On July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act into law . The bill passed both the House and Senate with bipartisan support, with concerted support from the cryptocurrency industry. This bill is the first major piece of U.S. legislation on cryptocurrency to become law.  

Viewed narrowly, the GENIUS Act looks to put some guidelines and regulations on the issuance of “stablecoins” – digital assets (cryptocurrencies) that promise to hold their value constant over time. 

However, the overall effect of the GENIUS Act is clearly to inject significant new risks and volatility into the overall financial system. The main use-value of stablecoins is to integrate cryptocurrencies into the more-regulated mainstream financial system by providing a bridge that simplifies transactions between these sectors.  

Given that the current cryptocurrency ecosystem hosts large amounts of illegal activity, providing a bridge between this ecosystem and mainstream regulated finance basically makes this legislation a reduction in the cost of doing business for many criminals.  

However, for most U.S. families, the real danger in the GENIUS Act is that the stitching together of stablecoins and the regulated mainstream financial system means this regulated system has a large new volatile asset-class that must be managed. A crucial weakness of the GENIUS Act is that it is silent on how this management will happen. For example, the simplest question the act does not answer is whether U.S. policymakers like the Federal Reserve or the Treasury Department will bail out stablecoins that are unable to maintain the constant value they promise investors? If stablecoins are bailed out during crises, this is a large exposure for U.S. taxpayers, providing socialized profits for a new risky financial asset. If they are not bailed out, stablecoin failures will present a new source of systemic risk for the global financial system as their failures might infect and pull down other parts of the financial system. 

Finally, defenders of the GENIUS Act often claim its introduction will make the U.S. dollar an even more attractive asset than it already is. They might be right about this – as stablecoins proliferate and grow, many (if not most) will need to hold dollar-denominated assets in reserve to guarantee the value of their coins. This will inject a new source of demand for dollars into global financial markets.  

But dollar strength driven by demand for it as a financial asset has large downsides as well. A dollar made strong by financial investors is a dollar that makes U.S. exports to the rest of the world more expensive, and makes imports to the U.S. cheaper. This in turn has led to chronic trade deficits that have proved deeply damaging to U.S. manufacturing. These trade deficits driven by excess demand for the U.S. dollar’s is by far the most important reason why manufacturing employment in the U.S. in the 2000s has collapsed. Amplifying the dollar’s strength for the purpose of integrating a risky and volatile set of assets (cryptocurrencies) into the global financial system is not a good deal for most U.S. workers.