没有免费的午餐：关于GENIUS法案的“危言耸听”

Recently, the hottest topic in our circle is the "GENIUS Act" that has just been signed into law. For a time, cheers were heard everywhere, and many people felt that the United States had finally opened the door to compliance for cryptocurrencies, especially stablecoins. We seem to be standing on the eve of a trillion-dollar market explosion. Supporters claim that this move will consolidate the global dominance of the US dollar while providing consumers with unprecedented strong protection.

Doesn’t that sound wonderful?

But as someone who has been educated in dialectical materialism since childhood, I firmly believe that " there is no free lunch in the world " and that God has already secretly marked the price of every gift. Is this bill really as "genius" as it appears on the surface? Or are there risks hidden under those bright clauses that we have not yet foreseen?

Today, let us use the most understandable language to thoroughly analyze the possible negative impacts of the GENIUS Act.

However, I must state first that as an active participant in the Crypto world, I personally welcome the introduction of the GENIUS Act. After all, it has brought blockchain and encryption technology into the daily lives of the general public, taking a key step towards "Massive Adoption" and adding a safety belt to the shaky globalization process . Therefore, the various shortcomings listed in this article are, at best, " warnings in prosperous times ", and at best, just a mental exercise of my own. Dear readers, just listen to it and laugh it off.

💵 Dollar Trap: Will the dream of manufacturing repatriation be crushed by stablecoins? 💵

Let’s start with the economy. One of the core goals of the bill is to make the US dollar stablecoin the “hard currency” of the global digital economy, thereby defending the hegemony of the US dollar. The logic is simple: the bill requires all compliant stablecoin issuers to use high-quality liquid assets (mainly short-term US Treasury bonds) for 1:1 collateral reserves.

Imagine, when the whole world is using the US dollar stablecoin, how much US Treasury bonds will be needed as reserves? This will create a huge and continuous demand pool for US Treasury bonds. Global funds will flood into the United States to buy Treasury bonds, and the US dollar will naturally become more "valuable" - that is, what we often call a "strong dollar."

This sounds like a great thing for the United States, but there is a huge paradox hidden in it. Especially for Trump's dream of "manufacturing repatriation", this is almost cutting off the source of the problem .

I wonder if you have ever thought about this question: Why has the US manufacturing industry become "hollowed out"? A key reason is the long-standing trade deficit. The US buys far more things (imports) than it sells (exports), resulting in a large amount of US dollars flowing to the world. So, what can other countries buy with these dollars? Since the US manufacturing industry has long been hollowed out, except for a few high-tech products, there are not so many "Made in the USA" products to choose from (besides, some high-tech products will not be sold even if you pay, such as to China). Therefore, most of this money has gone back to buy US Treasury bonds and Wall Street financial products.

This has formed a vicious cycle: foreign capital poured into Wall Street → pushed up the US dollar exchange rate → the strong dollar made "Made in the USA" extremely expensive overseas → exports became more difficult and imported goods became cheaper → the trade deficit further widened → the competitiveness of the local manufacturing industry was continuously weakened.

Now, the GENIUS Act is here. It is equivalent to adding a super turbocharger to this vicious cycle. The global popularity of stablecoins means that the United States is issuing a "digital dollar" to the world, which will trigger an unprecedented global demand for the US dollar and US Treasury bonds . What is the result? The value of the US dollar will be pushed to an unprecedented high.

This is a double whammy for the US manufacturing industry. It is also a heavy blow to US multinational companies, especially large technology and industrial giants, whose overseas revenue accounts for a large proportion. When the foreign currency profits earned by them overseas, such as euros and yen, are converted back into strong US dollars, the figures on the accounting statements will shrink significantly. This not only directly impacts the profitability of companies and depresses stock valuations, but may even drag down the overall performance of major stock indices such as the S&P 500.

The so-called "manufacturing repatriation" may only become a more distant and unrealistic dream in the face of such a strong dollar. While the GENIUS Act consolidates the dollar's financial hegemony, it may be at the expense of the country's real economy .

⚖️ The paradox of US dollar hegemony: The more you want to hold on, the faster you will accelerate "de-dollarization"? ⚖️

The core economic argument of the GENIUS Act is to consolidate the global dominance of the US dollar. However, in the long run, this overly aggressive move may accelerate the global centrifugal tendency towards the US dollar.

Before the emergence of stablecoins, the US dollar has long been a tool for the United States to impose economic sanctions and project geopolitical power. The GENIUS Act attempts to further concentrate the core of the digital currency ecosystem within the US dollar and its regulatory boundaries. However, " the moon waxes and wanes, and the water overflows. " It is the fear of the United States weaponizing the financial system that has become the main driving force for countries around the world to "start anew."

For example, everyone is optimistic about the huge potential of stablecoins in cross-border payments, and even imagines that it can replace SWIFT. But when did the word "SWIFT" become well-known to the Chinese people? It was during the Russo-Ukrainian war that SWIFT "expelled" Russia, which made many Chinese people begin to be vigilant. If stablecoins replace SWIFT and become the mainstream means of cross-border payments in the future, wouldn't it be a self-destruction of the US dollar hegemony?

Therefore, the GENIUS Act actually sends a clear signal to America's competitors: while the old order represented by SWIFT is facing disintegration and the new order represented by stablecoins is not yet fully mature, the window for establishing alternatives has arrived before the new digital dollar system takes root .

Although it is almost impossible to shake the hegemony of the US dollar in a short period of time, it is entirely feasible to achieve "de-dollarization" in local markets. The wave of "de-dollarization" led by Russia and China and responded by BRICS countries such as India and Iran and other emerging markets is developing at an unprecedented speed. The measures taken by these countries include: switching to local currency settlement in bilateral trade, increasing gold holdings to replace US dollar assets, and actively developing and promoting non-US digital currency payment systems to bypass SWIFT.

🏛️ Debt and Credit: The Government’s “Private Coffers” and “Household Affairs” 🏛️

First, the “money bag”: a debt trap that is hard to escape

As we mentioned earlier, stablecoins have created a huge demand for US Treasury bonds. What does this mean for the US government? It means that borrowing money has become easier than ever!

Under normal circumstances, if a government over-borrows, the market will demand higher interest rates as risk compensation due to concerns about its repayment ability. This is a natural "brake" mechanism. But now, the existence of the "hardcore buyers" group of stablecoin issuers is equivalent to people all over the world becoming buyers of U.S. debt , artificially lowering the cost of borrowing. The government can borrow more money more easily and cheaper, the constraints of fiscal discipline are greatly weakened, and borrowing becomes more addictive.

In economics, this can be seen as a variant of "debt monetization." Although the central bank does not directly print money for the government to spend, the effect is highly similar: private companies issue "digital dollars" (stablecoins) and then use the public's money to buy government bonds, which is essentially financing the government deficit by expanding the money supply. The final result is likely to be inflation. This "hidden tax" transfers wealth away from our pockets without us realizing it.

Even more dangerously, it could transform inflation risk from a cyclical policy choice into a structural feature of the financial system . Traditionally, large-scale debt monetization is an unconventional, temporary tool used by central banks in response to severe crises, such as the 2008 financial crisis or the COVID-19 pandemic. However, the GENIUS Act creates a permanent source of government debt demand that is decoupled from the economic cycle. This means that debt monetization will no longer be a crisis response measure, but will be "embedded" in the daily operations of the financial system . This will implant a latent and persistent inflationary pressure in the economic system, making the Fed's future task of controlling inflation extremely difficult.

The second is "Iron Chains Linking Boats" - a new transmission mechanism of financial instability

In this round of stablecoin craze, various forces have entered the market. For a time, USDT, USDC, USDe, USDs, USD1... various stablecoin symbols are dazzling. People even joked that the suffixes that can be followed by "USD" are not enough with 26 letters.

But after the GENIUS Act, no matter what suffix follows your "USD", if you want to operate in compliance in the United States, the world's largest capital market, you must use US debt as a core reserve asset. This is the origin of the title of this section, "Iron Chains Linking Boats": Different stablecoins are "boats", but they are closely linked together by the chain of "US debt". Americans may not be familiar with the consequences of "Iron Chains Linking Boats", but Chinese are very familiar with it.

The GENIUS Act thus creates an unprecedented, new transmission path for financial instability. It ties the fate of the cryptocurrency market to the health of the U.S. Treasury market in an unprecedented way.

• On the one hand, if a major stablecoin suffers a crisis of confidence , it could trigger a massive wave of redemptions, forcing its issuer to sell off a huge amount of U.S. Treasuries in a short period of time. Such a "fire sale" is enough to disrupt the U.S. Treasury market, which is the cornerstone of the global financial system, and could lead to a surge in interest rates and a wider financial panic.
• On the other hand, if a crisis occurs in the U.S. sovereign debt market itself (for example, a debt ceiling deadlock or a sovereign credit rating downgrade), it will directly jeopardize the reserve security of all major stablecoins and may trigger a systemic "run" on the entire digital dollar ecosystem.

The bill thus creates a two-way contagion channel that can amplify risks. Moreover, as stablecoins are new things, the public is still not aware of them, and any panic caused by any disturbance may be sharply amplified in this risk transmission chain.

Finally, "face" - the reputation risk that cannot be ignored

The two parties actually had quite a big difference in the voting process of the GENIUS Act. A huge point of controversy was the president's conflict of interest. There is a provision in the bill that prohibits members of Congress and their families from profiting from the stablecoin business - this is good, in order to avoid suspicion. But strangely, this ban does not extend to the president and his family .

Why is this so sensitive? Because it is well known that the Trump family is deeply involved in the crypto industry. World Liberty Financial, a company held by the family, issued a stablecoin called USD1, which rose rapidly in a short period of time. Trump himself reported tens of millions of dollars in income from the company in his 2024 financial disclosure.

If you search for "World Liberty Financial", you will see that the title of its official website reads " Inspired by Trump, Powered by USD1 ". The head of a country standing up for a cryptocurrency is too much of a " public tool for private use " (the last head of state to do this was Argentine President Javier Milley, known as "Little Trump"). On the one hand, the president is vigorously promoting the legalization of stablecoins, while on the other hand, his own stablecoin business is booming. This not only casts a shadow of "interest transfer" on the bill itself, but also damages the reputation of the entire Web3 and crypto industry, as if it has become a tool for political elites to make profits.

The deeper risk is that a bill with obvious party and personal interests is bound to be unstable. Although it was passed under the leadership of the Republicans, the criticism from the Democrats is endless. Who can guarantee that after the regime change in the future, the new government will not "liquidate" the current president? By then, will they choose to "throw out the baby with the bath water" and directly abolish or subvert the entire stablecoin framework because they hate the conflicts of interest behind the bill? This political uncertainty is undoubtedly a time bomb for an industry that desperately needs long-term stable expectations.

🏦 Game of Thrones: Is it an "innovation paradise" or a "giant's backyard"? 🏦

The bill claims to “promote innovation,” but if we look closely at its rules, we might come to the exact opposite conclusion.

The bill sets a set of strict regulatory standards for stablecoin issuers that are comparable to those of banks: anti-money laundering (AML), know your customer (KYC), frequent audits, bank-level security systems... All of this means extremely high compliance costs. Studies have shown that up to 93% of fintech companies are troubled by meeting the requirements of the unified regulation.

For start-ups, this is almost an insurmountable wall. So who can easily deal with it? The answer is self-evident: those Wall Street giants and mature financial technology companies that have already established large businesses. They have ready-made legal and compliance teams, strong capital, and rich experience in dealing with regulators.

The result is likely to be that this bill, which is called "promoting innovation", actually digs a deep "moat" for industry giants, ruthlessly blocking those small teams that are full of vitality and the most subversive. In the end, we may not see a flourishing innovation ecosystem, but an oligopoly market dominated by a few banks and "recruited" technology giants. It will once again concentrate systemic risks on those institutions that proved to be " too big to fail " in the 2008 financial crisis, and may just be laying the groundwork for the next crisis caused by oligarchs.

Although Tether has received mixed reviews, its " entrepreneurship myth " of rising from grassroots, growing wildly, and eventually becoming an industry giant and even the company with the highest per capita profit in the world will probably become a thing of the past after the GENIUS Act.

👁️Proxy Monitoring: Who is watching your wallet? 👁️

While pushing the GENIUS Act, lawmakers also passed another bill, the Anti-CBDC Surveillance State Act, and claimed to have successfully prevented the government from issuing an "Orwellian" central bank digital currency (CBDC) that could directly monitor our every consumption. This was hailed as a "great victory for privacy."

But wait, could this just be a clever smoke screen?

The government does not operate a centralized ledger, but what does the GENIUS Act do? It requires all private stablecoin companies to conduct strict identity authentication (KYC) of users and record all transaction data.

Here, I would like to use a famous case in the Web2 era to help you understand - the Snowden incident and the "Prism Project" (PRISM). At that time, the documents exposed by Snowden showed that the US NSA could directly obtain users' emails, chat records, photos and other private data from the servers of technology giants such as Google, Facebook, and Apple through a secret project called "PRISM". Although these data nominally belong to private companies, the government still has ways to get them.

This logic also applies under the GENIUS Act. According to the "Third-Party Doctrine" deeply rooted in US law, the information you voluntarily provide to a third party (such as a bank or a stablecoin company) is not fully protected by the Fourth Amendment of the Constitution. This means that in the future, government agencies will most likely be able to obtain all your transaction records from stablecoin companies without a search warrant.

Do you understand? The government simply outsourced the surveillance and established a "proxy surveillance". This system is almost the same as direct government surveillance in terms of function, and is even more covert because the government can push the responsibility to "private companies" and thus avoid accountability politically and legally.

It is even a bit ironic that the GENIUS Act is hailed as a major milestone in the history of blockchain development. It has made blockchain and encryption technology take a big step towards "Massive Adoption" that the pioneers have long dreamed of. But at what cost? The anonymity and anti-censorship that the blockchain pioneers value most are completely castrated . I don't have a regretful attitude towards this, because I know very well that perfect things do not exist in this world.

Conclusion

Having said this, I believe everyone has a more three-dimensional and prudent understanding of the GENIUS Act. It is by no means a simple story of black and white.

It is like a sharp double-edged sword for the United States. While trying to consolidate the status of the dollar and bring regulatory certainty, it may also aggravate the plight of the real economy, sow the seeds of inflation, stifle real grassroots innovation, and erode our financial privacy in a smarter way .

The future has come, but where it will go requires each of us to stay awake and keep asking questions.

• This article is based on public information analysis and does not constitute investment advice. Cryptocurrency investment is risky, please make decisions carefully, DYOR.
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