Crypto Finds a Stable Future, GENIUS Act and the Rise of Dollar-Backed Stablecoins
Introduction: A New Financial Dawn?
In a world riddled with political instability, hyperinflation, and dwindling trust in national currencies, the emergence of stablecoins backed by trusted assets such as the US dollar or US government bonds offers a beacon of hope. This trend has gained legitimacy following the recent introduction of the GENIUS Act by US President Joe Biden, aimed at regulating and stabilizing digital currencies.
The global financial landscape is undergoing a transformation, and stablecoins are at the heart of it. While cryptocurrencies like Bitcoin have been known for volatility, stablecoins—especially those pegged to the dollar—are increasingly viewed as viable alternatives for cross-border transactions and financial storage in countries suffering economic turmoil.
Background: From Volatility to Stability
Traditional cryptocurrencies like Bitcoin and Ethereum operate without any backing asset, making them speculative and highly volatile. Over the last two years, the collapse of major crypto firms and exchanges has led to a loss of over $3 billion in citizens’ money in several countries, notably Lebanon.
In 2019, the Lebanese government froze bank accounts and restricted withdrawals, leaving citizens stranded without access to their savings. As a result, Lebanese individuals and others from similarly distressed nations have turned to storing wealth in crypto—particularly stablecoins—as a hedge against economic collapse.
Stablecoins are cryptocurrencies that have a fixed value, typically pegged to an underlying asset like the US dollar. They offer the benefits of crypto (borderless, fast, and digital) while avoiding the typical price swings of Bitcoin or Ethereum. The problem so far has been lack of regulation, fraud risks, and trust issues. That’s what the GENIUS Act aims to address.
What Is the GENIUS Act?
GENIUS stands for Guaranteeing Essential National Infrastructure for Users of Stablecoins. The Act, signed into law on July 18, 2025, attempts to regulate privately issued stablecoins while protecting users and ensuring monetary stability.
Key provisions of the GENIUS Act include:
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100% Reserve Requirement:
Issuers must back every coin with highly liquid assets like US dollars or short-term US government securities (e.g., Treasury Bills). -
Monthly Public Disclosure:
Issuers are required to make their balance sheets public, showing reserves and liabilities. -
Prohibition of Misleading Claims:
Stablecoins cannot claim to be “government-approved” or “legal tender” unless explicitly authorized. -
Protection Against Bad Actors:
Regulatory safeguards have been instituted to weed out fraudulent exchanges and protect customers from scams, like those from the FTX collapse.
Use Case: Store of Value in Distressed Economies
The Lebanese example mentioned by Monika Halan illustrates how individuals in financially unstable countries are now using dollar-backed stablecoins as a way to secure their money. They are doing this even if their own countries have failing banks, hyperinflation, or weak governance.
People in Venezuela, Argentina, Zimbabwe, and now Lebanon find value in keeping money in a stablecoin rather than their national currency. This trend is expected to rise as more countries fall into economic distress.
A Global Trend: Why Stablecoins Matter
The significance of stablecoins extends beyond just individual protection:
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Cross-Border Remittances:
Personal remittances globally are valued at over $840 billion a year. With average costs of 6%, using stablecoins can bring this down drastically, especially in countries with poor banking infrastructure. -
Transaction Speed and Security:
Stablecoins allow real-time money movement with full transparency and lower costs. -
Trust in the Dollar, Not Local Banks:
With the backing of the US dollar or treasury bonds, these coins are safer than bank accounts in high-risk countries. -
Private Innovation Meets Public Oversight:
The GENIUS Act represents the first time a major economy has laid out rules that allow for private digital innovation while keeping risks in check.
What’s Next? Will Banks Lose Business?
Traditional banks and financial intermediaries may feel threatened by stablecoins. However, the future might involve partnerships or parallel operations.
Some banks are already planning to use stablecoin platforms to offer faster, cheaper services. Others are exploring issuing their own tokens or adopting government-issued digital currencies like CBDCs (Central Bank Digital Currencies).
The banking sector may see margin compression, but those who adapt early will retain relevance in this new ecosystem.
Implications for India and the Global South
While India is not currently at risk of hyperinflation, it has not yet embraced stablecoins. The regulatory stance remains cautious. India’s primary concern is loss of monetary control and misuse for illicit activity.
However, private stablecoins are likely to grow via underground or gray channels if formal regulations do not accommodate their legitimate use.
Unless India enacts frameworks for compliant use—like the GENIUS Act—it risks falling behind in financial innovation.
Challenges and Cautions
Despite optimism, challenges remain:
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Regulatory Arbitrage:
If rules vary drastically across jurisdictions, bad actors may find ways to game the system. -
Trust in Issuers:
Even with the GENIUS Act, a stablecoin is only as trustworthy as its issuing institution. -
Monetary Sovereignty:
Countries may lose control over their economies if too many citizens move wealth to dollar-backed stablecoins. -
Cybersecurity:
As with all digital assets, stablecoins are prone to hacking if not protected with the highest levels of encryption.
Conclusion: Digital Dollars for a Digital World
The GENIUS Act is a major step in making cryptocurrencies—specifically stablecoins—more trustworthy, usable, and integral to the global financial system. It gives people in distressed countries a legitimate way to protect and use their money. With a blend of transparency, safety, and innovation, dollar-backed stablecoins could become the de facto standard for remittances and savings worldwide.
While we are still in the early days of adoption, the genie is out of the bottle—and it appears stablecoins, governed well, may indeed be the digital backbone of a safer, fairer global economy.
🔍 Q&A Section
Q1: What is the GENIUS Act and why was it introduced?
A1: The GENIUS Act is a US law signed on July 18, 2025, aimed at regulating stablecoins. It mandates 100% asset backing, monthly disclosures, and restricts misleading claims. It was introduced to provide a regulatory backbone to dollar-backed cryptocurrencies and prevent fraud.
Q2: How do stablecoins differ from traditional cryptocurrencies like Bitcoin?
A2: Stablecoins are pegged to stable assets like the US dollar or treasury bills, which helps maintain a consistent value. Bitcoin, on the other hand, is not backed by any asset, making it highly volatile and speculative.
Q3: Why are people in countries like Lebanon using stablecoins?
A3: Due to government-imposed banking restrictions, inflation, and currency collapse, citizens are turning to stablecoins as a secure way to store and transfer money. These coins offer dollar-level stability in regions with failing financial systems.
Q4: Will traditional banks lose relevance because of stablecoins?
A4: Some traditional banks may lose revenue as stablecoins replace international remittances and low-cost transactions. However, proactive banks are exploring partnerships and tech integrations to adapt to this change.
Q5: What should Indian investors or regulators do about stablecoins?
A5: India should watch global trends closely and develop a regulatory framework that allows safe, legal, and innovation-friendly use of stablecoins. Without proactive regulation, India risks falling behind or seeing unofficial adoption with potential misuse.
