With the recent enactment of the so-called Genius Act—the first federal law regulating the issuance of stablecoins, cryptocurrencies whose value is pegged to the U.S. dollar or other relatively stable assets—the United States has taken a further step toward the privatization of money. This move, strongly backed by the crypto industry, comes as no surprise, given that the sector has become the top donor to recent U.S. election campaigns.
Although stablecoins still represent a minority share of the overall crypto market, they appear poised for significant growth in market capitalization—from the current $260 billion to $500 billion by 2028 according to JPMorgan, or even $3.7 trillion by 2030 according to Citigroup. As of now, the market leader remains USDT, issued by Tether, a company controlled by Italian investors Giancarlo Devasini and Paolo Ardoino. Also gaining ground is USDC, issued by the American company Circle, which was recently listed on Wall Street.
Meet the stablecoins, a “steady” alternative to traditional cryptocurrencies
The goal: regulate (and privatize) the market
The newly passed U.S. law stipulates that stablecoins may only be issued by entities explicitly authorized by federal regulators, following verification of certain capital requirements such as reserve fund segregation, monthly attestations, and minimum capital standards. It also introduces anti-money laundering obligations, with direct oversight from the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC).
The law further addresses the status of stablecoin holders in the event of the issuing company’s bankruptcy: they will have general priority over other creditors, though full recovery of losses is not guaranteed.
Finally, the approved package includes a particularly significant provision that effectively fully privatizes the market. This is the so-called Anti-CBDC Surveillance State Act, which prohibits the Federal Reserve from issuing a central bank digital currency (CBDC). The bill, which still awaits Senate approval, would push the United States in a totally opposite direction to European Central Bank, which is instead actively pursuing the issuance of digital euro.
More stable, but not equally transparent
Doubts remain, particularly due to widespread areas of opacity. Stablecoins, after all, claim to provide the kind of stability that traditional cryptocurrencies have always lacked. However, so far—especially in the case of Tether—they have failed to offer genuine transparency, either regarding their corporate structure or their actual ownership. This has led to controversy and legal action by U.S. authorities concerning the true extent of the reserves held to back the user funds converted into tokens.
Adding to the concerns are growing warnings about the risks stablecoins pose to international financial stability. As a result, many observers question whether it is appropriate to entrust private issuers with a role that effectively touches on monetary policy.
Oxfam: how the ultra-rich are fueling the climate crisis and global inequality
Genius Act Under Fire
The Genius Act has also come under scrutiny. Critics such as Nobel Prize–winning economist Paul Krugman have highlighted the risks it poses to financial stability and the potential increase in money laundering. At the same time, Adam Levitin, a law professor at Georgetown University, has criticized the legislation for introducing dangerous changes to U.S. bankruptcy law.
The Genius Act ““safety for stablecoin investors at no cost, but because it cannot deliver on that promise, it sets up a situation where the government has to deliver safety otherwise, on its own dime,” Levitin explained. “In other words, it sets up a bailout.”
He added: in a default event, “there’s no guarantee that clients can get their money back out again. If a custodian goes bankrupt it may not provide immediate access to your coins. You’ll be an unsecured creditor of the custodian”. And the domino effect could be devastating. In short, it’s like a casino: the winners are Wall Street’s speculative investors (thanks to the federal guarantee). While the losers, in the event of a collapse, could be the taxpayers.
Tariffs will produce boomerang effect on US economy according to Yale researchers
Are Stablecoins Really Stable?
A growing body of economic research highlights the risks stablecoins pose to financial stability. In theory, a stablecoin should be redeemable at any time for an equivalent value in U.S. dollars. However, the reserve assets backing these coins often consist of a mix of Treasury securities, fiat currencies, cryptocurrencies, and even gold. The most notorius case is Tether—the largest stablecoin by market capitalization—whose reserves are largely made up of illiquid assets not always equivalent to immediately available cash.
This creates the risk of a mismatch between liquidity and dollar-pegging, which is compounded by custody risks—as demonstrated by the collapse of the FTX exchange and the Coinbase scandal—and by the potential insolvency of the issuer.
A recent study published in May by the U.S. National Bureau of Economic Research, involving researchers from Columbia University, the University of Pennsylvania, and the University of Chicago, specifically examined the issue of so-called “run risk”—that is, the risk of users rushing to redeem their stablecoins (the crypto equivalent of a bank run during a default scenario)—and its impact on the reserve mechanism that underpins the stability of these currencies.
The analysis found that there is an inherently fragile balance between price stability and run risk. When redemption is easy and immediate, volatility in the stablecoin decreases (i.e., the coin becomes more stable). However, greater liquidity also increases pressure on the secondary market, which in turn heightens the risk of runs and sudden crises.
