TL;DR
- The new GENIUS Act mandates 100% Treasury reserves for all stablecoins.
- This policy could make stablecoins a major holder of U.S. debt.
- The law effectively creates a privatized form of quantitative easing.
The United States Treasury has executed a major change in monetary policy by redirecting stablecoin reserves into government debt. On July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), initially promoted as a measure to protect consumers using digital currencies.
In practice, the law forces stablecoin issuers to maintain 100% of reserves in U.S. Treasury bills or central bank cash. Regulatory oversight falls under the Office of the Comptroller of the Currency, a Treasury bureau, bypassing the Federal Reserve.
Crypto Economy note that every digital dollar minted now functions as a direct purchase of sovereign debt. Treasury Secretary Scott Bessent projects the market could expand from $309 billion today to $2–3.7 trillion by 2030.
The GENIUS Act prohibits issuers from investing in corporate debt, commercial paper, or any asset outside short-term government obligations. They may hold only dollar deposits in FDIC-insured banks, Treasury bills under 90 days, or repo agreements backed by those bills. Issuers cannot rehypothecate assets except to meet redemption needs overnight.
Research by the Bank for International Settlements indicates that stablecoin inflows suppress short-term Treasury yields by 2.5–5 basis points per $3.5 billion in market capitalization. Outflows exert a larger effect, increasing yields two to three times as much.
Extrapolated to a potential $3 trillion market, the mechanism could reduce borrowing costs by 25–50 basis points, saving the U.S. government over $100 billion annually in interest.
The law effectively decouples fiscal and monetary policy
Even if the Fed raises the federal funds rate to tighten conditions, mandated stablecoin purchases could allow the Treasury to fund itself at lower rates. Critics argue the law also permits cash reserves, limiting the effect, but proponents view it as a privatized form of quantitative easing.
Analyst Shanaka Anslem Perera frames the GENIUS Act as a structural shift in U.S. financial power. Stablecoins have become key tools in emerging markets, and under the Act, each minted token funnels capital directly into Treasury debt.
Wall Street, including institutions like JPMorgan, appears to adjust to this framework, accepting cryptocurrencies as collateral and acknowledging the growing influence of the Treasury over markets.
