Recently President Trump signed the GENIUS Act into law, a historic piece of legislation that will pave the way for the United States to lead the global digital currency revolution. In its statement the White House writes that ‘the GENIUS Act will make America the undisputed leader in digital assets, bringing massive investment and innovation to our country.’ And: ‘By driving demand for U.S. Treasuries, stablecoins will play a crucial role in ensuring the continued global dominance of the U.S. dollar as the world’s reserve currency.’
The legislation establishes a regulatory framework for stablecoins (a type of cryptocurrency often tethered to the value of the U.S. dollar or another asset), which makes them a more secure investment than other cryptocurrencies. I spare you the boring details of what the acronym ‘GENIUS’ stands for, suffice it to say that, considering President Trump, the name of this legislation cannot come as much of a surprise.
The GENIUS Act makes it easier for Elon Musk, Donald Trump or other billionaires to issue their
own money. The Trump family’s crypto platform World Liberty Financial earlier this year issued a dollar-backed stablecoin, USD1, in partnership with Binance, a cryptocurrency exchange recently convicted of aiding and abetting money laundering on a grand scale. And, in conjunction with his inauguration, President Trump also launched a meme coin (coins inspired by trends, humorous or fun topics, or anything else someone can think of), $TRUMP, which by the middle of this year is said to have netted POTUS and his associates over $320 million from this token and related crypto ventures.
So the current occupants of the White House clearly have a vested interest in an expanding and successful crypto market. But this is not a piece on President Trump but on the resurgence of all things crypto in general. Since its heyday during and right after the pandemic, most cryptocurrencies have lost tremendous amounts in value and interest namely among the speculators in cryptos, tokens and the blockchain have subsided. The GENIUS Act is likely to change this.
On the face of it, the Act’s insistence that every stablecoin be backed one-for-one by “good old” U.S. dollars or Treasury bills is rather comforting. No more wild west of digital dollars, where your cryptocurrency might be propped up by magical thinking, pyramid schemes or, heaven forbid, Beanie Babies.
Yet one cannot help but wonder if this newfound rigidity will snuff out the very spark of innovation it claims to nurture. Imagine Silicon Valley start-ups, frothing with enthusiasm, queuing outside Federal Reserve offices for permission to issue a stablecoin. A tad bureaucratic, perhaps? These budding crypto visionaries might find themselves donning pinstripe suits and drafting incomprehensible compliance manual, rather than, say, revolutionising cross-border payments.
On the positive side, the Act might restore faith in stablecoins among solemn, tweedy institutional investors. Banks and pension funds will sleep more soundly, confident that their digital assets aren’t backed by little more than shareholder optimism and the founders’ sterling collection of commemorative stamps. And consumers will be reassured that their hard-earned quid isn’t vanishing into the cryptocurrency ether.
But let us not overlook the irony: the Act’s lofty aim of encouraging permissionless innovation may be somewhat undermined by its insistence on permission granted by regulators wielding red pens. It’s rather like inviting guests to a garden party, then demanding they submit a detailed horticultural plan before stepping on the lawn.
Tokenisation? Still allowed, but now with the bureaucratic flair of a 1950s civil service memo. Want to tokenize a building? A bond? Your cat? Brilliant. Just make sure you’ve passed the Federal Reserve’s 37-point compliance checklist and don’t mind waiting six months for approval.
For institutions, this is delightful. They finally get to dip their toes into blockchain without wading through a swamp of crypto bros and pseudonymous frogs. For startups, it’s a bit like being told you can still play in the sandbox—but only if you install CCTV, hire a compliance officer, and provide a risk-adjusted sandbox plan.
In essence, GENIUS doesn’t kill tokenisation or blockchain, it domesticates them. In the early days of the crypto craze the sky was the limit. Innovation – often of the dubious kind – was unchained, yet investors were supposed to know that they were entering uncharted waters and were expected to be aware of the associated risks. Regulation was then and is now necessary, the lack of it then allowed and encouraged though innovation, albeit some of it unsavoury or even outright illegal.
All told, the GENIUS Act is a double-edged sword. It promises stability and legitimacy, yet risks transforming the vibrant crypto bazaar into a dreary civil service corridor. Only time will tell whether this grand regulation will birth a new era of digital finance or simply suffocate the fireworks.
Regulation is necessary, there can be no doubt about that, but maybe to start with a more relaxed attitude would highlight the weaknesses which subsequently need to be addressed while not prohibiting at an early stage the process of discovering and developing the opportunities arising. There are no doubt many useful and legitimate uses of the blockchain yet to be discovered and existing ones to be developed and become mainstream, such as smart contracts for process automation, where payment is automatically released once goods for example arrive in port. Or Decentralised Identity (DID) a verifiable digital passport which individuals own and gives them control over their data and who they wish to share it with.
And, of course, in the meantime the Act makes it easier for the billionaires of this world to handsomely cash in.
The grumpy older man 