This is an extremely clever asymmetric strategy. The United States is taking advantage of its opponent's weakest link: the fear of losing control, to build its own moat. -- Author
1. Ghosts of History: The Digital Return of the East India Company
History never simply repeats itself, but it rhymes. When Trump happily signed his name on the document of the "GENIUS Act", what came to my mind was the memory of history - the Dutch and British East India Companies, commercial behemoths that were granted sovereign powers by the state in the 17th and 18th centuries.
This bill may seem to be just a technical adjustment to financial regulation, but its deeper meaning is that it is issuing a charter for the "New East India Company" of the 21st century. A transformation that will reshape the global power structure has already begun.
1a. Charter of new powers
Looking back four hundred years, the Dutch East India Company (VOC) and the English East India Company (EIC) were not ordinary trading companies. They were a mix of merchants, soldiers, diplomats and colonists, relying on state authorization. The Dutch government granted the VOC the power to recruit its own army, issue currency, sign treaties with other monarchs, and even wage war. Similarly, the royal charter granted to the EIC by Queen Elizabeth I of England also gave it the power to monopolize trade in India and establish military and administrative functions. These companies were the earliest multinational corporations in history. They controlled not simple commodities, but defined the lifeblood of globalization at that time - ocean trade routes.
What the "Genius Act" does today is to grant legitimacy to the new era's power giants - stablecoin issuers - in the form of legislation. On the surface, the bill aims to regulate the market and prevent risks by setting reserve standards and requiring asset certification. But its real effect is to create an oligarchy of "legal" stablecoin issuers recognized by the US government through screening and certification. These "crowned" companies, such as Circle (USDC issuer), the future Tether (if it chooses to comply), and Internet giants like Apple, Google, Meta, and X with billions of users, will no longer be wildly growing crypto rebels, but "chartered companies" that are officially included in the US financial strategic map. What they control will be the global trade routes of the new era - a digital financial track that runs 24/7 without interruption and without borders.
1b. From trade routes to financial tracks
The power of the East India Company is rooted in its monopoly over physical trade routes. They used gunboats and fortresses to ensure exclusive rights to the trade in spices, tea, and opium, and reaped huge profits from it. The new era "digital East India Company" will exercise power by controlling the financial tracks of global value flows. When a dollar stablecoin regulated by the U.S. Treasury or a specific agency becomes the default settlement unit for global cross-border payments, DeFi (decentralized finance) lending, and RWA (real world asset) transactions, its issuer has the power to define the rules of the new financial system. They can decide who can access the system, freeze assets at any address according to instructions, and set compliance standards for transactions. This is a deeper and more intangible power than controlling physical routes.
1c. Ambiguous symbiosis and confrontation with the state
The history of the East India Company is an epic of evolving relations with the mother country. Initially, they were agents of the state to promote mercantilism and engage in strategic games with competitors such as Portugal. However, the company's profit-seeking nature caused it to quickly expand into an independent power center. In order to make profits, the EIC would not hesitate to launch wars (such as the Battle of Plassey) and engage in unethical trade (such as the opium trade), repeatedly dragging the British government into diplomatic and military quagmires that it was unwilling to participate in. Finally, when the company was on the verge of bankruptcy due to mismanagement and overexpansion, it had to seek help from the state, which led to the government gradually strengthening supervision through a series of bills (such as the Tea Act of 1773 and the Pitt Act of 1784), and finally completely depriving it of administrative power after the Indian National Rebellion in 1858, and bringing its territory under direct royal rule.
This history previews the possible dynamic relationship between stablecoin issuers and the U.S. government in the future. Currently, these companies are seen as strategic assets to promote the hegemony of the U.S. dollar and counter China's digital yuan. However, once they grow into a global financial infrastructure that is "too big to fail", their own institutional interests and shareholder demands will become crucial. They may make decisions that are contrary to U.S. foreign policy for the sake of commercial interests.
This indicates that when the US dollar stablecoin system issued by private institutions becomes too large, it will inevitably conflict with national sovereignty. At that time, we are likely to see an escalation of the stablecoin bill based on interest game.
The following table clearly contrasts these two power entities across time and space, revealing the striking similarities in history:
The ghost of history has returned. Through the "Genius Act", the United States is releasing a new East India Company. It is dressed in the cloak of technological innovation and holds the scepter of blockchain, but its core is the logic of an ancient commercial empire - a global private corporate sovereignty chartered by the state that will eventually compete with the state for power.
2. Global Currency Tsunami: Dollarization, Great Deflation, and the End of Non-Dollar Central Banks
The "Genius Act" has spawned not only a new power entity, but also a monetary tsunami that will sweep the world. The energy of this tsunami comes from the collapse of the Bretton Woods system in 1971. It was that historic "liberation" that paved the way for the global conquest of the US dollar stablecoin today. For those countries whose sovereign credit is already fragile, the future will no longer be a choice between the government's national currency and the traditional US dollar, but a choice between the collapsing local currency and the accessible, frictionless digital dollar. This will trigger an unprecedented wave of super-dollarization, completely ending the monetary sovereignty of many countries and bringing them a devastating deflationary shock.
2a. The ghost of Bretton Woods
To understand the power of stablecoins, we must go back to the moment when the Bretton Woods system collapsed. The system pegged the dollar to gold, and other currencies to the dollar, forming a stable structure with gold as the ultimate anchor. However, this system contains a fatal contradiction, namely the "Triffin Dilemma": as the world's reserve currency, the dollar must continue to flow to the world through the US trade deficit to meet the needs of global trade development; but the continued deficit will shake people's confidence in the dollar's ability to exchange for gold, and ultimately lead to the collapse of the system. In 1971, President Nixon closed the gold exchange 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 decoupled from gold and became a pure credit currency. It was liberated from the "shackles of gold", and the Federal Reserve could issue currency more freely to meet the domestic fiscal needs of the United States (such as the expenses of the Vietnam War) and the global demand for dollar liquidity. This laid the foundation for the dollar's hegemony in the past half century - an unanchored hegemony that relies on global network effects and the comprehensive national strength of the United States. Stablecoins, especially stablecoins recognized by US law, are the ultimate technical form of this post-Bretton Woods system. It has elevated the liquidity supply capacity of the US dollar to a whole new dimension, enabling it to bypass the layers of regulatory governments and the traditional, slow and expensive banking system, and directly penetrate into every capillary of the global economy and every individual's mobile phone.
2b. The advent of hyper-dollarization
In countries such as Argentina and Turkey that have long suffered from high inflation and political turmoil, people spontaneously exchanged their local currencies for US dollars in order to preserve their wealth. This is the phenomenon of "dollarization". However, there are many obstacles to traditional dollarization: you need a bank account, you need to face capital controls, and you need to bear the risks of holding physical currency. Stablecoins completely dismantle these barriers. Anyone with a smartphone can exchange their depreciating local currency for a stablecoin anchored to the US dollar in a few seconds at a very low cost.
In Vietnam, the Middle East, Hong Kong, Japan, and South Korea, U stores are rapidly replacing traditional money changers. Dubai sales offices have begun to accept Bitcoin payments, and Yiwu shops have begun to accept U to buy cigarettes.
These pervasive payment penetrations will turn the stablecoinization of the US dollar from a gradual process into an instantaneous tsunami. When a country's inflation expectations rise slightly, capital will no longer "flow out" but "evaporate" - instantly disappearing from the local currency system and entering the global crypto network. We can define this attribute as "enhanced substitution for sovereign currencies."
This would be a fatal blow to governments whose credibility is already shaky. The status of their currencies would be completely shaken because people and businesses have a more perfect and efficient alternative.
2c. Great Deflation and the Evaporation of State Power
When an economy is swept up by the wave of hyper-dollarization, its sovereign state will lose two of its most core powers: one is the power to make up for the fiscal deficit by printing money (i.e., seigniorage); the other is the power to regulate the economy through interest rates and money supply (i.e., monetary policy independence).
The consequences were catastrophic.
First, as the local currency is abandoned en masse, its exchange rate will spiral downward into hyperinflation. However, at the level of economic activity denominated in dollars, there will be a sharp deflation. Asset prices, wages, and the value of goods will plummet if measured in dollars.
Secondly, the government’s tax base will evaporate. Taxes denominated in the rapidly depreciating local currency will become worthless, and the country’s finances will collapse. This fiscal death spiral will completely destroy the country’s ability to govern.
This process, which started with Trump signing the Genius Act, will be accelerated through RWA (real world asset on-chain).
2d. The White House vs. the Federal Reserve: Power Struggle within the United States
This monetary revolution will not only hit America's opponents, it will even trigger a crisis within the United States.
Currently, the Federal Reserve, as an independent central bank, controls the monetary policy of the United States. However, a privately issued digital dollar system supervised by a new agency under the Treasury Department or the White House would create a parallel monetary 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 (for example, stimulating the economy in an election year, or precisely sanctioning opponents), thereby triggering a profound crisis of confidence in the independence of the U.S. dollar's monetary policy in the future.
3. The financial battlefield in the 21st century: the United States versus China’s “free financial system”
If the stablecoin bill is a power reconstruction internally, then externally, it is a crucial chess piece placed by the United States in the great power game with China: supporting a private, public blockchain-based, dollar-centered "free financial system" through legislation.
3a. The Financial Iron Curtain of the New Era
After World War II, the United States led the establishment of the Bretton Woods system, the purpose of which was not only to rebuild the post-war economic order, but also to build a Western economic group that excluded the Soviet Union and its allies in the context of the Cold War. Institutions such as the International Monetary Fund (IMF) and the World Bank have become tools for promoting Western values and consolidating the alliance system. Today, the "Genius Act" is to build a new version of the "Bretton Woods system" in the digital age. It aims to establish a global financial network based on the US dollar stablecoin, which is open, efficient, and ideologically diametrically opposed to the Chinese state-led model. This is a bit like the arrangement of the US free trade system to counter the Soviet Union, but with a more ruthless approach.
3b. Open vs. Closed: Permission-Based vs. No Permission Required
China and the United States have fundamental differences in their strategic paths toward digital currency. This is an ideological war between "openness" and "closedness."
China's digital RMB (e-CNY) is a typical "permissioned" system. It runs on a private ledger controlled by the central bank, and every transaction and every account is under the strict supervision of the state. This is a digital "walled garden" with the advantages of efficient centralized management and strong social governance capabilities, but its closed nature also makes it difficult to gain the real trust of global users, especially those individuals and institutions who are wary of its monitoring capabilities.
In contrast, the stablecoins supported by the United States through the "Genius Act" are built on "permissionless" public blockchains such as Ethereum and Solana. This means that anyone, no matter where they are, can innovate on this network - develop new financial applications (DeFi), create new markets, and conduct transactions - without the approval of any centralized institution. The role of the US government is not to be the operator of this network, but to be the "credit guarantor" of the most core asset (US dollar) in this network.
This is an extremely clever asymmetric strategy. The United States is taking advantage of 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 to an open ecosystem centered on the US dollar. China is invited to participate in a game that it cannot win structurally: How can a local area network controlled by the state compete with a vibrant financial Internet open to the world?
3c. Bypassing SWIFT: A dimensionality reduction attack that cuts off the source of the problem
In recent years, a core strategy for China, Russia and other countries to deal with the hegemony of the US dollar is to build financial infrastructure that bypasses US control, such as a cross-border payment system that replaces SWIFT (Society for Worldwide Interbank Financial Telecommunication). However, the emergence of stablecoins makes this strategy clumsy and outdated. Stablecoin transactions based on public blockchains fundamentally do not need to go through the intermediary of SWIFT or any traditional bank. The transfer of value is completed in a cryptographic way through a globally distributed network of nodes, which is a brand new track parallel to the old system.
This means that the United States no longer needs to defend the old financial castle (SWIFT) with great effort, but directly opens up a whole new battlefield. In this new battlefield, the rules are defined by codes and protocols, not treaties between countries. When most of the world's digital value begins to run on this new track, trying to build a "SWIFT alternative" is like trying to build a more luxurious carriageway in the era of highways. It has lost its meaning.
3d. Winning the battle for network effects
The core war in the digital age is the war of network effects. Once a platform attracts enough users and developers, it will form a strong gravitational force that makes it difficult for its 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 world's most innovative financial network. The resulting network effect will be exponential.
Developers around the world will give priority to developing applications for the US dollar stablecoin with the largest liquidity and the broadest user base. Global users will flock to this ecosystem because of the rich application scenarios and asset choices. In contrast, e-CNY may be promoted within a specific scope such as the "Belt and Road Initiative", but its closed, RMB-centric nature makes it difficult to compete with this open US dollar ecosystem on a global scale.
In summary, the "Genius Act" is far from a simple domestic bill. It is the core strategic deployment of the United States in the geopolitical chess game of the 21st century. It uses the concepts of "decentralization" and "openness" in a "four-two-pound" way to consolidate its most core power - the hegemony of the US dollar. It is not a symmetrical arms race with China, but by changing the terrain of the financial battlefield, it brings the competition into a new dimension where the United States has an absolute advantage and strikes down the opponent's financial system.
4. Denationalization of Everything: How RWA and DeFi Undermine State Control
Stablecoins themselves are not the end of the revolution, they are more like a Trojan horse that enters the city. Once global users get used to holding and transferring value through them, a bigger 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 the global public ledger. This process, the "real world asset on-chain" (RWA), will fundamentally sever the connection between assets and the jurisdiction of a specific country, realize the "denationalization" of assets, and ultimately subvert the traditional financial system centered on banks.
4a. Stablecoins: The Trojan Horse to a New World
In ancient legend, the Greeks conquered the fortified city of Troy by offering a giant wooden horse. Today, stablecoins are playing a similar role. In the eyes of governments and regulators, 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.
However, the irony of history is that while the GENIUS Act is committed to consolidating state power by promoting "safe" stablecoins, it has inadvertently built the largest user acquisition channel in history for "dangerous" and truly decentralized non-state currencies.
The core function of stablecoins is to serve as a gateway between the world of traditional fiat currencies and the world of crypto assets. They are the "on-ramp" of the crypto world and the "bridge" across the two worlds. An ordinary user may initially just want to enjoy the low cost and high efficiency of stablecoins in cross-border remittances or daily payments, or the subsidies given by merchants. But once they download a digital wallet and get used to the on-chain transaction model, the distance between them and truly decentralized assets such as Bitcoin and Ethereum is only one click away.
Platforms that provide stablecoin trading services, such as Coinbase or Kraken, are themselves an all-encompassing supermarket of crypto assets. Users come for stablecoins, but will soon be attracted by the high returns provided by DeFi protocols or the narrative of Bitcoin as a store of value. From holding USDC to staking ETH to participate in liquidity mining, this process is a natural extension for a user who has already entered the field.
This creates a profound paradox for the state. The state's short-term goal is to strengthen the dollar's 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-independent. The same wallet can store both regulated USDC and anonymous Monero; the same exchange can trade both compliant stablecoins and fully decentralized Bitcoin.
As users gain a deeper understanding of the crypto world, their demands for higher yields, stronger privacy, or true censorship resistance will grow, and they will naturally shift from stablecoins that only provide stable value but no potential for appreciation to assets that can meet these higher-level needs.
4b. RWA Revolution: Assets Break Free from National Borders
If DeFi is the superstructure of this revolution, then RWA is its solid economic foundation. The core of RWA is to convert assets that exist in the physical world or traditional financial system into tokens on the blockchain through legal and technical processes.
We can imagine a scenario like this:
An app developed by a Chinese team and available in the Apple App Store with millions of users worldwide has its ownership tokenized through legal and technical means, becoming a digital certificate circulated on the blockchain.
The token is traded on an on-chain, permissionless decentralized finance (DeFi) protocol.
A user in Argentina received the token in his digital wallet within seconds of initiating the transaction.
The entire process - tokenization of assets, collateralization, minting and transfer of stablecoins - is done entirely on-chain, bypassing the traditional banking systems of China, the United States (due to its dollar peg), and Argentina. This is not just a superior payment track, it is a parallel financial universe that almost ignores the political and legal boundaries drawn by the Westphalian system.
This is precisely how the "denationalization of currency" promotes the "denationalization of finance" and ultimately achieves the "denationalization of capital."
When capital can be denationalized, capitalists will naturally be denationalized as well.
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, securities firms, exchanges, payment companies and other institutions use their huge capital, complex systems and government licenses to solve the trust problem between the two parties of the transaction and charge high fees.
Blockchain technology, through its immutable, open and transparent characteristics, and rules enforced by code (smart contracts), provides a new trust mechanism - "code is law". Under this new paradigm, most of the functions of traditional intermediaries appear redundant and inefficient:
The bank's deposit and lending business can be replaced by decentralized lending protocols.
The exchange's matching transactions can be replaced by the automated market maker (AMM) algorithm.
Cross-border settlements by payment companies can be replaced by global transfers of stablecoins in seconds.
Wall Street's asset securitization can be replaced by more transparent and efficient RWA tokenization.
5. The Rise of the Sovereign Individual and the Twilight of the State
When capital can flow without borders, when assets can be separated from judicial jurisdiction, and when power shifts from nation-states to private giants and online communities, we have reached the end of this transformation - a new era dominated by the "Sovereign Individual" and marked by the end of the Westphalian system. This revolution, driven by stablecoins and artificial intelligence (AI), will have a far-reaching impact that exceeds the French Revolution, because it not only brings about a change of regime, but also changes the form of power.
(The book The Sovereign Individual is indeed a prophecy for our times)
5a. The prophecy of the (Sovereign Individual) comes true
In 1997, James Dale Davidson and Lord William Rees-Mogg predicted in their groundbreaking book (The Sovereign Individual) that the advent of the information age would fundamentally change the logic of violence and power. They argued that the nation-state rose in the industrial age because it could effectively protect and tax large, fixed industrial assets. But in the information age, the most important capital—knowledge, skills, and financial assets—will become highly mobile and even exist in invisible cyberspace. At that time, the state will be like a rancher trying to fence in "winged cattle", and its ability to tax and control will be greatly reduced.
The emergence of stablecoins, DeFi, and RWA is the real version of the "cybermoney" and "cyberreconomy" in this book. Together, they build a global, low-friction value network that truly gives capital wings. An elite individual can easily allocate his wealth to RWA tokens around the world and transfer it instantly between different jurisdictions through stablecoins, all of which is recorded in a public ledger that is difficult for the state machine to reach. The book's predictions that "individuals will be free 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 Treaty of Westphalia in 1648, the basic unit of world politics has been the sovereign state. The core principles of this system include: the supreme sovereignty of the state within its territory, the sovereign equality of all countries, and the principle of non-interference in each other's 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 the sovereign individual is fundamentally eroding this foundation. When the economic activities and wealth accumulation of the most creative and productive individuals occur "outside the territory" (cyberspace), territorial borders lose their meaning. States will inevitably weaken their fiscal foundations as they find themselves unable to effectively tax these globally mobile elites. In order to stop the outflow of wealth, desperate governments may resort to more radical and authoritarian measures, such as the "hostage-taking" taxation predicted in the book and the destruction of technologies that facilitate individual autonomy. But this will only accelerate the exodus of the elites, forming a vicious cycle. Ultimately, the nation-state may degenerate into a hollow shell whose function is limited to providing welfare and security to those less mobile people who cannot enter the global digital economy - a "nanny state" serving the poor. But obviously, such a country has nothing to do with wealth creation.
5c. The final frontier: the final battle between privacy and national taxation
The next step in this revolution will be privacy. Although the current public blockchain is pseudonymous, transactions can still be tracked. However, as privacy technologies such as zero-knowledge proofs mature (such as those used by Zcash and Monero), financial transactions in the future may be completely anonymous and untraceable.
When a globalized, stablecoin-based financial system is combined with strong privacy technologies, it poses the ultimate challenge to the country's tax collection capabilities. Tax authorities will face an impenetrable "black box" that cannot effectively identify transaction parties and taxable income. This will be the ultimate form of "deregulation" because when the country loses the ability to collect taxes, it also loses the ability to conduct effective supervision and provide public services.
The French Revolution replaced "monarchical sovereignty" with "national sovereignty". The subject of power changed from the king to the nation-state, but the territorial nature of power did not change. The revolution started by stablecoins uses "network sovereignty" and "individual sovereignty" to dissolve "territorial sovereignty of the nation-state". It is not a transfer of power, but the "decentralization" and "denationalization" of power. This is a more fundamental and thorough paradigm shift, and its far-reaching impact is indeed no less than, or even greater than, the French Revolution. We are standing at the dawn of the disintegration of the old world and the emergence of a new order. This new world will give individuals unprecedented freedom and power, but it will also bring chaos and challenges that we can hardly imagine today.
