Washington’s new stablecoin rules bring welcome clarity, but don’t mistake clarity for monopoly. The GENIUS Act creates a repeatable regulatory template: other countries can copy it to issue their own sovereign stablecoins, closing local liquidity gaps that dollar-denominated tokens don’t solve.
Regulatory clarity cuts both ways
The GENIUS Act establishes clear reserve, oversight, and compliance standards that reduce uncertainty for major issuers like Circle’s USDC. That stability is good for institutional use and DeFi integration. But the same framework doubles as a blueprint for other jurisdictions. Japan, Hong Kong and several Latin American nations are already using similar approaches to design legal rails for currency-backed digital tokens.
The dollar detour problem
Today, many cross-border flows between non‑U.S. economies require an intermediate conversion to dollars — a costly “dollar detour.” For example, remitting from Japan to Brazil often means yen → USD → real, creating extra FX fees, settlement steps and counterparty exposures. For everyday consumer and business payments, that detour adds friction US dollar stablecoins don’t remove.
Unintended consequences: sovereign alternatives gain momentum
By standardizing expectations for stablecoin issuance, the GENIUS Act lowers perceived legal risk for sovereign and private projects elsewhere. Countries can now design local currency stablecoins that match domestic needs and reduce currency conversion costs. Programmable settlement between compliant national tokens could cut cross‑border costs from several percent to under 0.1% and remove settlement lag — effectively displacing the need to route payments through dollar rails.
Network effects work both ways
Network effects helped USD stablecoins build liquidity and DeFi integration. Still, these forces favor the token that best fits the use case. A Mexican importer paying suppliers in pesos gains little from holding dollar tokens; a peso‑denominated stablecoin removes FX risk and simplifies accounting. Interoperability standards and smart‑contract settlement can let peso, yen and real stablecoins interoperate the way email providers interconnect — without a single currency gatekeeper.
Regulatory harmonization across major markets will make cross‑border compliance easier, but it will also democratize issuance. The likely outcome: a plural landscape of compliant, programmable stablecoins where the dollar remains important — especially for institutional and trading uses — but not universally dominant for everyday cross‑border payments.
Risk note: Firms and policymakers should weigh legal, operational and FX risks when adopting or integrating new national stablecoins; regulatory alignment does not remove implementation, counterparty or smart‑contract risks.
Source: CoinDesk. Read the original coverage for full details.