CCTV News: Trump signs stablecoin-related bill. What is a stablecoin? What should be “stabilized”?

Written by: CCTV News

On the 18th local time, US President Trump officially signed the "Guidance and Establishment of a National Innovation Act for American Stablecoins" (referred to as the "Genius Act") at the White House, marking the first time that the United States has formally established a regulatory framework for digital stablecoins.

Trump said stablecoins would increase demand for U.S. Treasuries, lower U.S. interest rates and ensure the dollar's status as a global reserve currency.

Since Trump started his second term, he has launched a number of initiatives to support cryptocurrencies. The United States has recently stepped up efforts to promote the relevant legislative process of the "Genius Act". What impact will this have on the United States?

 △On July 18, Trump officially signed the "Genius Act".

Speed up the legislative process

On June 17, the U.S. Senate passed the Genius Act by a vote of 68 to 30, marking the first time the chamber has approved major cryptocurrency legislation.

On July 17 , the U.S. House of Representatives voted to pass three bills related to stablecoins and other encrypted digital currencies: the Guidance and Establishment of a U.S. Stablecoin National Innovation Act, the Digital Asset Market Clarity Act, and the Anti-Central Bank Digital Currency Surveillance National Act.

On July 18 , US President Trump signed the Genius Act, calling it "one of the greatest changes in financial technology since the birth of the Internet." At the same time, he reiterated that "central bank digital currency will never be allowed in the United States."

Three questions about the US cryptocurrency bill

What are stablecoins?

Cryptocurrencies are generated through algorithms and adopt a decentralized model. Holders update the quantity according to the algorithm. Major cryptocurrencies include Bitcoin, stablecoins, etc.

Unlike Bitcoin, stablecoins are relatively stable in price and are usually pegged to the U.S. dollar at a 1:1 ratio. Once the Genius Act is signed and implemented, it will require stablecoins to be backed by liquid assets such as the U.S. dollar or U.S. short-term Treasury bonds, and issuers will be required to disclose stablecoin reserve details on a monthly basis.

Currently, the two largest stablecoins in the world by market value are Tether (USDT) and USD Coin (USDC), and their combined market value accounts for about 90% of the total market value.

Stablecoins were first launched in 2014. In 2020, the global stablecoin market value was only US$20 billion, which was in the initial stage of the market. Since then, stablecoins have entered a stage of rapid growth supported by two major driving forces:

• On the one hand, in cryptocurrency transactions, more than 90% of Bitcoin transactions are settled through USDT/USDC, making it the "crypto-dollar standard";

• On the other hand, in emerging market countries, stablecoins have become a "digital safe-haven asset" for the general public, accounting for as much as 72% of the cryptocurrency trading volume in these countries.

According to statistics from the cryptocurrency data provider Bihu, the stablecoin market is currently worth about $247 billion. U.S. Treasury Secretary Bessant said the stablecoin market is expected to grow to $3.7 trillion by 2030.

What is the purpose of the US government’s promotion of stablecoins?

Experts pointed out that in the process of digital currency development, the value and influence of the US dollar have been greatly impacted. The United States hopes to promote the stable currency model, give full play to the existing and strong advantages of the US dollar, and maintain and enhance its influence in the field of stable currency and digital currency .

Trump and some US officials have suggested that the future pressure on US debt could be reduced by issuing stablecoins.

From a fundamental perspective, the US government promotes stablecoins in the hope of continuing to maintain its dominance in the global monetary and payment systems , further influencing the future global monetary and payment systems, and maintaining the United States' own competitiveness.

Can the United States maintain the status of the dollar through stablecoins?

Experts analyzed that the current global influence of the US dollar is based on the international economic order after World War II, and has formed the international influence of the US dollar itself. The measures currently taken by the Trump administration show that it does not recognize the US trade deficit and wants to maintain a surplus or balance. Maintaining a surplus means that no more US dollars will flow into the international market through trade, which will obviously impose certain restrictions on the global use of the US dollar.

Whether a currency or a payment method can gain favor is not only a matter of usage cost, but also includes the credibility represented by the currency .

Experts believe that whether the United States can assume necessary responsibilities for the world, fulfill its commitments, maintain the stability of the global trade economy, rather than interfere with international economic and trade relations through sanctions and long-arm jurisdiction, is very important to the development of stablecoins. If these cannot be done, and the dollar is simply replaced with another way of expression without changing the way the dollar's value is determined, then both the dollar and the corresponding stablecoin may find it difficult to gain global and broader support in the future.

The bill continues to be controversial in the United States

Analysts believe that the Genius Act will pave the way for US banks to issue digital assets on their own after it becomes law . Wall Street executives from JPMorgan Chase and Citigroup are eager to start digital asset businesses, while Bank of America CEO Brian Moynihan has warned that it is unclear how much digital currency will be in demand.

The Genius Act has also been questioned and opposed by some people from both parties. Some Democrats believe that the bill fails to provide adequate protection for consumers, national security or financial stability, and accuses the Trump family of having links with cryptocurrencies. Republicans who hold opposing views believe that the bill does not follow an executive order signed by Trump in January this year, which includes a ban on the promotion of central bank digital currencies.