The proposed GENIUS Act – a U.S. legislative effort to create Treasury-backed stablecoins – is drawing international scrutiny as analysts warn of systemic risks to global financial markets. While framed as a modernization of dollar-based payments, critics argue the plan could amplify existing vulnerabilities in the world's reliance on U.S. debt instruments.
At its core, the Act would allow private entities to issue digital currencies pegged to U.S. Treasury bonds. Warwick Powell, adjunct professor at Queensland University of Technology, notes this effectively transforms public debt into collateral for private monetary systems – a move he describes as creating “hyper-financialized” structures with limited regulatory oversight.
The implications extend far beyond U.S. borders. Central banks and institutional investors holding $7.6 trillion in U.S. Treasuries could find themselves exposed to new forms of financial contagion. “If this system stumbles,” Powell warns, “the resulting shockwaves would ripple through every economy tied to dollar-based trade.”
Asian markets appear particularly vulnerable given the region’s heavy exposure to dollar-denominated transactions. Business leaders and policymakers are now debating whether this development should accelerate regional dedollarization efforts through alternative payment systems and currency swap agreements.
For investors, the proposal introduces both uncertainty and opportunity. While stablecoins could theoretically improve transaction efficiency, the lack of clear risk management frameworks raises questions about long-term market stability. Analysts suggest watching for increased Asian central bank activity in gold reserves and digital currency initiatives as potential countermeasures.
