Why Passing the Stablecoin GENIUS Act might not be “Genius”

Critics say enacting the pro-crypto legislation will make the financial system less safe and less stable—and further enrich Donald Trump.

The New Yorker has reported:-

• According to recent news reports, some big non-crypto firms, including Amazon, Walmart, and Meta, are considering launching their own stablecoins, while banks such as Wells Fargo and Bank of America are discussing teaming up to create one.
• All this activity suggests that more is at stake here than trading in crypto assets.
• Christian Catalini, a research scientist at M.I.T.’s Sloan School of Management, who set up the university’s Cryptoeconomics Lab, predicted.
• “We will see massive entry, both by incumbents and challengers,”  .
• Corey Frayer, the director of investor protection at the Consumer Federation of America, said.
• “Essentially, stablecoin, this private form of money, is going to be part of the mainstream financial system,”
• “People will be using Bezos bucks, Zuckerberg bucks, Trump bucks for payments.
• It’s going to be incredibly confusing.
• And there will be no guarantee that these new forms of dollars will always be worth a dollar.”
• During the Biden Administration, Frayer served as an adviser on crypto issues to Gensler at the S.E.C.
• Several times in recent years, he reminded me, stablecoins have traded well below a dollar—
• In May, 2022, when the stablecoin Tether fell to ninety-five cents; and
• Again, in March, 2023, during the Silicon Valley Bank crisis, when the value of Circle’s USDC coin fell below eighty-seven cents.
• Back then, there were relatively few linkages between crypto and most of the banking system, which limited the fallout from ructions in the crypto world.
• But, if stablecoins expand greatly and hold much of their cash in bank accounts, or if banks create their own stablecoins, a run on stablecoins, in which their holders try to turn them into actual cash, could conceivably generate a run on the banks.
• Frayer said.
• “The stablecoin bill creates a transmission channel from the extremely volatile crypto ecosystem to the traditional financial sector, and that’s incredibly dangerous,”
• The proliferation of stablecoins could turn the U.S. financial system into a twenty-first century version of the pre-Civil War system, in which many private banks issued their own currencies, and businesses and savers had to decide whether to trust them.
• In this era of “wildcat banking,” the value of money fluctuated widely, and there were frequent runs and bank failures.
• To address this chaos, and to help fund the war against the Confederacy, Lincoln’s government eventually passed the National Banking Acts of 1863 and 1864, which imposed stricter capital and reserve requirements on banks and helped to create a single national currency.
• A version of Frayer’s argument has also been made by Barry Eichengreen, a leading economic historian who teaches at Berkeley.
• “The problems that bedevilled 19th-century dollars are likely to be equally debilitating to the stablecoin ecosystem,”
• Eichengreen wrote in a guest essay for the Times last week. Pointing to this historical experience, Frayer said,
• “It is an ironic situation that we should be on the verge of returning to a system of private monies after everything we have learned.”
• The Genius Act Will Bring Economic Chaos - https://www.nytimes.com/2025/06/17/opinion/genius-act-stablecoin-crypto.html
• If the political embrace of crypto continues unchecked—House Republicans are considering broadening the GENIUS Act to deregulate other areas of the industry—“irony” could end up being too weak a word. 

Read the full article here

• https://www.newyorker.com/news/the-financial-page/why-passing-the-stablecoin-genius-act-might-not-be-so-smart#:~:text=Defenders%20of%20the%20GENIUS%20Act,a%20monthly%20basis%3B%20and%2C%20in