Written by: Rick Awsb
I. The Ghost of History: The Digital Return of the East India Company
History never simply repeats itself, but it does rhyme. When Trump happily signed his name on the document of the 'Genius Act,' what flooded my mind was the memory of history—that in the 17th and 18th centuries, the commercial behemoths granted sovereign powers by the state, the Dutch and British East India Companies.
This bill seems to be merely a technical adjustment in financial regulation, but its deeper implications are that it is issuing charters for the 'new East India Company' of the 21st century; a transformation that reshapes the global power landscape has already begun.
1a. The Charter of New Powers
Looking back 400 years, the Dutch East India Company (VOC) and the British East India Company (EIC) were not ordinary trading firms. They were hybrids that combined merchants, soldiers, diplomats, and colonizers, operating under state authorization. The powers granted to the VOC by the Dutch government included: the ability to recruit armies, issue currency, sign treaties with other monarchs, and even wage war. Similarly, the royal charter granted to the EIC by Queen Elizabeth I endowed it with the power to monopolize trade in India and establish military and administrative functions. These companies were among the first multinational corporations in history, controlling not just simple goods but defining the lifeblood of globalization in that era—ocean trade routes.
Today, what the 'Genius Act' is doing is legislatively granting legitimacy to the new power giants of the era—stablecoin issuers. On the surface, the act aims to regulate the market and prevent risks by setting reserve standards and requiring asset certifications. However, its true effect is to create a 'legitimate' oligopoly of stablecoin issuers recognized by the U.S. 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 the wild-growing crypto rebels but 'chartered companies' formally incorporated into the U.S. financial strategic landscape. 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 ensured their exclusive rights to spices, tea, and opium trade with gunboats and fortresses, raking in enormous profits. The 'digital East India Company' of the new era will exercise its power by controlling the financial tracks that flow global value. When a dollar stablecoin regulated by the U.S. Treasury or specific institutions becomes the default settlement unit for global cross-border payments, DeFi lending, and RWA transactions, its issuer will gain the power to define the rules of the new financial system. They can decide who can access this system, freeze any address's assets per directives, and set compliance standards for transactions. This represents a deeper, more intangible power than controlling physical routes.
1c. The Ambiguous Symbiosis and Confrontation Between Nations
The history of the East India Company is an epic of evolving relationships with their mother country. Initially, they acted as agents of the state to pursue mercantilism and engage in strategic games against competitors (like Portugal). However, the profit-driven nature of the company quickly inflated 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 foreign and military quagmires it did not wish to partake in. Ultimately, when the company was on the brink of bankruptcy due to mismanagement and overexpansion, it had to seek state assistance, leading to a gradual increase in regulation through a series of acts (such as the Tea Act of 1773 and the Pitt’s India Act of 1784), culminating in the complete stripping of its administrative powers after the Indian Rebellion of 1858, returning its territories to direct royal rule.
This history rehearses for us the possible dynamic relationship between future stablecoin issuers and the U.S. government. Currently, these companies are seen as strategic assets to promote dollar hegemony and counter China's digital yuan. However, once they grow into 'too big to fail' global financial infrastructures, their own institutional interests and shareholder demands will become crucial. They may make decisions that contradict U.S. foreign policy for commercial interests.
This suggests that when the dollar stablecoin system issued by private entities becomes too large, it will inevitably conflict with national sovereignty, and we may soon see an upgrade of stablecoin legislation based on interest games.
The following table clearly compares these two power entities that traverse time and space, revealing the remarkable similarities in history:
The ghost of history has returned. Through the 'Genius Act,' the U.S. is unleashing a new East India Company. It wears the cloak of technological innovation, wields the scepter of blockchain, but its core is the ancient logic of commercial empires—a global private enterprise sovereignty authorized by the state, ultimately contending for power with the state.
II. The Global Monetary Tsunami: Dollarization, Massive Deflation, and the End of Non-Dollar Central Banks
The 'Genius Act' has given birth not just to a new power entity but to a monetary tsunami that will sweep across the globe. The energy of this tsunami originates from the collapse of the Bretton Woods system in 1971. That historic 'liberation' paved the way for today’s global conquest by dollar stablecoins. For countries whose sovereign credit is already fragile, the future will no longer be about whether the government chooses its own currency or traditional dollars; rather, it will be about the people's choice between a collapsing local currency and an easily accessible, frictionless digital dollar. This will trigger an unprecedented wave of super dollarization, completely ending the monetary sovereignty of many countries and bringing them 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, creating a stable structure anchored in gold. However, this system contained a fatal contradiction known as the 'Triffin Dilemma': as the global reserve currency, the dollar must continuously flow into the world through America's trade deficit to meet the needs of global trade development; however, the continued deficit undermines confidence in the dollar's ability to be exchanged for gold, ultimately leading to the system's collapse. In 1971, President Nixon closed the gold window, signaling the death of the system.
However, the death of the dollar is merely the beginning of its rebirth. Under the subsequent 'Jamaica System', the dollar was completely decoupled from gold, becoming a purely fiat currency. It was liberated from the 'chains of gold', allowing the Federal Reserve to issue currency more freely to meet domestic fiscal needs (such as expenditures for the Vietnam War) and global liquidity demands for the dollar. This laid the foundation for the dollar's hegemony over the past half-century—a hegemon that relies on global network effects and U.S. comprehensive national power, without a fixed anchor. Stablecoins, especially those recognized under U.S. law, represent the ultimate technological form of this post-Bretton Woods system. They elevate the dollar's liquidity provision capacity to an entirely new dimension, enabling it to bypass layers of regulation from various governments and circumvent the traditional, slow, and expensive banking system, directly penetrating every capillary of the global economy and into the hands (or phones) of individuals.
2b. The Arrival of Hyper-Dollarization
In countries like Argentina and Turkey, long plagued by high inflation and political turmoil, people spontaneously exchange their local currency for dollars to preserve their wealth, which is the 'dollarization' phenomenon. However, traditional dollarization faces many 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 dollar-pegged stablecoins.
In Vietnam, the Middle East, Hong Kong, Japan, and South Korea, u-shops are rapidly replacing traditional exchange shops, real estate offices in Dubai are starting to accept Bitcoin payments, and small shops in Yiwu are beginning to accept u for cigarette purchases.
These pervasive payment penetrations will turn the dollar's stablecoinization from a gradual process into a tsunami that occurs instantaneously. When inflation expectations rise slightly in a country, capital will no longer be 'flowing out' but 'evaporating'—instantly disappearing from the local currency system and entering the global crypto network. We can define this attribute as 'enhanced substitutability for sovereign currency.'
For governments whose credit is already shaky, this will be a fatal blow. The status of local currency will be completely undermined because individuals and enterprises will have a better, more efficient alternative.
2c. Massive Deflation and the Erosion of National Power
When an economy is swept by the tide of super dollarization, its sovereign state will lose two of its most core powers: first, the power to print money to cover fiscal deficits (i.e., the monetary seigniorage); second, the power to regulate the economy through interest rates and money supply (i.e., monetary policy independence).
The consequences are catastrophic.
Firstly, as local currencies are massively abandoned, their exchange rates will plummet, plunging into hyperinflation. However, in terms of economic activity denominated in dollars, there will be severe massive deflation. Asset prices, wages, and the value of goods measured in dollars will plummet.
Secondly, the government's tax base will evaporate. Taxes denominated in rapidly depreciating local currency will become worthless, and national finances will collapse. This death spiral of finance will completely destroy the governance capability of the state.
This process, starting from Trump's signing of the Genius Act, will accelerate through RWA (tokenizing real-world assets).
2d. The White House vs. The Federal Reserve: The Power Struggle Within America
This monetary revolution is not just aimed at undermining America's opponents; it will even trigger crises within the U.S.
Currently, the Federal Reserve, as an independent central bank, controls U.S. monetary policy. However, a private digital dollar system regulated by a new agency set up by the Treasury or the White House would create a parallel currency track. The executive branch could indirectly or even directly intervene in the money supply and flow by influencing the regulatory rules for stablecoin issuers, thereby bypassing the Federal Reserve. This could become a powerful tool for the U.S. executive branch to achieve its political or strategic goals (such as stimulating the economy during an election year or precisely sanctioning opponents), potentially triggering a profound crisis of trust regarding the independence of U.S. monetary policy in the future.
III. The Financial Battlefield of the 21st Century: America's 'Free Financial System' Against China
If the stablecoin legislation is a power restructuring internally, then externally it is a crucial chess piece dropped by the U.S. in its great power game against China: through legislation, it supports a private, public blockchain-based, dollar-centric 'free financial system.'
3a. The Financial Iron Curtain of the New Era
After World War II, the United States took the lead in establishing the Bretton Woods system, not only to rebuild the post-war economic order but also to construct a Western economic group that excluded the Soviet Union and its allies in the context of the Cold War. Institutions like the International Monetary Fund (IMF) and the World Bank became tools for promoting Western values and consolidating alliance systems. Today, what the 'Genius Act' aims to build is a new version of the Bretton Woods system for the digital age. It intends to establish a global financial network based on dollar stablecoins, which is open, efficient, and ideologically opposed to the state-led model of China. This is somewhat akin to the arrangement of the free trade system that the U.S. established to counter the Soviet Union but with a harsher approach.
3b. Open Siege Against Closure: Permissioned vs. Permissionless
The strategic paths of China and the U.S. in digital currency reveal fundamental differences; this is an ideological war of 'openness' versus 'closure.'
China's digital yuan (e-CNY) is a typical 'permissioned' system. It operates on a private ledger controlled by the central bank, where every transaction and every account is under strict state surveillance. This is a digitized 'walled garden' whose advantages lie in efficient centralized management and powerful social governance capabilities, but its closed nature makes it difficult to gain the genuine trust of global users, especially those wary of its monitoring capabilities.
In contrast, the stablecoins supported by the U.S. through the 'Genius Act' are built on permissionless public blockchains like Ethereum and Solana. This means that anyone, regardless of their location, can innovate on this network—developing new financial applications (DeFi), creating new markets, and conducting transactions—without needing approval from any centralized institution. The role of the U.S. government is not to operate this network but to act as the 'credit guarantor' of its most core asset (the dollar).
This is an extremely clever asymmetric strategy. The United States is leveraging 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 a dollar-centric open ecosystem. China is invited to participate in a game it cannot structurally win: how can a state-controlled local network compete with a globally open and vibrant financial internet?
3c. Bypassing SWIFT: A Dimensional Attack from Below
In recent years, a core strategy for countries like China and Russia to combat dollar hegemony has been to establish financial infrastructures that bypass U.S. control, such as alternative cross-border payment systems to SWIFT (Society for Worldwide Interbank Financial Telecommunication). However, the emergence of stablecoins makes this strategy appear clumsy and outdated. Stablecoin transactions based on public blockchains fundamentally do not require intermediaries like SWIFT or any traditional banks. The transfer of value is completed cryptographically through a globally distributed network of nodes, representing a completely new, parallel track that operates independently of the old system.
This means that the U.S. no longer needs to laboriously defend old financial castles (like SWIFT) but can directly open up an entirely new battlefield. In this new battlefield, the rules are defined by code and protocols rather than treaties between nations. As a significant portion of global digital value begins to operate on this new track, trying to establish a 'SWIFT alternative' would be akin to building a more luxurious carriageway in the era of highways—utterly meaningless.
3d. Winning the Battle for Network Effects
The core war of the digital age is a war of network effects. Once a platform attracts enough users and developers, it creates a strong gravitational pull that makes it difficult for competitors to catch up. Through the 'Genius Act,' the United States is merging the dollar—the world's most robust currency network—with the crypto world—the most innovative financial network. The resulting network effects will be exponential.
Global developers will prioritize creating applications for dollar stablecoins with the greatest liquidity and the broadest user base. Global users will flock to this ecosystem due to its rich application scenarios and asset choices. In contrast, the e-CNY may be promoted within specific contexts like the 'Belt and Road Initiative,' but its closed, renminbi-centric nature makes it difficult to compete globally with this open dollar ecosystem.
In summary, the 'Genius Act' is far from a simple domestic bill. It is a core strategic deployment of the U.S. in the geopolitical chess game of the 21st century. It employs a 'small move to gain a big advantage' approach, leveraging the concepts of 'decentralization' and 'openness' to consolidate its most core power—dollar hegemony. It is not engaging in a symmetrical arms race with China but rather shifting the terrain of the financial battlefield, bringing competition into a new dimension where the U.S. holds absolute advantages, delivering a dimensional strike against its opponents' financial systems.
IV. The 'Denationalization' of Everything: How RWA and DeFi Undermine National Control
Stablecoins themselves are not the endpoint of the revolution; they are more like a Trojan horse that has breached the city. Once global users become accustomed to using them to hold and transfer value, a grander and deeper revolution will follow. The core of this revolution is to transform all valuable assets—stocks, bonds, real estate, artworks—into digital tokens that can flow freely on a global public ledger. This process, known as 'tokenizing real-world assets' (RWA), will fundamentally sever the connection between assets and specific national jurisdictions, achieving the 'denationalization' of assets and ultimately overthrowing the traditional financial system centered around banks.
4a. Stablecoins: The 'Trojan Horse' to the New World
In ancient legends, the Greeks breached the fortified city of Troy by offering a giant wooden horse. Today, stablecoins are playing a similar role. To governments and regulatory agencies in various countries, regulated, asset-backed stablecoins seem 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 in history for 'dangerous,' truly decentralized non-state currencies.
The core function of stablecoins is to serve as a portal connecting the world of traditional fiat currencies and the world of crypto assets. They are the 'on-ramps' for the crypto world and the 'bridges' that cross between the two worlds. An ordinary user may initially seek stablecoins for their low cost and high efficiency in cross-border remittances or daily payments, or for the subsidies offered by merchants. However, once they download a digital wallet and become accustomed to the on-chain transaction model, the distance between them and truly decentralized assets like Bitcoin and Ethereum shrinks to just a click.
Platforms that provide stablecoin trading services, like Coinbase or Kraken, are themselves a comprehensive supermarket of crypto assets. Users come for stablecoins but soon find themselves 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 the state. The short-term goal of the state is to reinforce 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 completely 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 transition from stablecoins that only provide value stability without appreciation potential to assets that can meet these higher-level demands.
4b. The RWA Revolution: Assets Breaking Free from National Boundaries
If DeFi is the superstructure of this revolution, then RWA is its solid economic foundation. The core of RWA is to transform assets that exist in the physical world or traditional financial systems into tokens on the blockchain through legal and technical processes.
We can envision such a scenario:
An app developed by a Chinese team, with millions of global users on Apple's App Store, has its ownership tokenized through legal and technical means, becoming a digital credential that circulates on the blockchain.
The token is traded in a permissionless decentralized finance (DeFi) protocol on one blockchain.
A user in Argentina received this token in their digital wallet within seconds after initiating the transaction.
The entire process—asset tokenization, collateralization, stablecoin minting, and transfer—takes place completely on-chain, bypassing the traditional banking systems of China, the U.S. (due to its dollar peg), and Argentina. This is not just a superior payment track; it is a financial parallel universe that almost ignores the political and legal boundaries defined by the Westphalian system.
This is precisely how 'the denationalization of currency' drives 'the denationalization of finance,' ultimately achieving 'the denationalization of capital.'
When capital can be denationalized, capitalists will naturally also be denationalized.
4c. The Twilight of the Traditional Financial System
This new financial ecosystem driven by stablecoins and based on RWA poses a comprehensive challenge to the traditional financial system. The core function of traditional finance is essentially as an intermediary of information and trust. Banks, brokerages, exchanges, payment companies, and other institutions leverage their vast capital, complex systems, and government licenses to solve the trust issues between transacting parties and charge high fees for it.
Blockchain technology, through its immutable and transparent nature, along with the rules enforced by code (smart contracts), provides a new mechanism for trust—'code is law.' In this new paradigm, most functions of traditional intermediaries appear redundant and inefficient:
The lending and borrowing business of banks can be replaced by decentralized lending protocols.
Exchange matching services can be replaced by automated market maker (AMM) algorithms.
Cross-border settlements by payment companies can be replaced by stablecoin's instantaneous global transfers.
The securitization of assets on Wall Street can be replaced by the more transparent and efficient tokenization of RWA.
V. The Rise of Sovereign Individuals and the Twilight of the State
When capital can flow across borders, when assets can detach from jurisdiction, and when power shifts from nation-states to private giants and network communities, we arrive at the endpoint of this transformation—a new era dominated by 'sovereign individuals,' marked by the end of the Westphalian system. This revolution driven by stablecoins and artificial intelligence (AI) will have profound effects that surpass those of the French Revolution, as it will not only bring about a change in regime but also alter the very form of power itself.
(The Sovereign Individual is indeed the prophecy of our era.)
5a. The Prophecy of the Sovereign Individual Comes True
In 1997, James Dale Davidson and Lord William Rees-Mogg predicted in their sensational work (The Sovereign Individual) that the arrival of the information age would fundamentally change the logic of violence and power. They believed that the reason nation-states rose during the industrial age was that they effectively protected large, fixed industrial assets and taxed them. However, in the information age, the most important capital—knowledge, skills, and financial assets—will become highly mobile, even existing in intangible cyberspace. At that time, the state will resemble a rancher trying to fence in a 'winged cow,' with its ability to tax and control greatly diminished.
The emergence of stablecoins, DeFi, and RWA is the real version of 'cybermoney' and 'cybereconomy' discussed in this book. Together, they create a global, low-friction value network that allows capital to truly take flight. An elite individual can easily allocate their wealth to RWA tokens around the globe and instantly transfer between different jurisdictions using stablecoins, all recorded on a public ledger that is difficult for state machinery to reach. The predictions in the book that 'individuals will free themselves from government oppression' and 'wealth holders will be able to bypass the state's monopoly on currency' are becoming a reality.
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 possesses supreme sovereignty over its territory, sovereignty of nations is equal, and the principle of non-interference in internal affairs. The cornerstone of this system is the absolute control of the state over the population and property within its territory.
The rise of sovereign individuals is fundamentally eroding this cornerstone. When the most creative and productive individuals conduct their economic activities and accumulate wealth in 'cyberspace,' the territorial boundaries lose their meaning. The state finds itself unable to effectively tax these globally mobile elites, and its financial base will inevitably be weakened. In a desperate attempt to prevent wealth from flowing out, the government may resort to more radical and authoritarian means, such as the 'hostage-taking' taxation and destruction of technologies that facilitate individual autonomy predicted in the book. But this will only accelerate the exodus of elites, creating a vicious cycle. Ultimately, the nation-state may devolve into a hollow shell, limited to providing welfare and security for those unable to enter the global digital economy— a 'nanny state' serving the poor. But clearly, such a state has nothing to do with wealth creation.
5c. The Final Frontier: The Last Battle for Privacy and National Taxation
The next step in this revolution will be privacy. Current public blockchains, while pseudonymous, still allow transactions to be tracked. However, with the maturation of privacy technologies such as zero-knowledge proofs (like those used by Zcash and Monero), future financial transactions may achieve complete anonymity and untraceability.
When the globalized, stablecoin-based financial system combines with powerful privacy technologies, it poses the ultimate challenge to the state's ability to collect taxes. Tax authorities will face an impenetrable 'black box,' unable to effectively identify transaction parties and taxable income. This will be the final form of 'deregulation', as when the state loses its ability to tax, it also loses its capacity to effectively regulate and provide public services.
The French Revolution replaced 'monarchical sovereignty' with 'national sovereignty,' shifting the locus of power from kings to nation-states, but the territorial nature of power did not change. The revolution initiated by stablecoins, however, dissolves 'territorial sovereignty of nation-states' with 'network sovereignty' and 'individual sovereignty.' This is not just a transfer of power; it is the 'decentralization' and 'denationalization' of power. This represents a more fundamental and thorough paradigm shift, the implications of which are indeed comparable to, if not exceeding, the French Revolution. We stand at the dawn of the disintegration of an old world and the emergence of a new order. This new world will grant individuals unprecedented freedom and power but will also bring about chaos and challenges that are difficult for us to imagine today.
