The GENIUS Act was signed into law on July 18, 2025, establishing the first comprehensive US regulatory framework for stablecoins. Two additional cryptocurrency bills are also advancing through Congress: one to clarify which crypto assets fall under securities oversight, and another to prohibit the Federal Reserve from issuing a central bank digital currency. To be clear, this piece is not intended to analyze or recommend investments in the crypto market—there are far more qualified experts for that. Instead, it argues that the government, through this bipartisan legislation, is leveraging the GENIUS Act to preserve US dollar dominance.
USD stablecoins are cryptocurrencies designed to maintain a stable value pegged 1:1 to the US dollar, achieved by holding reserves in assets like cash equivalents, insured bank deposits, or short-term US Treasuries to ensure redeemability and minimize volatility. This backing instills user confidence in the coin’s stability, enabling it to serve as a digital alternative to fiat currency for transactions while simultaneously generating demand for US government debt. Under the GENIUS Act, such reserves must consist of “qualified assets,” including Treasuries, to comply with federal regulations.
Ever since Russia’s invasion of Ukraine in 2022, questions have arisen about the dollar’s future role in international trade, particularly after Western nations froze Russian dollar deposits and excluded key Russian banks from the SWIFT payment system. This compelled Russia to seek alternative payment methods for essentials like spare parts, chips, and pharmaceuticals. It also served as a wake-up call for adversaries like China: the dollar had been weaponized against Russia, and it could similarly be turned against others who fail to adhere to U.S.-led rules.
China had already begun developing alternatives to the dollar system as early as 2021, though these efforts gained significant traction only recently. Its digital currency project, mBridge, is an initiative aimed at facilitating peer-to-peer cross-border payments using central bank digital currencies, bypassing the traditional U.S. dollar-dominated SWIFT system. While adoption has grown, mBridge has primarily been deployed for emergency dollar-avoidance transactions. China remains particularly exposed to the U.S. dollar, having held trillions in U.S. Treasury debt over the years.
In addition, China has aggressively pursued bilateral currency swap agreements, managed by the People’s Bank of China (PBOC), which enable direct exchanges of RMB for a partner country’s currency between central banks. These agreements facilitate trade and investment without U.S. dollar intermediaries, thereby reducing reliance on the dollar and SWIFT. As of 2025, more than 40 such agreements, totaling around 4 trillion yuan ($586 billion), support non-USD settlements, especially among Belt and Road Initiative nations. For example, under the 2023 Malaysia-China swap (RMB 180 billion/MYR 90 billion), Malaysian palm oil exporters receive RMB directly from Bank Negara Malaysia, which swaps MYR with the PBOC, enabling seamless trade with Chinese buyers. These swaps also provide liquidity during crises and advance RMB internationalization.
These developments have fueled discussions about global de-dollarization, but as I have noted before, such talk is often exaggerated and worth dismissing. In my view, the more pressing concern stemming from these events—and the one that directly influenced the GENIUS Act—is the challenge of funding the US national debt.
It is evident that the administration plans to stimulate the economy through tax cuts and deregulation while steering clear of unpopular spending reductions, a stance shared across party lines. The result? The U.S. will need to issue more debt to sustain growth, and with potentially higher interest rates on the horizon, even greater volumes of that debt must find buyers.
As I discussed last month in Foreign Investor Capital Flight, the Treasury has deregulated banks to allow them to hold more Treasuries. The GENIUS Act takes this further by requiring stablecoins to be pegged to the U.S. dollar through holdings of dollars or Treasuries. Treasury Secretary Scott Bessent estimates that the stablecoin market could expand from about $250 billion today to $2 trillion by 2030, positioning it as a major funding source for the U.S. government. With mounting evidence that Asian countries are reducing their use of the dollar, the U.S. is proactively addressing this shift. Ultimately, the GENIUS Act appears to be another strategic step by the government to safeguard its debt obligations and ensure the enduring dominance of the U.S. dollar.
