U.S. Stablecoin Law Reinforces Dollar Dominance and Global Regulatory Shift

The U.S. passage of the GENIUS Act has marked a pivotal moment in the evolution of stablecoins, setting a regulatory precedent that is expected to influence global digital finance. The law introduces a federal regulatory framework for fiat-backed stablecoins, requiring full transparency from issuers, including one-to-one asset backing, mandatory federal licensing, and independent reserve audits [1]. Fabian Dori, chief investment officer at Sygnum Bank, emphasized that these provisions are essential for promoting responsible innovation and financial stability [1]. According to Dori, the act is likely to significantly impact both the short-term and long-term development of stablecoins by providing institutional investors with the legal confidence to engage with regulated stablecoins [1].

One of the most contentious aspects of the GENIUS Act is its prohibition on yield-bearing stablecoins, a feature that has been central to their integration within decentralized finance (DeFi). Dori noted that this restriction may reshape the market by creating a clear distinction between payment-focused stablecoins and tokenized money market products [1]. “It’s true that it’s not possible anymore to earn yield directly from holding fiat-backed stablecoins,” he said. “That will create a clear segregation between non-yielding stablecoins and tokenized money market funds” [1]. This shift is expected to drive demand for alternative financial instruments in the DeFi space, potentially altering the landscape of digital asset usage and innovation.

The regulatory divergence between the U.S. and Europe is another key development under the GENIUS Act. While the U.S. has taken a more innovation-focused approach, Europe has been slower to adopt a proactive regulatory framework, particularly with its digital euro initiative [1]. Dori suggested that the U.S. approach could attract new issuers and use cases, potentially pressuring Europe to adjust its stance. “It seems a bit like the U.S. is much more focusing on a framework that allows and drives innovation, while Europe is primarily focused on risk management,” he said [1]. This regulatory contrast may influence the global positioning of stablecoin markets and encourage cross-border competition.

On the institutional side, the act has also sparked concerns and debates. Bankers have expressed alarm over the potential risks posed by stablecoins, particularly in terms of check fraud and financial instability [6]. At the same time, the law expands the powers of the Office of the Comptroller of the Currency (OCC) to regulate large nonbank stablecoin issuers [2]. This regulatory expansion has drawn attention, especially given reports of the Trump family’s involvement in a stablecoin business [2]. The GENIUS Act also allows state-level banks to issue stablecoins up to $10 billion, while federally regulated banks may issue up to $50 billion [4]. These thresholds are intended to balance innovation with systemic risk management.

The broader implications of the act extend to the global role of the U.S. dollar. By mandating full reserve backing in U.S. dollars, the law reinforces the dominance of the dollar in the stablecoin market, which currently accounts for over 50% of the Ethereum blockchain’s stablecoin usage [5]. In contrast, China has shown signs of softening its stance toward crypto, suggesting a potential shift in its regulatory approach [9]. This development could signal an emerging rivalry in the global stablecoin landscape, with the U.S. and China each seeking to assert influence through regulatory and technological initiatives.

Source: [1] The State of Stablecoins After GENIUS Act: Expert Weighs In (https://cointelegraph.com/news/the-state-of-stablecoins-after-genius-act-expert-weighs-in)

[2] Warren Presses New OCC Chief Over Trump Family Stablecoin Business (https://subscriber.politicopro.com/article/2025/07/warren-presses-new-occ-chief-over-trump-family-stablecoin-business-00486251)

[4] Stablecoin Certification Review Committee, Mandated By (https://www.forbes.com/sites/vipinbharathan/2025/07/31/stablecoin-certification-review-committee-mandated-by-the-genius-act/)

[5] Wall Street Strategist Tom Lee Is Betting $250 Million That (https://finance.yahoo.com/news/wall-street-strategist-tom-lee-084500659.html)

[6] Bankers Are 'Very Concerned' About Stablecoins, Check Fraud (https://www.americanbanker.com/news/bankers-are-very-concerned-about-stablecoin-check-fraud)

[9] U.S. Passes Stablecoin Law to Strengthen Dollar as China Considers Shift (https://www.ainvest.com/news/passes-stablecoin-law-strengthen-dollar-china-considers-shift-2508/)