Amundi Warns GENIUS Act May Destabilize Global Payment System

Amundi, a prominent European asset management firm, has expressed concerns over the potential destabilization of the global payment system due to the U.S. GENIUS Act. The bill, which was passed by the Senate last month, aims to regulate U.S. dollar-pegged cryptocurrency tokens, viewing them as a means of payment rather than security. This classification subjects the issuers to scrutiny by both state and federal regulators.

The GENIUS Act, officially known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act, is seen by some as a step towards making the U.S. a global leader in digital assets and blockchain innovation. However, Amundi's Chief Investment Officer, Vincent Mortier, has cautioned that the bill could have both positive and negative implications. He noted that while the U.S. could benefit from the increased buying of U.S. Treasury bonds triggered by dollar-pegged stablecoins, it could also create problems by offering an alternative to the USD, potentially weakening the currency.

Mortier's concerns are echoed by other financial experts. Italy’s finance minister, Giancarlo Giorgetti, previously warned that U.S. stablecoin policies pose a greater threat to European financial stability than the Trump trade war. He highlighted the potential for stablecoins to undermine the euro’s dominance in cross-border payments and urged EU lawmakers to strengthen the euro’s international standing. The digital euro, developed by the European Central Bank, is seen as a solution to reduce Europe's reliance on foreign financial instruments.

Mortier further elaborated on the potential risks, stating that mass adoption of stablecoins could impact financial stability and lead to "dollarization," where stablecoins function as quasi-banks. This could result in people depositing money in stablecoins, assuming they can access it at any time and use it as a direct means of payment. This shift could disrupt traditional banking systems and financial stability.

Mark Hays, an associate director of crypto and fintech at the Americans for Financial Reform, acknowledged the importance of the GENIUS Act but also noted its potential implications. He cautioned that the crypto industry and its allies are using the bill to push for an uncontrolled experiment, which could have unforeseen consequences for the financial system.

Andrew Bailey, Governor of the Bank of England, has also expressed concerns about stablecoins. He warned that they pose a risk to public trust in the financial system and urged central banks to carefully consider the innovations in payment systems. Bailey emphasized the need for a decision that ensures the singleness of money, trust, and the role of the reserve currency. He believes that official reserves are crucial for preserving financial stability during times of stress and supporting liquidity in challenging situations.

The GENIUS Act, supported by fifty Republicans and eighteen Democrats, is now moving to the House of Representatives for approval before it can be signed into law. If passed, it could significantly impact the global financial landscape, with potential benefits and risks for both the U.S. and other countries. The bill's passage could also benefit World Liberty Financial, a crypto startup owned mainly by the Trump family, which plans to issue a new stablecoin, USD1. Analysts predict that if the bill is signed into law, the startup could become a dominant player in the crypto ecosystem.