#cpiwatch The GENIUS Act and Its Global Implications
The recently passed GENIUS Act marks a major shift in how the United States regulates digital dollars, yet it has received surprisingly little public attention. By banning interest payments on stablecoins, the law effectively redirects billions in potential yield away from users and toward issuers. For example, large stablecoin providers holding massive amounts of U.S. Treasuries continue to earn interest, while stablecoin holders now receive nothing in return.
This move also creates a competitive challenge at the global level. China has introduced an interest-bearing digital yuan, offering positive yield to users. For international businesses and merchants, the comparison is becoming clear: holding digital dollars now carries an opportunity cost, while holding digital yuan provides income. At the same time, institutional investors are shifting capital toward tokenized funds that legally offer yield, highlighting a growing divide between regulated stablecoins and alternative financial products.
More broadly, the lack of a Federal Reserve backstop for stablecoin issuers raises systemic risk concerns. In a market shock, forced asset sales could disrupt U.S. Treasury markets and spill into the wider economy. Instead of strengthening dollar dominance in the digital age, the GENIUS Act may unintentionally weaken it by making digital dollars less attractive in an increasingly competitive global financial system.