The stablecoin time bomb hidden in Trump’s GENIUS act

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1. >The Genius Act paves the way to a massive crash. The authors of the bill have not clearly defined how the reserves will be regulated and they have inexcusably neglected the risk of doom loops. But there is a much, much worse aspect of the Act. It emasculates the Federal Reserve by banning it from issuing its own stablecoin, a digital dollar by which to counter the up-and-running digital yuan of the People’s Bank of China. And, deprived of the necessary tools like the equivalent of the Federal Deposit Insurance Corporation, the Fed will be tasked with cleaning up the mess private stablecoin issuers are bound to create.

2. Underlying Negative Factors:

   Potential for Bailouts and Systemic Risk: Critics argue the bill might set the stage for an eventual taxpayer-funded bailout of the cryptocurrency sector. Concerns exist that backing stablecoins is not scalable with the current state of the U.S. Treasury market, and illiquidity in Treasury markets could lead to insolvency for large stablecoin issuers, potentially affecting the credibility of Treasury markets.

   Inadequate Consumer Protection (according to critics): While the bill aims to protect consumers, some argue it creates a “light touch” regulatory regime that could still expose consumers to significant risks, particularly related to custodial risk and issuer bankruptcy. They suggest the bankruptcy priority changes are insufficient and could complicate an orderly wind-down.

   “Tether Loophole” and Illicit Activity: Critics warn that the bill may expand loopholes for offshore issuers like Tether, making it easier for illicit actors (terrorists, cartels, criminals) to use stablecoins for money laundering, sanctions evasion, and other illegal activities.

   Conflict of Interest Concerns: Senator Elizabeth Warren, a vocal critic, argues the bill could “turbocharge” corruption, especially given a past president’s involvement in a crypto firm. While the bill prohibits current officials from issuing stablecoins, questions remain about how it would affect existing investments or ownership structures. Concerns also exist about allowing “Big Tech” companies to issue their own stablecoins, leading to potential conflicts of interest, undermined competition, and threats to financial stability and privacy.

   Overreach and Privacy Concerns: The bill allows companies to freeze or destroy stablecoin wallets based on government orders, which critics worry could be misused and deter legitimate users or erode trust.

   Exemptions and Waivers: The bill contains provisions for regulators to waive prohibitions (e.g., on non-financial public companies issuing stablecoins), which critics argue could undermine the intended safeguards.

   Lack of Interest Yield for Holders: Some analysis suggests the act allows banks holding treasuries to legally mint stablecoins without necessarily paying interest to the stablecoin holder, creating a potential revenue stream for banks without direct benefit to consumers.

3. His whole admin is made of interests of rent seekers who reaped the gains of globalization, without creating any value. Their expectation for free wealth flowing into their accounts, is not rooted in any broad economic theory, just the feelings of recent experiences. Everything they do will absolutely collapse over the long term, cause they have no value creating proposition, it’s all just wealth extraction.

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