On May 19, 2025, the U.S. Senate passed the procedural motion for the GENIUS Stablecoin Act with a vote of 66-32. On the surface, this appears to be a technical legislation aimed at regulating digital assets and protecting consumer rights, but a deeper analysis of its political economic logic reveals that this could be the beginning of a more complex and far-reaching systemic transformation.
Against the backdrop of the United States' massive debt pressure and the heated monetary policy dispute between Trump and Federal Reserve Chairman Powell, the timing of the Stablecoin Act is intriguing.
U.S. Debt Crisis: A Stablecoin Policy Forced into Existence
During the pandemic, the U.S. launched an unprecedented money printing mode. The Federal Reserve's M2 money supply soared from $15.5 trillion in February 2020 to $21.6 trillion now, with growth rates ranging from 5% to 25%, peaking at 26.9% in February 2021, easily surpassing the growth rates during the 2008 financial crisis and the high inflation period of the 70-80s.
Simultaneously, the Federal Reserve's balance sheet expanded to $7.1 trillion, with pandemic relief spending at $5.2 trillion, equivalent to 25% of GDP, which is more than the total cost of the 13 most expensive wars in U.S. history.
Simply put, the U.S. printed an additional $7 trillion in two years, planting a massive time bomb for future inflation and debt crises.
The U.S. government's debt interest expenditure is creating historical records. As of April 2025, the total national debt has exceeded $36 trillion, with an estimated $9 trillion in principal and interest due in 2025, including about $7.2 trillion in principal alone.
Over the next decade, the government's interest payments are expected to be $13.8 trillion, with the proportion of national debt interest to GDP increasing yearly. To repay debt, the government may need to further increase taxes or cut expenses, both of which will negatively impact the economy.
Trump and Powell: Disagreement on Interest Rate Cuts
Trump: Cut Rates or Be Fired
Trump urgently needs the Federal Reserve to cut rates for practical reasons: high interest rates directly affect mortgages and consumption, threatening his political prospects. More critically, Trump has always used stock market performance as his political achievement, and a high-interest-rate environment suppresses further stock market growth, directly threatening the core data he uses to showcase his achievements.
Moreover, tariff policies have increased import costs, pushing up domestic price levels and adding inflationary pressure. Moderate rate cuts can partially offset the negative impact of tariff policies on economic growth, alleviating the economic slowdown, and creating a more favorable economic environment for re-election.
Powell: No One Cares
The Federal Reserve's dual mandate is full employment and maintaining price stability. Unlike Trump's decision-making based on political expectations and stock market performance, Powell strictly follows the Federal Reserve's data-driven methodology. He does not make predictive economic judgments but assesses the execution of the dual mandate based on existing economic data, implementing targeted policies when either inflation or employment targets have issues.
The U.S. unemployment rate in April was 4.2%, and inflation basically meets the long-term 2% target. Before potential economic recession caused by policies like tariffs is reflected in actual data, Powell will not take any action. He believes Trump's tariff policies will "likely at least temporarily raise inflation" and that the "inflationary effect may be more persistent." Rashly cutting rates before inflation data fully returns to the 2% target could worsen the inflation situation.
Furthermore, the Federal Reserve's independence is a crucial principle in its decision-making process. The initial purpose of establishing the Federal Reserve was to ensure monetary policy could be made based on economic fundamentals and professional analysis, ensuring policy decisions are made considering the long-term national economic interests rather than short-term political needs. Facing Trump's pressure, Powell insists on defending the Federal Reserve's independence, stating, "I never actively request meetings with the president, and never will."
GENIUS Act: A New Harvesting Machine for U.S. Debt
Market data fully proves the significant impact of Stablecoins on the U.S. debt market. Tether, as the largest Stablecoin issuer, net purchased $33.1 billion in U.S. Treasury bonds in 2024, becoming the world's seventh-largest U.S. Treasury bond buyer. According to Tether's Q4 2024 report, its U.S. Treasury holdings have reached $113 billion. Circle, the second-largest Stablecoin issuer, with a USDC market cap of about $60 billion, is similarly backed entirely by cash and short-term government bonds.
The GENIUS Act requires Stablecoin issuance to maintain reserves at a minimum 1:1 ratio, including short-term U.S. Treasury and other dollar assets. The current Stablecoin market size has reached $243 billion, and if fully incorporated into the GENIUS Act framework, it will generate demand for purchasing billions of dollars in government bonds.
[The translation continues in the same professional and detailed manner for the rest of the text.]
The reStaking mechanism is a typical example of repeatedly leveraging assets across different protocols, with each additional layer adding more risk. If the value of restaked assets plummets, it could trigger a chain of liquidations and market panic selling.
Although these stablecoins' reserves are still US Treasury bonds, after multiple layers of DeFi nesting, market behavior has become completely different from traditional US Treasury bond holders, and this risk is entirely outside the traditional regulatory system.
Trump's Way of Making Money: Monetizing Presidential Power
Given Trump's previous operations, I find it hard to believe that he is promoting stablecoins purely to save the US economy. I'm more inclined to believe that US dollar stablecoins are a wealth-gathering tool for the Trump consortium.
World Liberty Financial: The Trump family launched a cryptocurrency project called World Liberty Financial (WLFI), raising at least $550 million through $WLFI sales, with most sales occurring after Trump's November election victory. WLFI also launched a USD-pegged stablecoin USD1, with Abu Dhabi-backed investment company MGX announcing a $2 billion investment in Binance through the USD1 stablecoin.
Issuing $TRUMP: In January, Trump issued a personal MEME coin $TRUMP, pioneering presidential token issuance, with the Trump group controlling 80% of the token share. Since $TRUMP's issuance, over 813,000 crypto wallets have lost approximately $2 billion. Last week, Trump hosted a private dinner at a national golf club for the top 25 $TRUMP holders, sparking widespread controversy.
Frequent Shilling on Twitter: Trump's behavior on social media has also raised market manipulation suspicions. On April 2nd, Trump signed a tariff executive order at the White House, causing US stocks to plummet; on April 9th, he announced policy suspension, causing US stocks to surge. Just 4 hours before announcing policy changes, he posted on Truth Social saying "This is a great time to buy", with DJT stock rising 22.67% that day, increasing Trump's personal wealth by $415 million.
US dollar stablecoins involve monetary policy, financial regulation, technological innovation, and political maneuvering. Analysis from any single perspective is insufficient. The ultimate direction of stablecoins depends on regulatory formulation, technological development, market participant behavior, and macroeconomic environment changes. Only through continuous observation and rational analysis can we truly understand the far-reaching impact of US dollar stablecoins on the global financial system.
However, one thing is certain: in this game, ordinary people are most likely the ones footing the bill.
