US Stablecoins as the Trojan Horse of Financial Imperialism (?)

DI LIGABUE DENISE

10/12/2025

In July 2025, the US Congress adopted the Genius Act, a first federal law governing the use of stablecoins, these crypto-assets indexed on the dollar. Unlike bitcoin, which is highly volatile, these "stable tokens" are designed to maintain a permanent 1:1 dollar exchange rate. Supporters say it offers legal clarity, consumer protections and a path for programmable money. Critics say it raises a deeper question :

If issuers are tightly steered into holding cash and short‑term Treasurys, does that make them structural buyers of US debt ? And even more importantly, what are the implications for foreign states and other players ?

“We’re one big happy family” : cryptocurrency and stablecoins

A cryptocurrency, also called cryptoasset or cybermoney, is a digital currency issued peer-to-peer, without the need for a central bank, using a decentralized network. It relies on cryptographic technologies to secure transactions and ensure their integrity.

Stablecoins could be defined as a branch of cryptocurrencies. Most people understand that cryptocurrencies are volatile and speculative. Bitcoin, Ether, and other name-brand cryptocurrencies fluctuate in value day by day, year by year. Stablecoins are meant to do away with these fluctuations. They are designed to minimize this volatility by being indexed on stable assets, such as the dollar or gold. To ensure the stability of stablecoins, operators can hold physical reserves or use algorithms adjusting their supply according to demand.

Currently, the global cryptocurrency market has a total capitalization of approximately $1.23 trillion. Bitcoin represents nearly 600 billion dollars, or about 48% of the market, making it the most dominant crypto. Stablecoins, on the other hand, constitute a specific category, with a collective value close to 128 billion dollars, or about 10% of the total market. With nearly 100 different types in circulation, their growth reflects a strong trend towards more stable digital assets for payments and decentralized finance (DeFi).

The Genius Act : legal framework and implications

The Genius Act defines a payment stablecoin as a digital token backed by a dollar, fully guaranteed by liquid assets (bank or government). These assets consist of US coins and currency, Federal Reserve balances, insured bank deposits, short-term Treasury securities, qualifying government money market funds, and tightly restricted overnight repurchase agreements backed by Treasurys. All of these are maintained in segregated accounts.

Issuers have to redeem at par, publish regular reserve disclosures, and provide audited financials above size thresholds, while sticking to a limited set of activities linked to issuing and redeeming stablecoins rather than broader lending or trading. Foreign issuers seeking access to US customers via domestic platforms must either comply with this framework or demonstrate to the Treasury that their home country’s regime is “comparable.”

When banks and financial institutions put their reserves into the central bank's accounts, they often invest in very short-term government debt called Treasury Bills (T-Bills), along with other short-term financial instruments like money market funds and secured loans. Because these institutions can't lend these funds widely, re-hypothecate (reuse collateral), or pay interest to users, their balance sheets tend to be filled mainly with T-Bills.

In this system, digital currencies like Circle and Tether act as intermediaries or pipelines. Investors from emerging markets, who are seeking to protect their savings from inflation or capital controls, buy digital dollars (stablecoins). These digital dollars are then used to purchase short-term US government debt ; mainly T-Bills. This process helps the US Treasury borrow money at a lower cost because the demand for T-Bills increases, which in turn lowers their interest rates. Rinse and repeat.

“It's a very important act, the GENIUS Act.

They named it after me, and I want to thank you. “

The Genius Act’s legal framework opens the way for a massive spread of stablecoins, notably with American banks and tech giants like Meta preparing to launch their own tokens. Mastercard, for example, has been collaborating since 2021 with Circle to use the USDC in their transactions, a cooperation that is gradually expanding.

The underlying strategy is that of the network effect : the majority of international stablecoin flows are concentrated outside the United States, notably in Asia and South America, where the demand for the digital dollar in cross-border payments is strong. These transactions, faster and less costly than traditional banking circuits, allow the United States to extend its global monetary influence. By massively buying treasury bills to guarantee their reserves, these issuers also participate in a new channel for financing US public debt. This phenomenon can be analyzed as a form of «American crypto-mercantilism»: on the one side, the consolidation of the supremacy of the dollar in world trade, and on the other, the capture of private financial flows to support the national debt.

Risk, Repercussion and possible Retribution

Internally, the adoption of stablecoins could weaken the transmission of monetary policy : if a growing share of savings and payments passes through these tokens, the demand for bank deposits could decrease, limiting banks' ability to finance the real economy. Another risk is the possibility of a «digital bank run» : in case of doubt about the solvency of an issuer, millions of users could request the immediate redemption of their stablecoins for dollars, causing a liquidity crisis. As confidence is essential for financial stability, massive interventions could be costly. The comparison with the "free banking" of the 19th century, where private banks issued their own notes, illustrates this risk of systemic fragility, which led to the creation of the Federal Reserve in 1913 to ensure monetary stability.

Externally, the main risk lies in the loss of monetary sovereignty. Due to the rapid growth of stablecoins, with a transaction volume reaching 27.6 trillion dollars in 2024 (more than the combined transactions of Visa and Mastercard that year), Americans are no longer the only ones who want to regulate this gold mine. In particular because complying with the American genius act involves financing(from foreigner pov) their/americans public debt and allowing American people to have more credit. This raises major regulatory issues for other world players.

The dependence on US payment infrastructures (Apple Pay, Google Pay, Mastercard, Visa) is already strong. As such, the European Central Bank (ECB) has expressed its concerns about increasing digital dollarization, which could reduce the control of European monetary policy if dollar stablecoins become predominant. The creation of a digital euro by the ECB aims to offer a sovereign alternative, resistant to dollar domination. This device would be a new form of central bank currency, directly issued by the State, unlike private stablecoins. For China too, the issue is strategic. Even though there is a strict ban on private cryptocurrencies, the state is developing its own central bank digital currency (CBDC), the e-CNY, to strengthen its monetary sovereignty and control financial flows. This would allow them to strengthen their sovereignty against the influence of the dollar and foreign stablecoins.

Will Troy falls ?

For the United States, the strategy seems clear : to maintain the "exorbitant privilege" of the dollar, even at the cost of disintermediating the role of the Federal Reserve. The domination of the dollar is based on a fragile balance between international confidence and the capacity for financial innovation. Crypto-mercantilism can extend this advantage, but by exposing it to new vulnerabilities. For Europe, and the rest of the world, the challenge now is not to undergo this digital dollarization, but to respond.

In sum, on paper, GENIUS can still deliver its promise : fully reserved dollar tokens under clear federal standards, faster and cheaper payments and a way to plug on‑chain settlement into the core of the dollar system. If Treasury Secretary Scott Bessent’s ambitions play out, that market could reach toward the trillions and become a lasting source of Treasury demand. But that also means US fiscal strategy, global demand for digital dollars and the next chapter of central bank money are now entangled.

GENIUS might prove to be a smart way to harness stablecoins, or the opening roll of the dice in a game that ends with a crisis‑driven digital dollar and a much more explicit debate over who really controls the money pipeline.