Historic Legislative Move in the US Senate
In June of this year, a significant event unfolded in the US Senate that could potentially transform the global financial framework. Legislators approved the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), marking the first comprehensive federal regulation for stablecoins—cryptocurrencies pegged to the US dollar—in American history. The bill garnered an unusual level of bipartisan support, passing with a vote of 68 to 30. This milestone signifies not just a shift for the cryptocurrency sector, but also a pivotal moment for the international monetary system. Digital economist Ravil Akhtyamov sheds light on the significance of this law, its underlying risks, and its potential implications for Russia and BRICS nations.
Aiming for Transparency and Investor Safety
The GENIUS Act is anchored in principles that prioritize transparency and the safeguarding of investors. It mandates that all issued stablecoins must be 100% backed by highly liquid assets. Essentially, for every digital coin that represents a dollar, the issuer must maintain an equivalent dollar in reserve or its equivalent in short-term Treasury bills. For instance, if a firm issues tokens valued at $1 billion, it must possess $1 billion in cash or government bonds held in reserve. Furthermore, the law requires monthly disclosures of these reserves to avert issues similar to the 2022 collapse of TerraUSD.
Another significant aspect of the legislation focuses on the protection of stablecoin investors. In situations where an issuer files for bankruptcy, the claims of token holders will take precedence over those of other creditors. The law also enforces stringent independent audits for key players with market capitalizations above $50 billion, responding directly to past transparency concerns surrounding Tether (USDT), the largest stablecoin by market cap.
Strengthening Financial Security and Crime Prevention
The GENIUS Act also emphasizes combating financial crime and enhancing national security. All issuers wishing to participate in the US market must implement comprehensive Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures that adhere to banking regulations. This includes performing customer due diligence, monitoring for suspicious activity, and complying with sanctions. Issuers are required to have the capability to immediately freeze or “burn” tokens at the request of regulatory or law enforcement bodies to mitigate illegal activities.
Moreover, the law restricts who can issue stablecoins. Major tech firms, commonly referred to as Big Tech, including Meta (formerly Facebook), Apple, and Amazon, are outright banned from entering this space to prevent the consolidation of financial power among corporations that already possess significant influence over digital markets and user data. Foreign entities will only be permitted to issue stablecoins for the US market after obtaining special authorization from the Federal Reserve and ensuring compliance with US standards. Notably, an amendment prohibits high-ranking government officials and their immediate families from benefiting from or managing stablecoin-issuing companies, addressing past conflicts of interest.
Lobbying Influences and Political Dynamics
The passage of the GENIUS Act must be viewed through the lens of extensive lobbying by the cryptocurrency sector. Reports indicate that during the 2024 election cycle, crypto-related organizations spent over $119 million backing candidates who support favorable regulations. The industry has been actively advocating for a bipartisan approach to cryptocurrency innovation.
However, the law faces scrutiny due to President Donald Trump’s involvement, as he holds significant shares in World Liberty Financial, which has already launched a stablecoin. Additionally, Trump has been promoting the $TRUMP memecoin, which he initiated and saw a market cap of $645 million at its height. While the amendment concerning government officials aims to mitigate conflicts of interest, it does not cover the president’s personal holdings, which are managed within a blind trust by his children.
Concerns from the Opposition
Democratic critics have raised substantial concerns about the bill. One major issue is the perceived lack of safeguards against risks posed by foreign stablecoin issuers, who might exploit such instruments to evade sanctions or fund undesirable activities. Additionally, there are worries that the increased demand for short-term Treasury bills by stablecoin issuers could destabilize the US government debt market, making it more prone to volatility and impacting bond yields, which would ultimately affect taxpayer costs.
Global Repercussions: Tether’s Position and Dollar Dominance
Experts liken the GENIUS Act to the 2000 Commodity Futures Modernization Act, which eased oversight of derivatives before the 2008 financial crisis. They argue that the legislation is a series of inadequate measures that may create an illusion of regulatory legitimacy without fully addressing risks. A significant concern is the possibility of a domino effect following a stablecoin failure, especially since past instances have shown that stablecoins like USDC and Tether have dipped below their pegged value.
The implications of the GENIUS Act extend beyond the United States, impacting key players and altering global financial dynamics. Tether (USDT), with a market cap exceeding $110 billion, will face challenges if it wishes to continue serving American clients. To comply with the GENIUS Act, Tether may need to establish a US-based subsidiary and provide comprehensive transparency regarding its reserves. Failure to comply could result in Tether losing access to a critical market, leading to significant capital outflows.
The act also reinforces the US dollar’s global dominance, effectively setting the standard for stablecoin regulation worldwide. Nations and businesses looking to engage in international financial transactions will need to adhere to these new regulations, or risk being sidelined. This creates substantial barriers for alternative systems, such as those being developed by BRICS nations aimed at reducing reliance on the dollar. Furthermore, US sanctions will gain enhanced enforcement capabilities, allowing regulators to freeze tokens involved in prohibited transactions globally.
Risks for Russia and Urgency for Action
For Russia, the GENIUS Act poses immediate and significant risks. The primary concern is centered on the use of USDT as a means for international transactions and sanctions evasion. The new law heightens the likelihood of restrictions on USDT access, as American regulators will have greater authority to pressure exchanges and P2P platforms to stop serving users from sanctioned regions, including Russia. Major exchanges aiming to maintain US market access will likely impose stringent KYC measures, increasing the risk of account closures for Russian users, even those utilizing VPNs.
This situation introduces the potential for “tokenized sanctions,” where the ability to freeze tokens at the request of US authorities could be used against specific transactions or wallets linked to the Russian economy. These challenges underscore the urgent need for Russia to expedite the development of national alternatives, emphasizing the importance of a digital ruble to serve as a reliable foundation for domestic and cross-border settlements with EAEU and allied nations. Additionally, establishing legal national crypto exchanges and comprehensive regulations for crypto assets is vital to minimize reliance on vulnerable international platforms.
BRICS Response: Establishing a Dollar-Free Trading Network
The GENIUS Act’s threat to dollar supremacy will drive BRICS countries to hasten the establishment of an independent trading platform. The foundation of this platform will include full currency sovereignty, prohibiting transactions in US dollars or other major currencies, and instead denominating contracts in national currencies or a new BRICS settlement unit— a digital token backed by a commodity pool. Furthermore, the platform will aim for technological autonomy through blockchain technology, with transactions recorded on a decentralized ledger that eliminates external control.
This initiative will be particularly evident in the energy sector, where a Russian oil exporter could list prices in rubles and BRICS units. The system would automatically convert these prices for buyers in other BRICS nations, effectively excluding the dollar from the transaction process. Settlements would occur instantly through integrated central bank digital currencies.
BRICS nations may also develop a stable digital currency for mutual transactions, supported by a collective banking system where Operator Banks issue tokens and Custodian Banks hold reserves. This approach aims to reduce reliance on the dollar and SWIFT, lower transaction costs among member states, and bolster the use of national currencies. The initiative’s success will depend on agreeing on currency weights in the reserve basket, establishing unified regulatory standards, and selecting a technological infrastructure. If successful, it could significantly decrease the demand for USDT in Eurasia and position the BRICS settlement unit as an alternative reserve asset.
Looking Ahead: The Future of the GENIUS Act
Despite Senate approval, the GENIUS Act has not yet become law. Its future hinges on several factors, including negotiations with the House of Representatives, which has its own stablecoin regulation proposal called the STABLE Act. The reconciliation process, which will involve reconciling the Senate and House versions, will be complex, especially concerning the balance of federal oversight versus states’ rights.
President Trump has expressed support for rapid stablecoin legalization, with his digital assets advisor indicating a desire to sign the law by August 2025. This timeline could serve as a strategic advantage for Trump in the lead-up to the 2026 Senate elections, allowing him to present himself as a champion of cryptocurrency innovation.
The outcome of these legislative developments will likely shape investor sentiment in the crypto market. An optimistic outcome, characterized by swift adoption of clear regulations, may lead to increased institutional confidence, an influx of capital, and significant growth in the market capitalization of regulated stablecoins. Conversely, a pessimistic scenario, involving delays or excessively restrictive provisions, could drive investors away from non-compliant tokens, creating a liquidity crisis and prolonged uncertainty in the market.
The Quest for Digital Sovereignty
The GENIUS Act represents more than just technical regulations for cryptocurrencies; it is a strategic tool in the realm of financial geopolitics. It aims to enhance the dollar’s prominence in a rapidly digitizing global economy by establishing standards for digital currencies. It also seeks to expand US jurisdiction over cross-border financial transactions involving crypto assets. This new regulatory framework poses challenges to alternative financial systems and initiatives aimed at reducing dependency on the dollar, such as those being explored by BRICS nations.
For Russia, the implications are clear: immediate and decisive actions are required to launch the digital ruble, build a national crypto infrastructure, and establish mechanisms for sanctions-resistant settlements with key partners. The enactment of this American law signals a shift away from unregulated “digital dollars” toward a new era defined by stringent regulations and the fight for financial sovereignty in the digital landscape.
