1. The ghost of history: The digital return of the East India Company.
History does not simply repeat itself; it rhymes. When Trump happily signed his name on the document of the 'Genius Act,' what surged in my mind was a historical memory—of the 17th and 18th centuries, when commercial giants granted sovereignty by the state, such as the Dutch and British East India Companies.
This bill may seem like a mere technical adjustment in financial regulation, but its deeper implications are that it is issuing a charter for the 'new East India Company' of the 21st century, heralding a transformation that reshapes the global power landscape.
1a. The charter of new power.
Looking back four hundred years, the Dutch East India Company (VOC) and the British East India Company (EIC) were not ordinary trading firms. They were hybrids of merchants, soldiers, diplomats, and colonizers, empowered by state authorization. The Dutch government granted VOC the power to recruit armies, issue currency, sign treaties with other monarchs, and even wage war. Similarly, Queen Elizabeth I's royal charter granted EIC the power to monopolize trade in India and establish military and administrative functions. These companies were the earliest multinational corporations in history, controlling not just simple goods but defining the lifeblood of globalization in their time—the maritime trade routes.
Today, what the 'Genius Act' does is legislate legitimacy for the new power brokers of the era—the stablecoin issuers. On the surface, the act aims to regulate the market and mitigate risks by setting reserve standards and requiring asset certification. However, its true effect is to create a 'legitimate' oligopoly of stablecoin issuers recognized by the US government through screening and certification. These 'crowned' companies, such as Circle (USDC issuer), future Tether (if it chooses compliance), and internet giants like Apple, Google, Meta, and others with billions of users, will no longer be wild-growing crypto rebels but will be formally incorporated into the strategic landscape of US finance as 'chartered companies.' What they control will be the global trade routes of the new era—24/7 uninterrupted, borderless digital financial tracks.
1b. From trade routes to financial tracks.
The power of the East India Company was rooted in its monopoly over physical trade routes. They used gunboats and forts to secure exclusive rights to the spice, tea, and opium trades, extracting enormous profits. The new era's 'digital East India Company' will exert power by controlling the financial tracks of global value flows. When a dollar stablecoin regulated by the US Treasury or specific agencies becomes the default settlement unit for global cross-border payments, DeFi lending, and RWA transactions, its issuer will have the power to define the rules of the new financial system. They can decide who can access this system, freeze any address's assets based on directives, and set compliance standards for transactions. This is a deeper, more intangible power than controlling physical routes.
1c. The ambiguous symbiosis and confrontation with states.
The history of the East India Company is an epic of evolving relationships with its mother country. Initially, they were agents of the state promoting mercantilism and engaging in strategic games with competitors (like Portugal). However, the company's profit-driven nature quickly expanded it into an independent power center. For profit, the EIC did not hesitate to wage wars (like the Battle of Plassey) and engage in unethical trades (like the opium trade), repeatedly dragging the British government into diplomatic and military quagmires it wished to avoid. Ultimately, when the company faced bankruptcy due to mismanagement and overexpansion, it had to seek state aid, leading to a series of acts (like the Tea Act of 1773 and the Pitt's India Act of 1784) that gradually tightened regulation, ultimately stripping it of its administrative powers after the Indian Rebellion of 1858, bringing its territories under direct royal rule.
This chapter of history prefigures the possible dynamic relationship between future stablecoin issuers and the US government. Currently, these firms are seen as strategic assets in promoting dollar hegemony and countering China's digital renminbi. However, once they grow into 'too big to fail' global financial infrastructures, their own institutional interests and shareholder demands will become paramount. They may make decisions that contradict US foreign policy for commercial interests.
This suggests that when the system of dollar stablecoins issued by private entities becomes too large, it will inevitably conflict with national sovereignty, and we may likely see an upgrade of the stablecoin bill based on interest games.
The following table clearly compares these two power entities that transcend time and space, revealing the astonishing similarities in history.
The ghost of history has returned. Through the 'Genius Act,' the US is unleashing a new East India Company. It wears the cloak of technological innovation, holding the scepter of blockchain, but its core is the old logic of commercial empires—a global private enterprise sovereignty ultimately competing with the state for power.
2. The global monetary tsunami: Dollarization, great deflation, and the end of non-dollar central banks.
What the 'Genius Act' spawns is not only a new power entity but also a monetary tsunami that will sweep across the globe. The energy behind this tsunami stems from the collapse of the Bretton Woods system in 1971. That historic 'liberation' paved the way for the global conquest of dollar stablecoins today. For those nations whose sovereign credit is already weak, the future will not be about whether the government chooses its own currency or the traditional dollar, but about whether the public chooses between a collapsing local currency and a frictionless digital dollar within reach. This will trigger an unprecedented wave of super dollarization, completely ending the monetary sovereignty of many countries and bringing devastating deflationary shocks.
2a. The ghost of the Bretton Woods system.
To understand the power of stablecoins, one must return to the moment of the collapse of the Bretton Woods system. This system linked the dollar to gold, with other currencies pegged to the dollar, forming a stable structure anchored by gold. However, this system contained a fatal contradiction known as the 'Triffin Dilemma': as a global reserve currency, the dollar must continuously flow into the world through America's trade deficits to meet global trade demand; yet, persistent deficits undermine confidence in the dollar's convertibility to gold, ultimately leading to the system's collapse. In 1971, President Nixon closed the gold window, announcing the death of the system.
However, the death of the dollar is the beginning of its rebirth. Under the subsequent 'Jamaica System,' the dollar was completely detached from gold, becoming a purely fiat currency. It was liberated from the 'shackles of gold,' allowing the Federal Reserve to issue money more freely to meet domestic fiscal needs (such as the costs of the Vietnam War) and global demand for dollar liquidity. This laid the foundation for the dollar's hegemony over the past half-century—a hegemony reliant on global network effects and the overall strength of the US. Stablecoins, especially those recognized by US law, represent the ultimate technical form of this post-Bretton Woods system. They elevate the dollar's liquidity supply capabilities to a whole new dimension, enabling it to bypass layers of regulation from various governments and the traditional slow and costly banking systems, penetrating directly into every capillary of the global economy and into the hands (or mobile devices) of individuals.
2b. The arrival of hyper-dollarization.
In countries like Argentina and Turkey, which have long suffered from high inflation and political turmoil, the public spontaneously exchanges their local currency for dollars to preserve their wealth, leading to the phenomenon of 'dollarization.' However, traditional dollarization faces numerous obstacles: you need a bank account, face capital controls, and bear the risks of holding physical currency. Stablecoins completely dismantle these barriers. Anyone with a smartphone can, in a matter of seconds and at a very low cost, exchange their soon-to-depreciate local currency for stablecoins pegged to the dollar.
In Vietnam, the Middle East, Hong Kong, Japan, and South Korea, U-stores are quickly replacing traditional exchange shops, Dubai property agencies are starting to accept Bitcoin payments, and small shops in Yiwu are beginning to accept U for purchasing cigarettes.
These pervasive payment infiltrations will transform the dollarization process into a tsunami that occurs instantaneously. When a country's inflation expectations rise even slightly, capital will no longer 'flow out' but 'evaporate'—vanishing instantly from the local currency system and entering the global crypto network. We can define this attribute as 'enhanced alternatives to sovereign currencies.'
For those governments whose credit is already shaky, this will be a fatal blow. The status of local currency will be thoroughly undermined, as citizens and businesses will have a more perfect and efficient alternative.
2c. Great deflation and the evaporation of state power.
When an economy is swept away by the tide of super dollarization, its sovereign state will lose two of its most core powers: the ability to print money to cover fiscal deficits (i.e., seigniorage) and the ability to regulate the economy through interest rates and money supply (i.e., monetary policy independence).
The consequences will be catastrophic.
First, as local currencies are massively abandoned, their exchange rates will spiral downwards, falling into hyperinflation. However, in the realm of economic activities priced in dollars, there will be severe deflation. If asset prices, wages, and the value of goods are measured in dollars, they will plummet.
Secondly, the government's tax base will evaporate. Taxes denominated in rapidly depreciating local currency will become worthless, and the national treasury will be plunged into collapse. This death spiral of finance will completely destroy the governance capacity of the state.
This process, starting from Trump's signing of the Genius Act, will accelerate through RWA (real-world assets on-chain).
2d. White House vs. Federal Reserve: The power struggle within the US.
This monetary revolution is not just an attack on America's adversaries; it will also trigger crises within the US.
Currently, the Federal Reserve, as an independent central bank, holds US monetary policy in its hands. However, a privately issued digital dollar system regulated by a new agency under the Treasury or the White House will create a parallel monetary track. The executive branch can influence monetary supply and flow by affecting the regulatory rules for stablecoin issuers, thus bypassing the Federal Reserve. This could become a powerful tool for the US executive branch to realize its political or strategic goals (such as stimulating the economy in election years or precisely sanctioning opponents), potentially leading to a profound trust crisis regarding the independence of dollar monetary policy in the future.
3. The financial battlefield of the 21st century: America's confrontation with China's 'free financial system.'
If the stablecoin bill represents a restructuring of power domestically, then externally, it is a crucial piece in the US's geopolitical chess game against China: legislating support for a private, public blockchain-based 'free financial system' centered around the dollar.
3a. The financial iron curtain of the new era.
After World War II, the US led the establishment of the Bretton Woods system, aiming not only to rebuild the post-war economic order but also to create a Western economic bloc that excluded the Soviet Union and its allies against the backdrop of the Cold War. Institutions like the International Monetary Fund (IMF) and the World Bank became tools for promoting Western values and consolidating alliances. Today, the 'Genius Act' aims to construct a new version of the 'Bretton Woods system' for the digital age. It seeks to establish a global financial network based on dollar stablecoins, which is open, efficient, and ideologically opposed to the state-led model of China. It resembles America's arrangements for its free trade system against the Soviet Union, but is much more aggressive.
3b. Open siege against closed: Permissioned vs. Permissionless.
The strategic paths of China and the US in digital currencies reveal fundamental differences; this is an ideological battle of 'openness' versus 'closure.'
China's digital renminbi (e-CNY) is a typical 'permissioned' system. It operates on a private ledger controlled by the central bank, with every transaction and every account under tight national surveillance. This is a digital 'walled garden' whose advantages lie in efficient centralized management and strong social governance capabilities, but its closed nature makes it difficult to gain the genuine trust of global users, especially those wary of its surveillance abilities.
In contrast, the stablecoins supported by the 'Genius Act' in the US are built on public blockchains like Ethereum and Solana that are 'permissionless.' This means that anyone, regardless of their location, can innovate on this network—develop new financial applications (DeFi), create new markets, and conduct transactions—without needing approval from any centralized authority. The role of the US government is not to be an operator of this network, but to be the 'credit guarantor' of its most core asset (the dollar).
This is an extremely clever asymmetric strategy. The US is using its opponent's weakest link—the fear of losing control—to build its own moat. It attracts global innovators, developers, and ordinary users seeking financial freedom into an open ecosystem centered around the dollar. China is invited to participate in a game that it is structurally incapable of winning: how can a state-controlled local network compete with a vibrant, globally open financial internet?
3c. Bypassing SWIFT: A dimensional strike that cuts off the roots.
In recent years, a core strategy of countries like China and Russia to counter dollar hegemony has been to establish financial infrastructures that bypass US control, such as cross-border payment systems that serve as alternatives to SWIFT (Society for Worldwide Interbank Financial Telecommunication). However, the emergence of stablecoins has made this strategy appear clumsy and outdated. Stablecoin transactions based on public blockchains fundamentally do not require intermediaries like SWIFT or traditional banks. The transfer of value is accomplished through a globally distributed network of nodes in a cryptographic manner, representing a new, parallel track to the old system.
This means that the US no longer needs to toil to defend its old financial fortress (SWIFT), but has instead opened up a brand new battlefield. In this new battlefield, the rules are defined by code and protocols, not by treaties between states. When most of the world's digital value begins to operate on this new track, trying to establish a 'SWIFT alternative' becomes as meaningless as attempting to build a more luxurious horse-drawn carriage road in the age of highways.
3d. Winning the battle for network effects.
The core war of the digital age is a battle for network effects. Once a platform attracts enough users and developers, it creates a powerful gravitational pull that makes it difficult for competitors to catch up. Through the 'Genius Act,' the US is merging the dollar—this most robust global currency network—with the crypto world—this most innovative global financial network. The resulting network effects will be exponential.
Global developers will prioritize creating applications for dollar stablecoins that have the greatest liquidity and the broadest user base. Global users will flock to this ecosystem due to the rich application scenarios and asset choices available. In contrast, the e-CNY may be promoted within specific areas like the 'Belt and Road Initiative,' but its closed, RMB-centered nature makes it difficult to compete globally with this open dollar ecosystem.
In summary, the 'Genius Act' is far more than a simple domestic bill. It is a core strategic deployment of the US in the geopolitical chess game of the 21st century. It utilizes the concepts of 'decentralization' and 'openness' in a way that consolidates its most fundamental power—dollar hegemony. It is not engaging in a symmetrical arms race with China, but rather altering the terrain of the financial battlefield, bringing competition into a new dimension where the US has absolute advantages, delivering a dimensional strike against its opponent's financial system.
4. The 'de-nationalization' of all things: How RWA and DeFi undermine state control.
Stablecoins themselves are not the endpoint of the revolution; they are more like a Trojan horse breaching the walls of the city. Once global users become accustomed to holding and transferring value through them, a larger and deeper revolution will follow. The core of this revolution is to transform all valuable assets—stocks, bonds, real estate, art—into digital tokens that can flow freely on a global public ledger. This process, known as 'real-world assets on-chain' (RWA), will fundamentally sever the link between assets and specific national jurisdictions, achieving the 'de-nationalization' of assets and ultimately overthrowing the traditional banking-centered financial system.
4a. Stablecoins: The 'Trojan Horse' to the new world.
In ancient legends, the Greeks captured the impregnable city of Troy by offering a giant wooden horse. Today, stablecoins play a similar role. To governments and regulators, regulated and asset-backed stablecoins appear to be the 'Trojan Horse' to tame the wild horse of the crypto world—a relatively safe and controllable entry point.
However, the irony of history is that while the GENIUS Act aims to consolidate state power by promoting 'safe' stablecoins, it inadvertently builds the largest user acquisition channel for 'dangerous,' truly decentralized non-state currencies in history.
The core function of stablecoins is to act as a gateway connecting the world of traditional fiat currencies with the world of crypto assets. They serve as the 'on-ramp' to the crypto world, a 'bridge' across the two realms. An ordinary user may initially seek stablecoins for the low cost and high efficiency they offer in cross-border remittances or daily payments, or for subsidies from merchants. However, once they download a digital wallet and adapt to the on-chain transaction model, the distance between them and truly decentralized assets like Bitcoin and Ethereum becomes merely a click away.
Platforms that provide stablecoin trading services, like Coinbase or Kraken, are themselves all-encompassing cryptocurrency supermarkets. Users come for stablecoins but are quickly attracted by the high yields offered by DeFi protocols or the narrative of Bitcoin as a store of value. The process of moving from holding USDC to staking ETH for liquidity mining is a natural extension for a user who has already entered the space.
This creates a profound paradox for states. The short-term goal of the state is to strengthen dollar hegemony by promoting stablecoins pegged to the dollar. To achieve this goal, the state must encourage and support the development and popularization of user-friendly wallets, exchanges, and various applications. However, these infrastructures are technically neutral and protocol-agnostic. The same wallet can store regulated USDC or anonymous Monero; the same exchange can trade compliant stablecoins or fully decentralized Bitcoin.
As users deepen their understanding of the crypto world, their demand for higher yields, stronger privacy protection, or true censorship resistance will also grow. At that point, they will naturally shift from stablecoins that offer value stability but no appreciation potential to assets that can meet these higher-level needs.
4b. The RWA revolution: Breaking the shackles of national borders for assets.
If DeFi is the superstructure of this revolution, then RWA is its solid economic foundation. The core of RWA is to legally and technically transform assets existing in the physical world or traditional financial systems into tokens on the blockchain.
We can imagine such a scenario:
An app developed by a Chinese team that has millions of global users in the Apple App Store has ownership tokenized through legal and technical means, becoming a digital certificate circulating on the blockchain.
The token is traded in a permissionless decentralized finance (DeFi) protocol on a blockchain.
A user in Argentina received this token in their digital wallet within seconds after initiating the transaction.
The entire process—tokenization of assets, collateralization, the minting and transfer of stablecoins—occurs entirely on-chain, bypassing the traditional banking systems of China, the US (due to its dollar peg), and Argentina. This is not merely a superior payment track; it is a parallel financial universe that virtually ignores the political and legal boundaries defined by the Westphalian system.
This is precisely the 'de-nationalization of currency' that drives the 'de-nationalization of finance' and ultimately realizes the 'de-nationalization of capital.'
As capital can be de-nationalized, capitalists will naturally also become de-nationalized.
4c. The end of the traditional financial system.
This new financial ecosystem driven by stablecoins and based on RWA is a comprehensive impact on the traditional financial system. The core function of traditional finance is essentially to act as an intermediary for information and trust. Banks, brokers, exchanges, payment companies, and other institutions solve the trust issues between trading parties through their vast capital, complex systems, and government licenses, charging exorbitant fees in the process.
Blockchain technology, through its immutable, publicly transparent characteristics and rules enforced by code (smart contracts), provides a new trust mechanism—'code is law.' In this new paradigm, the majority of traditional intermediaries' functions become redundant and inefficient.
The deposit and loan business of banks can be replaced by decentralized lending protocols.
The matching of trades on exchanges can be replaced by automated market maker (AMM) algorithms.
Cross-border settlement of payment companies can be replaced by the second-level global transfer of stablecoins.
Asset securitization on Wall Street can be replaced by more transparent and efficient RWA tokenization.
5. The rise of sovereign individuals and the twilight of the state.
When capital can flow across borders, when assets can detach from jurisdictions, and when power shifts from nation-states to private giants and network communities, we reach the endpoint of this transformation—a new era dominated by 'sovereign individuals' (The Sovereign Individual), marked by the end of the Westphalian system. This revolution, driven by stablecoins and artificial intelligence (AI), will have far-reaching impacts that surpass the French Revolution, for it brings not just a change of regime but alters the very form of power itself.
(The Sovereign Individual is indeed a prophecy for our era.)
5a. The prophecy of 'The Sovereign Individual' comes true.
In 1997, James Dale Davidson and Lord William Rees-Mogg predicted in their groundbreaking work, 'The Sovereign Individual,' that the arrival of the information age would fundamentally change the logic of violence and power. They argued that nation-states rose during the industrial age because they could effectively protect large, fixed industrial assets and tax them. However, in the information age, the most important capital—knowledge, skills, and financial assets—would become highly mobile, even existing in intangible cyberspace. At that time, the state would be like a rancher trying to fence in 'cattle with wings,' and its ability to tax and control would be significantly diminished.
The emergence of stablecoins, DeFi, and RWA is the real-world embodiment of 'cybermoney' and 'cybereconomy' as described in this book. Together, they create a global, low-friction value network that truly allows capital to take flight. An elite individual can easily allocate their wealth across global RWA tokens and instantaneously transfer it across different jurisdictions using stablecoins, all recorded on a public ledger that national machines find hard to touch.
5b. The end of the Westphalian system.
Since the signing of the Peace of Westphalia in 1648, the basic unit of world politics has been the sovereign state. The core principles of this system include: the state has supreme sovereignty over its territory, sovereign equality among states, and non-interference in internal affairs. The cornerstone of this system is the absolute control of states over their populations and properties within their territories.
The rise of sovereign individuals is fundamentally eroding this cornerstone. When the most creative and productive individuals conduct their economic activities and wealth accumulation in 'cyberspace,' the territorial boundaries lose their significance. States find themselves unable to effectively tax these globally mobile elites, and their fiscal bases will inevitably be weakened. Desperate governments may resort to more radical and authoritarian measures to prevent wealth flight, such as the 'hostage-taking' style of taxation and destruction of technologies that promote individual autonomy as predicted in the book. But this will only accelerate the exodus of elites, forming a vicious cycle. Ultimately, nation-states may transform into hollow shells, existing solely to provide welfare and security for those who cannot enter the global digital economy— a 'nanny state' serving the poor. But clearly, such a state has no relation to wealth creation.
5c. The final frontier: The ultimate battle between privacy and state taxation.
The next step in this revolution will be privacy. While the current public blockchains are pseudonymous, transactions can still be traced. However, with the maturation of privacy technologies like zero-knowledge proofs (as used by Zcash and Monero), future financial transactions may achieve complete anonymity and untraceability.
When the globalized financial system based on stablecoins combines with powerful privacy technologies, it poses the ultimate challenge to state taxation capabilities. Tax authorities will face an impenetrable 'black box,' unable to effectively identify transaction parties and taxable income. This will be the ultimate form of 'de-regulation,' as when states lose their ability to tax, they also lose their capacity for effective regulation and providing public services.
The French Revolution replaced 'monarchical sovereignty' with 'national sovereignty,' shifting the power's subject from kings to nation-states, but the territorial essence of power remained unchanged. The revolution initiated by stablecoins, however, dissolves 'territorial sovereignty of nation-states' with 'network sovereignty' and 'individual sovereignty.' It is not a transfer of power but a 'decentralization' and 'de-nationalization' of power. This is a more fundamental and thorough paradigm shift, with impacts as profound as, if not exceeding, the French Revolution. We stand at the dawn of a disintegration of the old world and the emergence of a new order. This new world will grant individuals unprecedented freedom and power, but will also bring chaos and challenges that are difficult to imagine today.
