Plain English explanation of the US "Genius Act": Will the US dollar become more "domineering" in the future?

On July 18th local time, U.S. President Trump officially signed the “Guidance and Establishment of the U.S. Stablecoin National Innovation Act”—yes, the so-called “Genius Act” that has been widely discussed online.

You read that right, this means the U.S. federal government is, for the first time, officially “crowning” a dollar-pegged stablecoin, allowing compliant financial institutions to openly issue digital currencies tied 1:1 to the US dollar.

If the past decade in the crypto world was still in “barbaric growth,” then from today, an era led by the U.S. as the “regular army” has officially begun. As ABC News headline states: “Trump signs the first major federal cryptocurrency bill.”

This is not just a piece of legislation; it’s more like a butterfly flapping its wings in Washington, setting off a global financial storm brewing on the horizon.

What makes the “Genius Act” so impressive? It equips the dollar with a “digital engine.”

Let’s break down what this bill actually stipulates, and why it’s so significant.

Not everyone can play; licensing is required.

The bill clearly states that only banks and similar financial institutions licensed by federal or state authorities are eligible to issue stablecoins. Tech giants like Zuckerberg’s Meta or Musk’s companies? They can participate, but only through licensed entities—no bypassing regulations to do it themselves. In simple terms, it’s a licensing system that keeps the issuance rights firmly in the hands of authorized players.

How much money you have determines how many coins you can issue.

It enforces a “100% reserve” system. If you issue $10 billion in stablecoins, your bank account must hold an equivalent $10 billion in cash or U.S. Treasuries. This eliminates the risk of “printing money out of thin air” that many stablecoins have faced in the past, providing users with peace of mind.

Your money is truly yours; even if the company goes bankrupt, it cannot be taken away.

The bill establishes bankruptcy protections, requiring issuer’s user funds and company’s own funds to be strictly separated. If the company collapses, your funds have priority in repayment and cannot be used to settle debts. This addresses the most common security concerns among users.

Blocking the path to an “official digital dollar.”

The most striking point! The bill includes a “Anti-Digital Dollar Clause,” explicitly prohibiting the Federal Reserve from creating a CBDC (Central Bank Digital Currency) accessible to the public. Why? Because they don’t want the government to monitor everyone’s financial flows through a “super account.” Trump’s plan is: digitalization of the dollar should be handled by the private sector, with the government just issuing licenses and setting rules.

As Barron’s, a well-known American financial magazine, commented, the significance of this bill lies in formally bringing a long-contested, regulation-ambiguous concept under the protection of national law.

Why did it take ten years of patience to finally act now?

Many ask: stablecoins have been around for nearly a decade, so why has the U.S. regulators been “playing possum,” and why act only now?

The reason is simple: they couldn’t regulate before, but now they can’t wait any longer. If they delay further, it will be too late!

In the past, stablecoins were relatively small in scale, and with bipartisan bickering and regulatory “jurisdiction battles,” they remained in a gray area. But now, the situation has changed dramatically:

Market size is too large to hide risks. The global circulation of dollar stablecoins has surpassed $150 billion, becoming a hard currency in the crypto world. With such a massive volume, lack of regulation could lead to systemic financial risks if a major collapse occurs.

Geopolitical financial competition—this is the real big game. U.S. elites have suddenly realized that stablecoins are essentially a “digital extension of the dollar,” serving as the best vessel for dollar hegemony in the new era. If this market is left to non-state actors or other countries, future digital financial dominance could be lost. Seeing the EU and Japan developing their own regulatory frameworks, the U.S. must act first to set standards.

Thus, we see a rare scene: in the votes for the “Genius Act,” both houses of Congress passed with overwhelming majorities, contrasting sharply with other controversial bills. This indicates a high level of bipartisan consensus on the core interest of “digital dollar hegemony.”

“Butterfly Effect”: How a single bill can stir the global scene?

With Trump’s signature, the U.S. becomes the first major economy to pave the way for stablecoins. Its “butterfly effect” will be profound and irreversible.

Domestically, it boosts the economy. More fintech companies will develop in the U.S., and it will also compel stablecoin issuers worldwide to buy U.S. Treasuries as reserves, effectively helping the U.S. government “lift the sedan chair.”

Internationally, it’s a sharp “opportunity.”

Creating a “Digital Dollar Harvest Machine”: With official backing from the U.S. government, dollar stablecoins will become a more popular payment and store of value tool globally. This means future capital flows worldwide will rely more heavily on this “digital dollar” system.

Forcing the world to “pay up”: The bill requires reserves to be in dollars or U.S. Treasuries. The larger the stablecoin market, the higher the demand for U.S. Treasuries. This effectively makes global users finance the U.S. government at low cost, greatly enhancing U.S. monetary policy influence.

Pushing other countries to “follow suit”: The U.S. has taken the lead; what about other nations? They will have to act quickly. The EU, Japan, Singapore, and others will accelerate their own regulatory frameworks, marking the start of a global competition in digital currency regulation.

Of course, public opinion is also heated. As NBC reports, investors are excited, and the crypto market surged. But Bloomberg published an opinion warning that the “Genius Act” could bring unnecessary risks to the financial system and consumers, fearing it might undermine other countries’ financial sovereignty.

In summary, the U.S. has played a strategic hand—regulatory tool and global currency chess piece. It signifies that the game for global financial order, beyond traditional currencies, now includes a new, higher-dimensional “digital battlefield.”

This grand chessboard has only just begun.