Washington’s GENIUS Act has crypto advocates celebrating clear stablecoin regulation. Politicians tout it as cementing dollar dominance for decades. The financial press frames it as America’s masterstroke against competing currencies.
They’re all missing the point. The GENIUS Act didn’t create a protective moat around the dollar. It handed every other nation a blueprint for building their own digital currencies.
Regulatory Clarity Cuts Both Ways
The GENIUS Act deserves credit for bringing much-needed clarity to U.S. stablecoin operations. Clear reserve requirements, regulatory oversight, and compliance frameworks remove much of the uncertainty that has plagued the sector for years. Circle’s USDC and other major operators can finally build without constantly looking over their shoulders for regulatory changes.
But while Washington celebrates this supposed victory for dollar dominance, the real story unfolds differently. The GENIUS Act establishes a regulatory template that other nations are already adapting for their own currencies. Japan’s JPYC initiative, Hong Kong’s digital currency framework, and emerging programs across Latin America and Asia all borrow heavily from America’s approach.
The framework standardizes USD stablecoins without addressing the fundamental inefficiency that limits their global adoption: local liquidity gaps. Today’s cross-border payments still rely on expensive, multi-step currency conversions that eat 3-6% in foreign exchange costs.
The Dollar Detour Problem
Consider a Brazilian worker in Japan trying to send money home. Under today’s system, they must navigate a complex route of converting yen to dollars, purchasing USD stablecoins, and then converting to Brazilian reals. Each step incurs fees, delays, and counterparty risk.
This process makes little economic sense. Why should two non-dollar economies be forced through a USD intermediary?
USD stablecoins like USDC work brilliantly as bridge assets for institutional trading and DeFi applications. But for everyday cross-border payments between non-dollar economies, they introduce unnecessary complexity and cost, whereas neutral settlement layers enable cross-border liquidity without USD intermediation.
The Unintended Revolution
The GENIUS Act’s global influence creates consequences its architects probably didn’t anticipate. By providing a clear regulatory framework, it reduces the perceived risk of sovereign stablecoin projects worldwide. Countries no longer need to wonder whether digital currency regulation is feasible — they can adopt America’s proven approach.
Japan’s Digital Agency has already announced plans for yen-backed stablecoins using compliance frameworks inspired by U.S. legislation. Hong Kong’s monetary authority is developing similar standards for digital Hong Kong dollars. Brazil, Mexico, and other emerging economies are crafting their own versions.
Programmable foreign exchange between sovereign stablecoins could reduce cross-border costs below 0.1% while eliminating settlement delays. The vision resembles CLS Bank’s multilateral settlement system, but without USD hegemony. Foreign exchange without dollar gatekeepers.
Regulatory Harmony Means No Monopoly
The GENIUS Act succeeds as policy precisely because other jurisdictions can replicate its approach. Regulatory harmony across major economies reduces compliance complexity for global stablecoin operators while enabling seamless cross-border integration.
But this same harmonization prevents any single currency from monopolizing digital payments. When every major economy offers compliant local stablecoins, market forces will determine adoption patterns rather than regulatory barriers.
Circle’s USDC benefits from first-mover advantages and deep DeFi integration, making it an excellent bridge asset for institutional applications. However, consumer payments will likely gravitate toward local stablecoins that eliminate foreign exchange friction and provide a familiar denomination.
European regulations under MiCA are creating similar frameworks for euro-denominated stablecoins. Asian financial centers are developing parallel structures for yen, won, and other regional currencies. Latin American countries are exploring peso and real-backed alternatives.
The result resembles traditional correspondent banking networks more than dollar hegemony. Each currency maintains its local utility while gaining programmable capabilities for international settlement.
Network Effects Work Both Ways
Stablecoin adoption follows network effects similar to other digital platforms. Early users gravitate toward established options with deep liquidity and broad acceptance. This initially favors USD stablecoins due to their head start and existing DeFi integration.
However, network effects also reward local utility. A Mexican business paying suppliers in pesos has little reason to hold dollar-denominated stablecoins beyond transaction settlement. Local stablecoins eliminate currency risk while providing the same programmable money benefits.
The strongest network effects emerge around specific use cases rather than abstract store-of-value properties. Payroll systems, supplier payments, and consumer remittances all benefit from denomination matching that eliminates foreign exchange exposure.
Multi-currency stablecoin infrastructure resembles email protocols more than traditional monetary systems. Just as Gmail users can communicate with Outlook users through standardized protocols, peso stablecoins can settle with yen stablecoins through interoperable smart contracts.
The Plural Future of Money
The GENIUS Act represents a crucial step toward digital currency maturity, but not for the reasons its supporters claim. Rather than cementing dollar dominance, it validates the concept of sovereign digital currencies for every major economy.
The future financial system will likely feature dozens of compliant stablecoins representing major currencies, all interconnected through programmable settlement layers. Dollar stablecoins will play important roles in this ecosystem without necessarily dominating it.
For policymakers, the lesson is clear. Regulatory clarity accelerates innovation while protective barriers become obsolete.
The GENIUS Act didn’t crown the dollar as king of digital money. It proved that the future belongs to whoever builds the best infrastructure for local currency digitization. That’s a competition America can win, but only by competing on merit rather than relying on incumbent advantages.
The stablecoin revolution is just beginning, and it will be gloriously plural.
Source: https://www.coindesk.com/opinion/2025/09/09/the-genius-act-won-t-save-the-dollar
