Author: Chris Powers, Crypto Analyst; Translation: Jinse Finance xiaozou
A Historic Senate Vote Will Push Crypto from the Monetary Era into the Financial Era
On Monday, the Senate passed a procedural vote for the GENIUS Act with 66 votes in favor and 32 against, aimed at regulating the issuance and circulation of stablecoins in the United States. Although the bill still needs to pass the House of Representatives and be signed by President Trump, clearing the Senate hurdle was the most difficult (as it required Democratic support to reach the 60-vote threshold). With obstacles removed, the GENIUS Act is about to become the first cryptocurrency legislation passed by Congress.
Ironically, this first crypto legislation will embed fiat currency into the blockchain's fabric. This is far from the early crypto world's vision of viewing fiat as an enemy and seeking separation of money and state. Today, American politicians are discussing how blockchain can consolidate US dollar hegemony.
How did we get here? And where are we heading? With stablecoins about to be written into law, cryptocurrency is moving out of the anarchist monetary fantasy and pointing towards its true destination: a borderless financial infrastructure.
1. Blockchain, Not Bitcoin
When Bitcoin and crypto technology first emerged, Wall Street elites generally held an attitude that their interest in the underlying technology (blockchain) far exceeded Bitcoin itself. Some pursued "enterprise-level blockchain," while others completely abandoned the blockchain label, claiming to build "distributed ledger technology".
These attempts failed to attract users and were generally mocked by the crypto industry (not just Bitcoin believers) for being neither permissionless nor decentralized. Wall Street elites believed that volatile currencies could not be the cornerstone of a new financial system - and ultimately, our crypto circle also recognized this point. As we pointed out in the February 2020 (my favorite) Dose of DeFi:
A typical scenario is a Bitcoin believer (usually an American male) preaching to a country ravaged by inflation, extolling the gospel of Bitcoin's fixed supply. Comfortable in his Twitter echo chamber, he claims Bitcoin is the solution to developing countries' problems - if only people could appreciate hard currency and Austrian economics.
To date, Bitcoin has never been the savior of any economy. Its censorship-resistant P2P payment indeed provides a lifeline for individuals under high-pressure regimes, but countries with rampant inflation like Venezuela and Zimbabwe have not widely adopted it.
We thought they needed Bitcoin, but perhaps what they truly craved was the US dollar?
Ultimately, ideological disputes gave way to market demand. The practical value of US dollar stablecoins on the blockchain proved to be the pragmatic path to popularization.
2. Crypto's Growth
At this point, cryptocurrency's youthful fantasy of overthrowing the monetary order seems to have (temporarily) faded, replaced by a sober recognition of its nature as a financial infrastructure. Early Bitcoin believers were obsessed with creating monetary attributes, but ultimately, no one bought into it (except El Salvador). In fact, people showed little interest in new currencies and were more enthusiastic about efficiently transferring US dollars using these new blockchain technologies.
This was particularly evident during Bitcoin's professionalization after the 2013 bubble. Initially, Bitcoin itself served this function: users could transfer funds between exchanges supporting BTC, bypassing the cumbersome bank wire system. Then Tether (USDT) appeared, eliminating the exchange rate risk of using Bitcoin as a bridge asset - why endure Bitcoin's price volatility when you just want to transfer value?
The 2017 ICO bubble spawned numerous on-chain assets and ERC-20 tokens, and emerging DeFi trading and lending protocols added a new layer of legitimacy to blockchain (as a truly useful financial pipeline). People quickly discovered that the most popular product in the crypto world - leveraged positions - must rely on stablecoin lending. These DeFi lending platforms first created on-chain yields for stablecoins, expanding their audience from traders to all people wanting to save in US dollars, especially those outside the traditional US financial system.
3. Stablecoin's Moment of Enlightenment
It must be emphasized that this was not a grand plan by the US government. No one instructed Bitfinex to solve banking problems with US dollar stablecoins; Justin Sun did not follow a State Department memo when using US dollar stablecoins in emerging market gambling applications; no one from the Treasury Department requested Uniswap to upgrade to v2, allowing all assets to pair with stablecoins (not just ETH). This was purely market demand. Blockchain proved to be an efficient financial rail, and letting the world's reserve currency circulate on it multiplied its utility.
This market-driven US dollar stablecoin gravity finally alarmed legislators. Although crypto regulation discussions often oscillate between over-intervention and laissez-faire, the stablecoin bill's success is due to traditional crypto advocates unexpectedly gaining support from senators like Mark Warner (D-Virginia):
"The stablecoin market is nearly $250 billion. The US can no longer stand by. We need clear rules to protect consumers, defend national security, and support responsible innovation. The GENIUS Act is an important step forward."
Overall: Cryptocurrency's grand experiment as a new form of money has essentially failed. But as a financial infrastructure? It found its footing - ironically, by binding itself to the US dollar it once wanted to replace. The explosive growth of stablecoins forced legislation, but this bill is not meant to strangle stablecoins; instead, it legitimizes them, bringing this product that once lurked in obscure corners into Wall Street's brightly lit compliance plaza and Silicon Valley's meticulously trimmed garden walls.
4. US Stablecoins: A New Artery of Financial Infrastructure
Returning to the GENIUS Act, this is not just regulating a niche crypto asset, but a foundational project to reconstruct US financial infrastructure with stablecoins at its core. While existing stablecoins face short-term competitive pressures, their long-term impact will permeate various levels, from payment methods to banking structure.
(1) Payment Revolution and Stripe's Experimental Ground
The most direct impact will be in the payment domain. Online payment giant Stripe has launched a USDC stablecoin financial account for global business users; its acquired stablecoin infrastructure company Bridge can provide a seamless DeFi access experience. Visa and Mastercard have also entered, collaborating with card issuers and wallet service providers to allow consumers to spend stablecoin balances through existing card networks.
(2) Bank Disintermediation and the Rise of "Narrow Banking"
This is the truly interesting part (and unsettling for traditional banks). If businesses and digital-native users prefer to hold and transfer US dollars via stablecoins, what will happen to bank deposits? Traditional banks' model of lending based on deposits will be challenged - when large deposits flow into digital wallets on platforms like Coinbase, banks' intermediary role will be bypassed.
In fact, banks are already being marginalized in lending. While they still dominate small and medium enterprise loans and mortgages, specialized mortgage lenders often handle lending, with large banks providing funding. In the future, these lending institutions might collaborate with investment funds that professionally assess mortgage loans, forming a "loan origination + investment" separation model - essentially similar to the currently popular corporate bond and private credit markets. Stablecoins are accelerating the trend of "narrow banking" that economists describe: financial institutions primarily investing deposits in safe assets like government bonds, rather than issuing loans.
However, this future may still be some time away, as the banking lobby successfully added a clause prohibiting interest-bearing stablecoins in the GENIUS Act. Although aimed at controlling risks, the pursuit of returns is unstoppable. Interest may still "leak" through platforms like Aave, with rate spikes due to Ethena USDe circular strategies, to less regulated non-US platforms, such as innovative products like Sky Savings Rate. If these external platforms gain scale, they may introduce new systemic risks to the US financial system, forcing regulators to once again catch up with stablecoin developments.
(3) New DeFi Opportunities
If banks are no longer the primary source of credit, where will mortgages and small business loans come from? The answer may be DeFi. We anticipate that DeFi can make this evolving credit system more transparent and efficient - in the future, your mortgage might be issued by a DeFi protocol supported by global stablecoin liquidity pools rather than a bank. Interest-bearing stablecoins like BlackRock's BUIDL fund and Ondo Finance's OUSG have already emerged, providing compliant traditional asset yield channels for institutional investors. Can such a model be adapted for mass lending? This could create a more active (but riskier) credit ecosystem. A new order with reduced bank credit intermediation might be better, but needs to be pursued cautiously.
5. Stablecoins Beyond the US: A New Dollar Hegemony
Although the act directly affects only the US, it plants seeds for a transformation of the dollar's global role. Ironically, the largest US dollar stablecoin, Tether, is not registered in the US. Despite complying with US anti-money laundering regulations, Tether's founding team has always remained wary of the US market.
While US politicians focus on domestic citizens, the GENIUS Act will have an even greater impact on the rest of the world. For the US, stablecoin legalization will change the credit market structure; for other countries, this will directly challenge their local currency's monopoly status - this is not just a financial issue, but a matter of monetary sovereignty.
(1) Fiat Currency: A Replay of Local Newspaper Fate?
This trend of local monopoly collapse reminds one of Ben Thompson's media aggregation theory, only with currency as the protagonist. When the internet destroyed news distribution costs, most local newspapers perished, while giants like The New York Times went global - the internet rewards the largest and most trusted brands.
A similar scenario is about to unfold in the fiat currency realm. People in economically unstable or financially regulated countries will prefer US dollar stablecoins due to their stability and global liquidity. Governments may instinctively restrict them to preserve monetary sovereignty, but they may find it difficult in the face of network effects.
(2) The Trump Variable
A key premise for the success of the US dollar stablecoin narrative is that the US wants to maintain its global reserve currency status and that dollarization benefits US citizens. However, the Trump administration is pushing for global de-dollarization through the "Mar-a-Lago Accord", with its true intentions still unclear.
Look at the recent surge in US Treasury yields - Trump administration rhetoric has scared away foreign investors. The global decline in demand for dollars and Treasury bonds not only increases fiscal pressure on the US government but directly raises mortgage and car loan rates for ordinary citizens. While the crypto world is busy building global channels for US dollar stablecoins, we must ask: Is this really what the US itself wants? The GENIUS Act appears to be stablecoin regulation but has unexpectedly ignited a domestic debate about the future role of the dollar.
6. Borderless Currency vs. Borderless Financial Infrastructure
Despite Crypto's shift towards stablecoins and borderless financial infrastructure, the dream of monetary sovereignty never dies.
Bitcoin has realized the vision of a borderless currency, reaching a new high this week, and still has a long way to go as digital gold (even if it fails to overthrow dictatorial regimes). Other borderless monetary forms may emerge - Ethereum, as the infrastructure for many stablecoins and real-world assets (RWA), has in some sense already reached this state. Solana may follow, but all crypto assets achieving borderless monetary status must obtain monetary premium through fee income (fashionably called REV) and collective belief of token holders in the network's future - look, how similar this is to Powell's rallying cry for the dollar.
But after the GENIUS Act, we increasingly see that future borderless currencies must compete with "national currencies" running on blockchains, which will vie for hegemony in the era of borderless financial infrastructure through existing network effects.
