A Landmark Legislation with a Dark Underside
On June 17, the U.S. Senate passed the GENIUS Act—a bill celebrated as a major win for the cryptocurrency sector. Its primary aim? Regulate stablecoins, a type of cryptocurrency pegged to real-world currencies like the U.S. dollar. On the surface, it appears to offer much-needed oversight and legitimacy to a volatile market. But dig deeper, and the legislation reveals a troubling possibility: the seeds of a future economic disaster.
From Bitcoin to the Casino of Crypto
The original vision of cryptocurrency was one of decentralization—free from government control and central banks. Bitcoin emerged as the face of this revolution, often likened to digital gold due to its limited supply and mining-based creation. But over time, the industry took a different turn.
Today, the crypto world operates more like a digital casino. Investors are lured by the promise of rapid gains, fueled by unpredictable market swings. The value of most cryptocurrencies is not based on tangible economic fundamentals but speculation—much like spinning a roulette wheel.
Stablecoins: A Promise of Safety—or an Illusion?
To overcome this volatility and attract conservative investors, crypto firms introduced “stablecoins.” These are cryptocurrencies pegged to stable fiat currencies like the U.S. dollar, theoretically offering both flexibility and reliability.
For example, if Company T launches a token, “t-coin,” and promises a 1:1 redemption rate with the dollar, investors feel safer. But this system depends entirely on the company’s ability to honor that promise. If the company fails to back its coins with actual dollars, the currency collapses—just like Terra did in 2022, wiping out $500 billion in global crypto value overnight.
Corporate Currency: Convenience or Chaos?
Now that the GENIUS Act is in play, major corporations like Amazon and Walmart are reportedly planning to launch their own stablecoins. This opens a new can of worms. If each company issues its own token, will consumers be able to use them interchangeably? What happens if the value fluctuates depending on where it’s accepted?
These tokens could become fragmented digital currencies tied to specific brands, confusing consumers and complicating transactions. Worse, public confidence in these coins may be misplaced due to the very fact that they’re “regulated,” leading to uncritical trust in fundamentally risky assets.
How a Corporate Stablecoin Collapse Could Crash the Global Economy
Let’s say a large corporation issues $100 billion in stablecoins, backed by assets like U.S. Treasury bonds. As long as its finances are healthy, no problem. But if the company falters and investors panic, mass redemptions would follow. To meet demand, the company might offload U.S. bonds, triggering a bond price collapse and a sharp spike in interest rates.
This isn’t just a company issue—it becomes a systemic risk. Rising interest rates could cascade across banks and economies worldwide, potentially igniting a global financial crisis.
Regulation Isn’t Foolproof
While the GENIUS Act brings oversight, it doesn’t guarantee safety. The 2023 collapse of Silicon Valley Bank, despite regulation, showed that critical vulnerabilities can be missed. If even one large corporation mismanages its stablecoin reserves, the consequences could be catastrophic.
In short, the GENIUS Act may regulate stablecoins, but it cannot regulate human error, greed, or economic panic.
