Last month, the United States passed the Genius Act, a landmark piece of legislation that finally brings stablecoin – a cryptocurrency asset pegged to the US dollar – under a federal regulatory framework. While this may seem like a domestic achievement, the global implications are far-reaching, particularly for jurisdictions in Asia, including Hong Kong and mainland China.
The Genius Act is more than just cryptocurrency regulation; it represents a digital extension of US financial influence.
By legally defining stablecoins used in payment as non-securities and assigning oversight to banking regulators rather than securities regulators, the act clears the path for stablecoins like Tether and USDC to flourish globally. These tokens already dominate over 90 per cent of the stablecoin market and are set to become a default payment rail for digital transactions worldwide, especially in regions underserved by traditional banking systems.
Dollar-backed stablecoins are not just technical tools; they function as a new layer of financial infrastructure. In areas with high inflation or currency instability – such as parts of Latin America or Africa – users increasingly prefer holding Tether or USDC over local currency. In decentralised finance (DeFi) and Web3 ecosystems, dollar stablecoins are the dominant medium of exchange.
Even in sanctioned jurisdictions, the US government can exert influence by regulating issuers like Circle and Tether, providing Washington with a new lever of financial statecraft.
In effect, the Genius Act enables the digitisation and global distribution of the dollar through private-sector channels, with potentially minimal direct cost and substantial geopolitical advantage. Through the embedding of dollar-backed tokens in digital trade, finance and remittance systems, the dollar’s reach extends into markets beyond traditional banking networks. This reinforces the dollar’s role not only as the global reserve currency, but also as the default unit of account in emerging digital economies.
