Earlier this year, the US did something quite spectacular. In July, it passed the GENIUS Act to regulate stablecoins—a type of cryptocurrency that is pegged to a commodity or currency to ensure stability. It marked a further “normalization” of crypto within the global economy. But, within the legislation, was something far bolder: a 1:1 ratio rule. Any issuer of dollar-denominated stablecoins in the US will need to have equal liquid assets, specifically US dollars or bonds. This means, if X business issues $50,000 worth of stablecoins, it must also have either $50,000 in cash (USD) or own $50,000 in US bonds.
Through the GENIUS Act, America aimed at de-dollarization.
The White House was stimulating a new appetite for US dollars and US bonds within the US and across the world. America was reinforcing its financial order at a moment when US-led globalization was (and still is) fracturing.
The GENIUS Act is one of several significant developments over the past several months that point to a new interplay between geopolitics, bonds, and the broader financial world. While geopolitics and bonds have always danced together, what is forming now is new. The idea that issuing a cryptocurrency requires purchasing US bonds (or holding US dollars) is a new reality, underpinned by geopolitics (e.g., America’s need to keep the greenback the main currency of the world).
The growing global rivalries are forcing governments to switch gears in how their financial systems function. This is no longer about capital controls, interest rates, or currency manipulation, the old geopolitical drivers. There is far more at play that every global stakeholder must prepare for.
👁 GEOPOLITICAL FORESIGHT ON THE FINANCIAL ORDER
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