GENIUS Act Boosts USD Dominance in Stablecoin Market by 99%

The traditional view of stablecoins has been that they pose a threat to the U.S. dollar's dominance as the world's reserve currency. However, the passage of the Genius Act has had an unexpected side effect: it may be strengthening the dollar's position by turning stablecoins into advocates for American financial power. The Act, which formalizes stablecoin issuance, has channeled the sector's growth into dollar-denominated channels, ensuring that the U.S. dollar remains the primary currency in the stablecoin ecosystem.

The Act heavily favors U.S. companies with funds held in U.S. banks and reserves that include U.S. Treasuries. This ensures that the U.S. dollar dominates in the stablecoin sector just as it does in traditional finance. The Act creates a pathway for responsibly issuing digital dollars that are proudly made in America. Andrei Grachev, Managing Partner at DWF Labs, notes that stablecoins are becoming foundational infrastructure for payments, remittances, and AI-driven economies. The Act ensures that the lion’s share of this innovation orbits the USD, creating a virtuous cycle where more stablecoins mean more demand for dollar assets, which bolsters Treasury yields and reinforces the dollar’s appeal as a safe haven.

The GENIUS Act demystifies stablecoins by classifying “payment stablecoins” as USD-pegged digital assets, mandating full reserves and regular audits. This invites institutional heavyweights to the table, confident that they won’t get blindsided by enforcement actions. The result is a surge in USD-backed issuance, making the dollar the lingua franca of onchain finance. Cross-border payments, long plagued by high fees and delays, are getting a dollar-fueled upgrade. Regions like Asia and the Middle East are adopting these tools en masse, but overwhelmingly in USD form since the dollar has been the primary stablecoin-pegged currency since day one.

Critics argue that the Act could backfire by sparking a stablecoin arms race, with the EU’s MiCA framework or China’s digital yuan luring issuers away. However, the data suggests otherwise. Non-USD stables like EURT or CNHC remain niche players, comprising less than 1% of the market, while USD variants thrive because they tap into the dollar’s network effects of vast liquidity pools and integration with U.S.-dominated financial systems. By codifying these advantages, the GENIUS Act is raising the bar for all challengers.

Onchain data shows that the total stablecoin market cap has ballooned to $258 billion since the Act’s passage, with USD-denominated tokens claiming over 99% of that pie. Tether’s USDT holds court at $163 billion, while Circle’s USDC has jumped from $44 billion in January to $63 billion – a 43% leap. This growth will inevitably cascade into real-world industries. Stablecoins are fueling a $25 billion RWA sector, where everything from Treasuries to real estate is tokenized – and naturally USD-denominated stables underpin most of it. For emerging markets battling inflation, dollar stables offer a lifeline, allowing citizens to store value without forex hurdles. In DeFi, USD pegs provide the stable base for lending, borrowing, and yield farming.

Detractors warn that over-reliance on USD stables could amplify systemic risks if a major issuer falters, or that it entrenches U.S. monetary policy in ways that irk geopolitically. However, the Act’s safeguards, like priority repayments for holders and stringent reserves, tilt the scales toward resilience. In a multipolar world, this isn’t about isolation but smart power projection through financial innovation. What does this mean for the dollar’s future? In essence, elevation. As stablecoins scale to potentially $500 billion by 2028, they’ll carry the USD into uncharted territories from AI economies to tokenized supply chains, solidifying its role as the ultimate unit of account. It turns out the future of finance may be driven by a major player from its past.