US GENIUS Act Paves Way for $1.75 Trillion in Dollar Stablecoins, Posing Threat to China's Monetary Control

Washington D.C. – The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law by President Donald Trump on July 18, 2025, is poised to significantly reshape the global digital finance landscape. The legislation, highlighted by Faryar Shirzad on social media, establishes a federal framework for regulating dollar-backed stablecoins, a move seen as a strategic national security measure for the United States, while simultaneously posing a considerable threat to the People's Republic of China (PRC). The act aims to integrate digital assets into the traditional financial system, with estimates suggesting up to $1.75 trillion in new dollar-backed stablecoins could enter circulation within three years.

The GENIUS Act mandates that stablecoin issuers, primarily regulated U.S. banks, maintain 1:1 reserves with highly liquid assets like U.S. dollars or short-term Treasuries. This framework provides a credible peg for stablecoins, which are digital tokens designed to hold a stable value relative to the dollar. The law also requires public disclosures of reserve composition and prohibits interest payments on stablecoins, treating them functionally akin to cash.

For the United States, the GENIUS Act is seen as a pivotal step to solidify its leadership in digital finance and reinforce the dollar's global dominance. By formalizing a regulated pathway for dollar stablecoins, the U.S. combines the dollar's inherent liquidity with the efficiency and security of blockchain technology. This creates a new, instant channel for dollar transactions that can bypass traditional banking systems, strengthening American financial influence worldwide.

Conversely, Beijing views the proliferation of dollar stablecoins with significant apprehension. As detailed in an article by Zongyuan Zoe Liu in Foreign Policy, these digital assets could undermine China's strict capital controls, potentially leading to capital outflows and eroding the Communist Party's ability to manage its financial system and allocate capital. The unmonitored circulation of dollar stablecoins could also displace the yuan in everyday transactions, challenging China's monetary sovereignty and political leverage.

China has historically cracked down on decentralized cryptocurrencies, implementing a near-total ban on related financial activities by 2021, while simultaneously promoting its own state-controlled blockchain technology and the digital renminbi (e-CNY). However, adoption of the e-CNY has been slow. The emergence of regulated dollar stablecoins could further complicate Beijing's efforts to build a renminbi-based financial infrastructure, intensifying the digital currency race between the two global powers.