The recent signing of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) into law by U.S. President Donald Trump marks a significant step, as the U.S. formally establishes a regulatory framework for digital stablecoins.

Trump has stated that stablecoins will increase demand for U.S. Treasuries, lead to lower U.S. interest rates and secure the dollar's status as the global reserve currency.

This raises a fundamental question: can cryptocurrency truly deliver on such ambitious promises?

What are stablecoins?

Cryptocurrencies are digital assets generated through algorithms and operate on a decentralized model, with major examples including Bitcoin and Ether.

Unlike the volatile nature of Bitcoin, stablecoins are designed to maintain a relatively constant value, typically pegged to the U.S. dollar at a 1:1 ratio.

With the implementation of the GENIUS Act, stablecoin issuers will be mandated to back their coins with liquid assets such as U.S. dollars or short-term U.S. Treasury bills. Additionally, they will be required to disclose the composition of their reserves on a monthly basis, enhancing transparency.

Currently, USDT and USDC account for approximately 90 percent of the total stablecoin market. Emerging around 2014, stablecoins had a market capitalization of only about $20 billion back in 2020. Driven by widespread adoption, their total market value has surged to $247 billion. Scott Bessent, secretary of the U.S. Department of Treasury, projects the market value of all stablecoins to reach an impressive $3.7 trillion by 2030.

Why is the U.S. boosting stablecoins?

An analysis from China Media Group (CMG) points out that the development of digital currencies has somewhat impacted the U.S. dollar's value and influence. By vigorously promoting stablecoins, the U.S. aims to leverage the dollar's existing strengths to maintain and enhance its influence within the stablecoin and broader digital currency sectors.

Trump and some U.S. officials suggest that issuing stablecoins could alleviate future pressure on U.S. debt. Fundamentally, the U.S. government's push for stablecoins is driven by a desire to preserve its dominance in the global monetary and payment systems, further shaping the future of global finance and maintaining its own competitiveness.

This legislative push also culminates a long lobbying effort by the crypto industry, which, according to Federal Election Commission data, donated over $245 million in last year's elections to support pro-crypto candidates, including Trump.

Can stablecoins protect the dollar?

The CMG analysis questions whether stablecoins can truly safeguard the dollar's global standing. It argues that the dollar's current influence stems from the post-WWII international economic order. The Trump administration's focus on trade surpluses, for example, could limit dollar circulation globally, potentially restricting its international use.

A currency's success isn't just about cost; credibility is key. For stablecoins to thrive, the U.S. needs to consistently uphold its global responsibilities, fulfill commitments, and foster stable international trade, rather than relying on sanctions or extraterritorial interventions. If these broader commitments falter, simply rebranding the dollar won't secure its future or that of dollar-pegged stablecoins.

Democrats and critics have said the law should have blocked big tech companies from issuing their own stablecoins, which could increase the clout of an already powerful sector, contained stronger anti-money laundering protections and prohibited foreign stablecoin issuers.

"By failing to close known loopholes and protect America's digital dollar infrastructure, Congress has risked making the U.S. financial system a global haven for criminals and adversarial regimes to exploit," said Scott Greytak, deputy executive director of Transparency International U.S.

(Peng Yuhan contributed to the story.)