Amundi Warns GENIUS Act Could Weaken US Dollar Dominance

Amundi, a prominent European asset manager, has expressed concerns that the US GENIUS Act could inadvertently undermine the dominance of the US dollar. The legislation, which aims to regulate stablecoins by establishing reserve and capital requirements, was passed by the US Senate on June 17 and is now awaiting approval from the House of Representatives.

Vincent Mortier, Amundi’s chief investment officer, warned that the GENIUS Act could lead to a surge in dollar-backed stablecoins, potentially creating an alternative to the US dollar. This could weaken the greenback's global hegemony, as the requirement for stablecoins to be fully collateralized with assets of equal or greater value might send a message that the dollar is not as strong as previously perceived. Mortier also cautioned that companies issuing stablecoins could become "quasi-banks," a role they were never intended to play, potentially destabilizing the global payments system.

Mortier's comments come as stablecoins continue to gain traction in the crypto market, with their total value in circulation nearly doubling since the start of 2023 to surpass $250 billion. The GENIUS Act could pave the way for companies to issue their own stablecoins, with major tech firms reportedly exploring the possibility. Treasury Secretary Scott Bessent has predicted that stablecoins could become a $3.7 trillion market by 2030.

Stablecoins are considered a type of real-world asset (RWA) because they are backed by government bonds, fiat currencies, and other tangible assets. The passage of the GENIUS Act could provide positive momentum not just for stablecoins but for RWAs and tokenization more broadly. According to Abdul Rafay Gadit, a former Standard Chartered executive and founder of ZigChain, a digital currency exchange, the legislation could de-risk the use of digital dollars in tokenized ecosystems, making it easier to build compliant RWA platforms with embedded onchain settlements. This is critical for sectors like real estate, trade finance, and sukuk issuance.

While the GENIUS Act aims to promote the use of stablecoins, it could also have unintended consequences. The requirement for stablecoins to be fully collateralized with assets of equal or greater value could boost demand for US Treasury bonds. However, it could also send the message that the dollar is not as strong as previously perceived, potentially weakening the greenback's global dominance. Additionally, companies issuing stablecoins could become "quasi-banks," a role they were never intended to play, potentially destabilizing the global payments system.