The U.S. Senate is raising global eyebrows after passing the GENIUS Act, a new law regulating payment stablecoins. This law requires all dollar-backed stablecoins to be fully collateralized by cash or short-term U.S. Treasuries.
During a Senate Banking Committee hearing, Senator Bill Hagerty questioned Federal Reserve Chair Jerome Powell about the act’s economic impact. Powell welcomed the progress and suggested this demand shift could lower short-term interest rates and reshape global financial flows.
A market analyst has forecasted that dollar-pegged stablecoins might reach $4 trillion in circulation by 2030. This surge in demand could lead to an increase in U.S. Treasuries, which would likely affect the yield curve and lower borrowing costs. Powell recognized this trend, although he conceded that the exact effects are still a bit unclear. Nevertheless, both sides seem to agree that this development could be a benefit to the U.S. economy.
Global Concerns Over Stablecoin Expansion
Christine Lagarde, President of the European Central Bank, stated that stablecoins may disrupt monetary policy. She believes money should remain a public good, not a private tool issued by corporations. And then she went on to criticize stablecoins for confusing the line between currency and infrastructure.
Adding to these concerns was Governor Andrew Bailey of the Bank of England. He went on to say that any token considered money should in all circumstances maintain its nominal value. Without adequate safeguards, there is a risk that stablecoins can put economic stability in jeopardy.
Powell’s Position and What Lies Ahead
In the meantime, the Fed has kept interest rates unchanged since December 2024, sparking discussions about possible cuts. Some analysts, such as economist Peter Schiff, suggest that political pressure could lead to lower rates. There’s even chatter about the possibility of replacing Powell to speed up monetary easing.
The upcoming FOMC Minutes on July 9 may offer more clarity. Investors and policymakers will closely watch how the Fed aligns its next moves with the new stablecoin framework.
