Regulating stablecoins will take a real Genius Act

If this session of Congress is remembered for anything, it may be for its poorly named legislation.

- Bloomberg

First there was the One Big Beautiful Bill, which wasn't. Now there is the Genius Act, which isn't.

The Guiding and Establishing National Innovation for US Stablecoins Act, which Congress passed this week, would regulate stablecoins and effectively transform them from a security to a means of payment. While there is a need for some regulation, as some retailers are considering issuing their own stablecoins, mainstreaming the cryptocurrency is hardly a genius move. The bill would introduce a tremendous amount of risk to the financial system and to consumers. And for what purpose? The US already has a means of payment—it's called the dollar—and it works pretty well.

For most of crypto's history, its use case (other than paying for goods and services in the underground economy) has been unclear. Tokenization does have the potential to make payments quicker and more efficient. The big problem has always been volatility: Cryptocurrencies are not a stable store of value, and therefore not a useful means of payment. Stablecoins solve this by striving to maintain a peg to the dollar. They can do this in several ways, the most common of which is to use low-risk assets such as Treasury bills as backing.