By combining the payment efficiency of blockchain technology with the value stability derived from being pegged to the world’s reserve currency (USD), stablecoins have emerged as a monetary invention that some believe could revolutionise the financial world. While other countries are promoting stablecoins denominated in their own currencies, the recent passing of the GENIUS Act marks a major milestone: it represents an explicit endorsement from the US government that could push stablecoin development and adoption into high gear.
Context: Stablecoins combine the efficiency of blockchain with the stability of fiat currency, marking a potential revolution in global payment systems. With the recent passage of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, the US has signalled a clear regulatory support for the monetary innovation that could accelerate the mainstream adoption of stablecoins and reshape the financial landscape.
Macro implications: Widespread adoption of stablecoins could alter the transmission of monetary policy, shift demand for Treasury securities, and reinforce the global dominance of the US dollar (as issuers are forced to hold USD cash or USD equivalents as collateral). While the direct impact on economic output may be limited, second-order effects on interest rates, capital flows, and financial stability could be profound.
Risks and vulnerabilities: Stablecoins remain exposed to counterparty, collateral, and systemic risks, given their reliance on private issuers and a technology infrastructure with an unproven track record in handling mass transactions. In extreme scenarios, collateral mismanagement, capital flight, cyberattacks, or insufficient regulatory oversight could undermine confidence and trigger financial instability with global spillovers.
You can now read the full whitepaper at the link below
