does that make them structural buyers of US debt? That’s the case laid out by author and ideologist Shanaka Anslem Perera, who that under GENIUS, “Every digital dollar minted becomes a legislated purchase of US sovereign debt.”
What the GENIUS Act says on the tin
The GENIUS Act defines “payment stablecoins” as fiat‑referenced tokens used mainly for payments and settlement. Only permitted payment stablecoin issuers can serve US users at scale, and these issuers must back their tokens at a 1:1 ratio with a narrow pool of high-quality assets.
These assets include US coins and currency, Federal Reserve balances, insured bank deposits, short‑maturity Treasurys, qualifying government money market funds and tightly constrained overnight repos backed by Treasurys, all held in segregated accounts.
Issuers have to redeem at par, publish regular reserve disclosures, and provide audited financials above size thresholds, while sticking to a limited set of activities linked to issuing and redeeming stablecoins rather than broader lending or trading.
Foreign issuers seeking access to US customers via domestic platforms must either comply with this framework or demonstrate to the Treasury that their home country’s regime is “comparable.”
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Under the hood, GENIUS poses some issues for regulators
Yet GENIUS may be more of a warm-up than ready for the opening act. Analysts at Brookings recently some potential issues for regulators as they implement the act.
The caveats centered on uninsured bank deposits, the role that large non‑financial, publicly listed firms may play in issuing stablecoins, how “comparable” foreign regulation may deviate from US standards and issuers’ actually having the technological and procedural capacity to meet AML/CFT sanctions and monitoring obligations.
Do issuers become stealth buyers of US debt?
Perera’s “forensic analysis” goes several steps further. He reads GENIUS as turning payment stablecoin issuers into narrow banks whose main economic role is to turn global demand for digital dollars into structural demand for short‑term US sovereign debt. He argues:
“The United States Treasury has executed a structural transformation of American monetary architecture that bypasses the Federal Reserve, conscripts the private sector as a forced buyer of government debt, and may have solved — temporarily — the terminal problem of deficit financing.”
Because reserves are pushed into central bank balances, short-dated Treasurys, government money market funds and fixed short-term secured loans, and because issuers cannot lend broadly, rehypothecate freely, or pay yields to users, the natural outcome is balance sheets packed with T-bills.
In that sense, Circle, and their GENIUS‑compliant peers become pipelines. Emerging-market savers fleeing inflation or capital controls are buying digital dollars. Issuers park those inflows in short‑term US paper. The Treasury enjoys cheaper funding. Rinse and repeat.
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When flows reverse, a backdoor CBDC?
The same design that creates a steady bid for bills also creates what Perera calls “redemption asymmetry” on the way down. While the Federal Reserve’s current position on central bank digital currencies (CBDCs) is clear (i.e., not pursuing one without Congressional authorization), Perera told Cointelegraph, “that’s a peacetime policy.”
He points to Bank for International Settlements research that found stablecoin outflows raise Treasury yields two to three times more than inflows lower them. Should a trillion-dollar market suffer a 40% drawdown, hundreds of billions of short‑dated Treasurys could be dumped into the market in weeks. He warns:
“That’s when the CBDC conversation resurfaces. A stablecoin crisis becomes the catalyzing event that shifts political calculus. The argument becomes: Why subsidize private stablecoin risk when a Fed-issued digital dollar eliminates counterparty concerns entirely?”
At that point, the Fed’s “no digital dollar without Congress” stance would run straight into its financial‑stability mandate. The toolkit is already in place; using it to stabilize a GENIUS‑era shock would underline that private stablecoins now sit on top of a de facto central bank backstop.
Innovation, demand, and the trade‑off
On paper, GENIUS can still deliver its promise: fully reserved dollar tokens under clear federal standards, faster and cheaper payments and a way to plug on‑chain settlement into the core of the dollar system.
If Treasury Secretary Scott Bessent’s ambitions play out, that market could reach toward the trillions and become a lasting source of Treasury demand. But that also means US fiscal strategy, global demand for digital dollars and the next chapter of central bank money are now entangled.
GENIUS might prove to be a smart way to harness stablecoins, or the opening roll of the dice in a game that ends with a crisis‑driven digital dollar and a much more explicit debate over who really controls the money pipeline.
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