Recently, the U.S. Senate passed the procedural motion for the GENIUS stablecoin bill, quickly sparking widespread discussion in the market. Many scholars from traditional fields have sharply criticized this bill, even with obvious sarcasm. They liken this move to 'desperately seeking a cure' and predict that it will drag the U.S. into a new economic quagmire. Overall, scholars' doubts mainly focus on two key points:
First, the high returns of stablecoins essentially reflect the risk compensation of the crypto market and the demand for leverage in decentralized finance (DeFi). If the crypto market bubble is strongly promoted to solve the debt issue, it is tantamount to drinking poison to quench thirst, ultimately potentially triggering a catastrophic financial crisis.
Secondly, stablecoins do not come from thin air; their issuance will inevitably lead to the migration of deposits from the banking system and money market funds. In this process, there may even be a decrease in the broad money supply (M2) within the financial system. In comparison, encouraging banks and money market funds to increase their allocation to U.S. Treasury bonds may be a more rational strategy.
However, it is important to note that stablecoins, as a medium of exchange in the crypto market, represent only a small portion of their future demand. The true potential of stablecoins mainly comes from their reconstruction of the existing financial system, especially in the field of financial inclusion, where their demand potential has yet to be fully released.
Firstly, according to World Bank data, approximately 1 billion people globally have mobile phones but do not have bank accounts. Due to high costs, underdeveloped financial infrastructure, and cumbersome procedures, people in these regions have long faced a lack of basic financial services. However, once blockchain-based stablecoins become widespread, this situation will fundamentally change—ordinary people will be able to enjoy low-cost, efficient financial services simply by accessing the internet. This will not only significantly improve residents' quality of life but also promote regional trade and business development, optimizing capital allocation efficiency.
Furthermore, the traditional cross-border payment system has significant efficiency bottlenecks: not only are the settlement cycles long and fees high, but it also relies on multiple intermediary agencies to complete complex cross-border clearing processes. In contrast, stablecoin payments can achieve three breakthrough advantages through a decentralized technical architecture: 1) bypassing the banking system, saving approximately 40-60% in intermediary costs; 2) real-time settlement 24/7; 3) shortening transaction confirmation times from 2-5 days in the traditional system to the minute level. McKinsey's research shows that the application of blockchain technology in B2B cross-border settlement can reduce the cost of a single transaction by more than 50%. This cost advantage is crucial for small and medium-sized cross-border traders—previously slim profits squeezed by high fees can now be transformed into a significant competitive advantage.
Finally, in underdeveloped regions, due to exchange rate controls, the public lacks effective ways to hedge against inflation, the most typical example being currency exchange. In many areas of Africa and Latin America, many people lose more than 20% of their wealth each year due to currency depreciation. At the same time, they are unable to invest in higher credibility and cost-effective assets like U.S. stocks and Treasury bonds. However, with the help of stablecoins, people in these regions can easily bypass exchange rate controls, converting their weak currencies into higher-rated currencies, and even use stablecoins to enter the RWA market to allocate assets like U.S. stocks, gold, and U.S. Treasury bonds.
In the long run, the bull market in the crypto market mainly stems from the breakthrough effect of stablecoins. For example, the widespread promotion of stablecoins will transfer a large amount of financial activities onto the blockchain, thereby driving the prosperity of the RWA market. In this process, some systematically important assets in the crypto market will inevitably undergo value re-evaluation, such as digital gold Bitcoin and the main infrastructure for stablecoins, Ethereum. This is in stark contrast to the view that the GENIUS stablecoin bill will stimulate the crypto market bubble to expand stablecoin demand and thus solve the debt problem.
Regarding the second point, under the full collateral model of short-term U.S. Treasury bonds + cash equivalents for dollar stablecoins (assuming 80% U.S. Treasury bonds + 20% cash), their monetary attributes are highly homologous to the dollar, fully covering the main circulation functions of the dollar. This issuance mechanism essentially constructs an automated channel for increasing U.S. Treasury bond holdings: for every dollar stablecoin issued, it creates $0.8 in demand for U.S. Treasury bond allocation. In other words, during the issuance of stablecoins, the market's dollars not only continue to increase, but the market's debt ceiling is also raised. This phenomenon is similar to the situation in economics where bank investments and loans lead to a significant increase in demand deposits. Essentially, both are credit expansion and liquidity creation. Therefore, during the issuance of stablecoins, M2 is not only unlikely to decrease but may actually increase.
Moreover, many people overlook that the essence of USDT promotion is to levy seigniorage on dollar users around the world—enjoying the convenience of the dollar while accepting 0% interest on U.S. Treasury bonds. Although the returns on collateral end up in the pockets of stablecoin issuers, the U.S. government has the ability to impose high 'compliance fees' on stablecoin issuers through market access, taxation, and regulation. In contrast, merely encouraging banks and money market funds to increase their holdings of U.S. Treasury bonds can only temporarily alleviate selling pressure, facing a dual dilemma: it cannot fundamentally resolve the federal debt issue and may increase financial institutions' interest rate risk exposure.
Currently, many analyses still use the framework for evaluating Libra to interpret the GENIUS stablecoin bill, but the two are not on the same level at all. The strategic value of the GENIUS bill far exceeds that of the Libra project, primarily reflected in two aspects: first, the bill provides a clear legal basis for all PayFi projects, which helps systematically reduce compliance costs for innovative projects like Libra; more importantly, unlike Libra, which is led by private enterprises, the GENIUS bill is promoted by the federal government, with strategic goals aimed at alleviating U.S. debt pressure and enhancing the dollar's penetration in offshore markets through institutional arrangements.
Of course, although the GENIUS stablecoin bill has made some progress in the Senate, it still faces many challenges before it can ultimately be passed into law, mainly including the improvement of the regulatory framework, coordination of conflicts of interest, and unification of global compliance standards. Therefore, repeated negotiations are inevitable, and any variable could trigger significant market turbulence.
In terms of process, after the motion is passed, the bill still needs to undergo a final vote in the Senate (if it passes smoothly, it will be sent to the House of Representatives for deliberation). Next, the House will conduct committee reviews, full debates, and final voting. If the version passed by the House is consistent with that of the Senate, it will enter the presidential signing process; if there are differences, it will require coordination between the two chambers. If everything goes well, the bill could be passed as early as August.
Currently, at the funding level, the market still maintains a highly optimistic attitude towards the GENIUS stablecoin bill. Although Bitcoin has set a record of eight consecutive weekly gains, institutions show no signs of fear of heights, and U.S. capital continues to enter the market at a brisk pace. Even the president personally 'promotes'—on May 26, the Trump Media Technology Group announced plans to raise $3 billion specifically to invest in cryptocurrencies.