The U.S. government is embracing cryptocurrency
Introduction to GENIUS Payment Stablecoins
On July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act legislation into law. GENIUS is a major piece of legislation; the first major U.S. federal legislation regulating stablecoins. Stablecoins are a type of cryptocurrency tied to assets like the U.S. dollar.
GENIUS establishes a comprehensive regulatory framework for payment stablecoins, including authorized federal and State payment stablecoin regulators and payment stablecoin issuers.
Payment stablecoins are digital assets used for payments or settlements, and are required by GENIUS to have a stable value by maintaining “at least” a 1-to-1 ratio with the value of the dollar. (The Act says little about non-payment stablecoins – stablecoins issued and bought to hold for investment purposes by private investors – other than in Section 14, where the Treasury “shall carry out a study of non-payment stablecoins.”)
Regulatory Framework of GENIUS
The regulatory framework of GENIUS revolves around payment stablecoin regulators at the federal and State levels. These regulators oversee federal payment stablecoin issuers. Separate regulators oversee payment stablecoin issuers in all 50 States. Regulators also oversee all foreign payment stablecoin issuers. Yes, foreign payment stablescoins are allowed, as long as their issuers are approved by federal regulators.
The Stablecoin Certification Review Committee certifies all payment stablecoin applications. The Chair of the Federal Reserve Board is a member of the Stablecoin Certification Review Committee. So the Fed has a big say about who becomes an issuer of GENIUS payment stablecoins.
Approved issuers of payment stablecoins are required by Section 4 (a) (1) A of the GENIUS Act to back their stablecoins 100% with high-quality liquid assets. These assets must be U.S. dollars (cash or cash equivalents held in insured depository institutions), U.S. Treasury securities (e.g., Treasury bills, notes, or bonds), or other low-risk, highly liquid assets approved by the Office of the Comptroller of the Currency (OCC), such as U.S. government-backed securities.
So, the intent of GENIUS is to create cryptocurrency in the form of payment stablecoins tied to U.S. government securities. Currently, the Treasury auctions off U.S. Treasury securities to fund the government. But this funding mechanism can’t keep up with massive government overspending. So a major new source of funding for the U.S. government is needed.
GENIUS serves as a major new funding source for the U.S. government. That is why foreign payment stablecoins are allowed: it’s a way for other countries to fund our debt.
No one knows whether payment stablecoins will find favor with investors but if they do in a big way, it’s going to create a very large regulatory regime, and a large bureaucracy to go with it. All 50 states can have their own stablecoin issuers and there are separate stablecoin regulators for the states. This in addition to primary federal payment stablecoin regulators and issuers, which also oversee foreign payment stablecoins.
Important Points Regarding the GENIUS Act and Their Implications
· Section 4 (e) (1) and (2) of the GENIUS Act makes clear that
(1) “Payment stablecoins shall not be backed by the full faith and credit of the United States, guaranteed by the United States Government, subject to deposit insurance by the Federal Deposit Insurance Corporation, or subject to share insurance by the National Credit Union Administration.” And (2) “It shall be unlawful to represent that payment stablecoins are backed by the full faith and credit of the United States, guaranteed by the United States Government, or subject to Federal deposit insurance or Federal share insurance.”
The U.S. dollar, and bank accounts, are. All accounts at a Federal Reserve depository institution are insured and guaranteed by the FDIC up to $250,000.
The GENIUS Act describes digital assets as follows: “The term ‘digital asset’ means any digital representation of value that is recorded on a cryptographically secured distributed ledger.”
The dollar is a fiat currency – currency not backed by tangible assets like gold or silver – BUT it is backed by the “full faith and credit of the United States,” so in effect it does have value, whereas the payment stablecoin is essentially a token that serves as a representation of value. In other words, your payment stablecoins are tied directly to the dollar but are not insured as is the dollar. Caveat empor.
· In Section 5, under the heading FAILURE TO RENDER A DECISION it says,
“If a primary Federal payment stablecoin regulator fails to render a decision on a complete application within the time period specified in paragraph (1) [120 days] the application shall be deemed approved.”
This is an invitation for fraud. If our wickedly efficient government doesn’t respond within 120 days to an application to issue payment stablecoins, any dodgy applicant is automatically approved!We just gotta hope the GENIUS bureaucracy is efficient and honest at the federal level and in all 50 states (joke).
· To be fair, in order for a payment stablecoin issuer to receive certification the Federal stablecoin regulator must ensure that the applicant fulfills all the criteria to issue payment stablecoins. Moreover, GENIUS requires that issuers implement money laundering procedures to “prevent the permitted payment stablecoin issuer from facilitating money laundering, in particular, facilitating money laundering for cartels and organizations designated as foreign terrorist organizations under section 219 of the Immigration and Nationality Act (8 U.S.C. 1189) and the financing of terrorist activities, consistent with the requirements of this Act.”
The above sounds great on paper, but I remember the collapse of the FTX cryptocurrency exchange, in which investors lost billions; the $70 billion Bernie Madoff ponzi scheme; the subprime mortgage scandal; the failure of Lehman Bros. which helped to kicked off the 2008 recession, and the Goldman Sachs financial fraud (to name a few).
Government regulators don’t always do their jobs.
· A State approved payment stablecoin issuer supervised by a State regulator is allowed to issue payment stablecoins to the value limit of $10,000,000,000 (10 billion dollars). Above that level, the issuer must either cease issuing payment stablecoins or “transition to the Federal regulatory framework of the primary Federal payment stablecoin regulator…” associated with the institution (Federal Reserve, FDIC, Comptroller of the Currency, National Credit Union Association, etc.).
· There is a $100,000 fine per day for domestic stablecoin issuers each time they violate the terms outlined in GENIUS. For foreign stablecoin issuers, the fine is $1,000,000 per day, until the Secretary of the Treasury deems that the stablecoin issuer is compliant.
This provision may be enough to discourage fraudsters from illegal activities, as long as it is actually enforced.
· Section 17 makes clear that “payment stablecoins are not securities or commodities and permitted payment stablecoin issuers are not investment companies.”
CBDCs and Other Issues
(a) Critics of GENIUS describe the Act as the thin edge of the wedge toward establishing a central bank digital currency (CBDC). CBDC’s are digital currencies issued and overseen by a central bank: in the US, the Federal Reserve. If all money is in the form of a CBDC, there is no individually owned money. If you have digital CBDC money in a bank or invested, it’s not really yours, it’s the Federal Reserve’s. Your life savings can go to zero simply by a government declaration.
This is important because
(b) A CBDC issued and backed by the Federal Reserve is designed for use by the general public (individuals and businesses) for everyday transactions. GENIUS payment stablecoins are also designed for use by the general public for everyday transactions. CDBCs are digital assets and payment stablecoins are also defined as digital assets in Section 2 (22).
Section 2, (27) of the GENIUS Act states specifically that the Stablecoin Certification Review Committee contains a Chair of the Federal Reserve Board as a member. Section 7 of the Act makes it clear that the Federal Reserve Board (or the Comptroller of the Currency) may, under “exigent circumstances,” initiate enforcement actions against any State qualified stablecoin issuer. In other words, the U.S. central bank is the eminence gres (the power behind the throne) of GENIUS payment stablecoins.
(c) One of the fondest wishes of those who promote CBDCs is to abolish cash. What good is a CBDC if individuals can still use Federal Reserve Notes to pay outside the system? The purpose of a central bank digital currency is to quash individual financial independence and establish complete central control of the money supply.
Fortunately, GENIUS specifies that the reserves payment stablecoin issuers must use to back their stablecoins include “United States coins and currency (including Federal Reserve notes) or money standing to the credit of an account with a Federal Reserve Bank.” This provision would seem to ensure the continuance of cash.
Private sector CBDC?
Because of (a), (b), and (c) above, and because the public is aware of the dangers of CBDCs, Congress passed the Anti-CBDC Surveillance State Act and it became law on July 17, 2025. It prohibits the Federal Reserve from issuing a CBDC without congressional approval. I’m no lawyer, but the language in the Anti-CBDC Act is specific about not allowing CDBCs.
Nevertheless, GENIUS promotes dollar-backed digital stablecoins as a private-sector alternative to a government CBDC, requiring issuers to hold dollar or Treasury reserves. This is a sneaky way to strengthen dollar-based digital finance without formally creating a U.S. CBDC. But perhaps I am just paranoid.
Issuers, Sellers, and Buyers
All Issuers of payment stablecoins must be approved by authorized federal or State payment stablecoin regulators. Issuers are private companies who actually create the stablecoin. Issuers, of course, control the databases and ledgers for their coins.
Major sellers of stablecoins are likely to be the big investment banks, such as J.P. Morgan Chase, Citibank, etc. These are the “too big to fail” banks that get bailed out every time they make bad decisions, as in the case of the collapse of Silicon Valley Bank in 2023.[1]
Buyers can be institutions, other banks, and you and me.
What happens if Chase and Citibank get asked by the feds to cancel the coins you purchased from them? We know that the previous administration’s FBI demanded that social media outlets like Twitter (now X) and You Tube ban thousands of posts and even shut down entire accounts. And they did.
You might be a domestic violent extremist, such as a mom who attends local school board meetings and objects to local educational priorities. Or you might be a fascist who objects to having tampons placed in men’s bathrooms, or who objects to men who pretend to be women competing against girls in sporting activities. Or – gasp! – you might even be a believer in QAnon!!! (whatever that is).
Lest you think I am exaggerating (I am!), here is the text in Section 2, (16) Lawful Order:
“(16) LAWFUL ORDER.—The term “lawful order” means any final and valid writ, process, order, rule, decree, command, or other requirement issued or promulgated under Federal law, issued by a court of competent jurisdiction or by an authorized Federal agency pursuant to its statutory authority, that—
(A) requires a person to seize, freeze, burn, or prevent the transfer of payment stablecoins issued by the person;
(B) specifies the payment stablecoins or accounts subject to blocking with reasonable particularity; and
(C) is subject to judicial or administrative review or appeal as provided by law.”
(In the Act, “person” is defined in Section 2 (24) as follows: “The term ‘person’ means an individual, partnership, company, corporation, association, trust, estate, cooperative organization, or other business entity, incorporated or unincorporated.”
“I’m sorry sir, we have been ordered to seize your payment stablecoins,” or, “I’m sorry ma’am, there is a hold payment freeze on your payment stablecoins.” This is precisely what the Federal Reserve can do in a fully implemented CBDC digital asset system.
There are two ways to interpret anything of course: positive or negative, but the integrity of government programs is always in question.
Consequences
(1)
What happens when big banks issue (or sell) stablecoins and then mismanage them? This resembles the age-old practice of governments who shave coins that are supposed to be a certain weight of metal, as a way to raise money. Stablecoins that do not mirror the value of the dollar one-to-one may lose their value.
Government regulators have always caved-in to the private banks, particularly the ones who participate in the auctioning of U.S. Treasuries. These “way too big to fail” banks help the federal government fund itself (when it isn’t printing trillions of inflationary dollars, that is).
Here’s a nice little “out” for stablecoin issuers in the legislation:
“(22) PAYMENT STABLECOIN.—The term “payment stablecoin”—
(A) means a digital asset— …
(ii) the issuer of which— …
(II) represents that such issuer will maintain, or create the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value.”
Why is the clause in bold inserted? What does “reasonable expectation” mean? “Hey we tried, but your stablecoin has just lost 20% of its value against the dollar. Sorry about that!”
Welp, I guess the writers and signers of this Act expect a little hanky-panky with stablecoins.
To be fair, a provision exists in the Act to prevent fraud and misrepresentation: Section 4 (a) 10 C says,
“CONSULTATION.—The primary Federal payment stablecoin regulators may consult with the Public Company Accounting Oversight Board to determine best practices for determining audit oversight and to detect fraud, material misstatements, and other financial misrepresentations that could mislead permitted payment stablecoin holders.”
This is pretty vague language however.
As an aside, check out the Federal Deposit Insurance Corporation’s list of bank failures since October 2000. It’s a very long list that spans 58 pages and hundreds of banks.
Entrusting banks to issue “stablecoins” seems like a shaky proposition to me. But desperate times require desperate measures I guess, with a mismanaged federal government that is $37 Trillion in debt.
(2)
Most important, the GENIUS Act creates many, many more potential buyers of U.S. securities, ensuring that the federal government remains fully funded.
You might be wondering, whatever happened to DEFUNDING the government? Why are we making this massive grifting operation even bigger? That’s the question people who voted for Trump – many of whom were harassed and debanked for speaking out – are asking.
BRICS and the Chinese Communist Party
(1). The more positive side of GENIUS involves actions against the de-dollarization effort of the BRICS countries, and the economic and political competition with the Chinese Communist Party. The CCP, since the issuance of Unrestricted Warfare, their manual of war against the US, has been working for almost 30 years to wreck the dollar, interfere in U.S. elections and U.S. markets, and restrict access to rare earth metals vital to industry and technology applications.
The CCP holds about $816 billion in U.S. debt. If the CCP decides to dump their holdings it could adversely affect the U.S. economy and markets.
Meanwhile, the U.S. national debt as of this writing (August 2025) is approaching $37 trillion. Last year the interest on the national debt was over $1.1 TRILLION, over $200 billion more than the budget for the entire Defense Department! Decades of mismanagement, myopia, and deficit spending by the incompetents in Congress have finally hit home. The interest on the national debt will increase every year unless there is a massive cut in spending, OR a massive increase in government funding.
My guess is that Trump understands this and is hoping GENIUS will fund the government’s massive interest payments on its borrowed money.
(2). Whatever threatens the dollar also threatens the dollar’s status as the world’s reserve currency, which is still the primary currency for global transactions. The status of the dollar has allowed the US to print a massive amount of debt, which allows us to maintain our middle class lifestyle (or whatever is left of it). A middle class is the lifeblood of any successful industrial society.
Therefore, if the dollar’s special status is compromised, we can kiss our middle class lifestyle goodbye. President Trump was very aware that Congress cannot stop its massive deficit spending when he supported GENIUS to provide more funding for the federal government.
(3) Foreign payment stablecoins are allowed because they must all back their coins with dollars or U.S. government securities. It’s a way of getting other countries to help fund the massive ,debt the US has incurred, some of which has come from our huge trade deficits with the rest of the world over the last several decades. Renegotiating one-on-one tariff deals serves not only to bypass the globalist/CCP-controlled World Trade Organization, but to also rebalance the large imbalance in tariffs other countries impose on U.S. products.
So there you have it.
Final Thoughts
The financial math shows that the federal government is now past the point of no return. The only two choices left to prevent financial collapse are to radically truncate this government, or to massively fund it. DOGE discovered that reducing government spending and grifting off the government is impossible.
How impactful will GENIUS be? It all depends on how many payment stablecoins are issued and bought.
One thing is certain: GENIUS is the opposite of hard money backed by gold and silver. It’s a celebration and promotion of crypto and fiat currency: the U.S. dollar. In that sense it is a brilliant strategy by Trump to get the whole world backing our currency and economy, and financially supporting the U.S. government. Whether the latter will turn out to be a good thing or not is uncertain in my mind.
Some people will buy payment stablecoins to help support the government, and some will buy because stablecoins are cryptocurrency, and crypto is cool. Financial institutions and traders will likely find a way to create a market and trade these things.
If GENIUS takes off, it’s going to be a Wild Wild West scenario out there, so do your due diligence. Of course, GENIUS might never take off at all, and turn out to be a fart in the wind.
[1] The mismanaged SVB had over $200 billion in assets, all of which were guaranteed by the FDIC, even though 89% of the accounts were over the $250,000 insured limit.
Guaranteed by the FDIC means that taxpayer funds (or money printing magic) were used to bail out these wealthy silicon valley depositor.
