Why GENIUS Act is Truly "Genius" 

Updated: November 1, 2025

Key Points

• Stablecoins are drivers of U.S. Treasuries demand. Regulated stablecoins must hold cash-like U.S. assets, so on-chain dollar use becomes automatic Treasury demand.

• GENIUS Act secures the new distribution channel for national debt. By fixing who can issue and what they must hold, GENIUS locks this demand inside the U.S. system.

• The future of structural dollar demand is a new digital economy. As transactions move on-chain, dollar power will follow digital rails, not trade flows.

Introduction

I am writing this blog with some delay, but the idea of documenting my thoughts has been haunting me for some time now. On July 17, 2025, the US House of Representatives passed the S.1582 - GENIUS Act - the US law that legitimizes stablecoins and mandates the issuers to back every unit of stablecoin with the US dollar or very liquid U.S. assets, i.e., bank deposits or short-term Treasuries. In other words, under the GENIUS Act, every extra dollar of global demand for digital dollars is forced to turn into demand for U.S. dollar assets. 

And this is truly "genius"! In a world that is undergoing the transformation towards multipolarity, the rise of the regional national conglomerates and the increasing spread of cryptocurrencies controlled by corporations rather than governments or not controlled by any subject of international cooperation (e.g., Bitcoin), the GENIUS Act secured the demand for the US dollar for many years ahead, independently of the unfolding geopolitical play. 

In the following paragraphs, I reflect on some of the theoretical mechanisms behind it and expand the possible research directions.

A New Distribution Channel for National Debt

As Figure 1 shows, U.S. dollar stablecoin issuers have already entered the club of the top twenty foreign holders of U.S. Treasuries — somewhere between Norway and Saudi Arabia. That is a remarkable development: Until recently, this tier was dominated almost exclusively by national governments and monetary authorities. What the GENIUS Act does is open a parallel lane: Instead of trying to sell more of the same debt to the same sovereign buyers, it creates a regulated pathway for a new class of buyers — private stablecoin corporations whose business model requires them to hold U.S. safe assets.

One could call this a “blue-ocean” strategy. The point is that dollar-backed, fully reserved, blockchain-native financial intermediaries did not exist at scale in the old offshore dollar architecture. What is remarkable, too, is that the Act did not have to “persuade” these firms to buy Treasuries; it made Treasuries the default collateral of their business model. That is a very different kind of market creation.

Because the U.S. is one of the most lucrative and profitable markets, the majority of stablecoin companies could not bypass it. While traditional corporations and financial institutions were never prohibited from holding U.S. Treasuries, they buy them as one portfolio option among many. By contrast, stablecoin issuers buy them as a mandatory obligation. The GENIUS Act hardwires that preference. As a result, every extra dollar of growing global demand for tokenized dollars translates back into demand for U.S. public debt. This is why the Act broadens the perimeter of actors who must, by design, hold U.S. liabilities.

Monetary logic behind the GENIUS Act

Recent contributions on the international dollar system argue that we are no longer in classic “Triffin land,” because the reserve role of the dollar no longer requires the United States to run persistent current account deficits; instead, it is sustained by the elasticity of global dollar intermediation and the depth of U.S. financial markets (Borio & Disyatat, 2011; Bossone, 2025). 

Building on that view, the GENIUS Act can be read as a digital extension of this logic: by defining and supervising dollar stablecoins that must be backed by U.S.-domiciled, high-quality liquid assets, it creates an additional, policy-made channel through which non-resident demand for transacting in dollars is transformed into demand for dollar liabilities. However — and this is the key caution — the international position of the dollar does not hinge solely on GENIUS or on on-chain adoption. It still rests on the older pillars that Borio and Disyatat implicitly keep in the background: the benchmark role of the U.S. Treasury market as the world’s safe-asset supplier, the credibility of U.S. legal and supervisory institutions to protect those claims, and the Federal Reserve’s demonstrated willingness to backstop global dollar funding in crises (Obstfeld, 2012).

In that sense, GENIUS does not replace Triffin-era or post-Triffin foundations; it adds a new, digitally mediated source of structural dollar demand to the set of mechanisms that already sustain dollar dominance.

References:

1. Borio, C., & Disyatat, P. (2011). Global imbalances and the financial crisis: Link or no link? (BIS Working Paper No. 346). Bank for International Settlements.

2. Bossone, B. (2025, April 10). Not Triffin, not Miran: Rethinking US external imbalances in a new monetary order. VoxEU/CEPR. 

3. Obstfeld, M. (2012). Financial flows, financial crises, and global imbalances. Journal of International Money and Finance, 31(3), 469–480.

Please cite this article as: 

Petryk, M. (2025, November 1). Why GENIUS Act is Truly "Genius". MariiaPetryk.com. https://www.mariiapetryk.com/blog/post-25