When hundreds of billions of US debt find their "crypto savior," we are witnessing the birth of Dollar 2.0

Author: White55, Mars Finance

I. Legislative Process: A Dramatic Turn from "Near Death" to "Resurrection"

From May to June 2025, the U.S. Senate's negotiations over the "GENIUS Act" (full name: "Guidance and Establishment of the U.S. Stablecoin National Innovation Act") can be described as an epic battle intertwining politics and finance. This bill, aimed at establishing the first federal regulatory framework for the $250 billion stablecoin market, experienced a thrilling comeback from "procedural death" to "bipartisan compromise," ultimately advancing to the Senate floor debate stage with a voting result of 68 to 30. However, behind this victory lies months of interest exchanges between the two parties, lobbying battles among industry giants, and the moral controversies sparked by the Trump family's "crypto gold mine."

Timeline Review:

• March 2025: Republican Senator Bill Hagerty officially proposed the initial draft of the bill, aiming to establish a "federal + state" dual regulatory system for payment stablecoins.
• May 8: The bill's first procedural vote unexpectedly failed 48 to 49, with Democrats collectively turning against it citing "Trump family conflicts of interest."
• May 15: The two parties urgently negotiated and introduced a revised bill, removing provisions targeting the Trump family's crypto business in exchange for some Democratic support.
• May 20: The amendment passed the critical "cloture vote" with a 66 to 32 margin, clearing legislative hurdles.
• June 11: The Senate passed the bill with an overwhelming advantage of 68 to 30, entering the final debate and amendment process.

Senate Majority Leader John Thune spoke on Wednesday in support of voting for the "GENIUS Act." Source: U.S. Senate

The core of this series of twists lies in the Republican Party's clever framing of the bill as a strategic tool for "digital dollar hegemony," while the Democrats showed signs of wavering due to concerns about "regulatory vacuum leading to financial risks." Senate Majority Leader John Thune's lobbying rhetoric was highly provocative: "If the U.S. does not lead stablecoin rules, China will fill the void with the digital yuan!"

II. Core Provisions: Regulatory Blueprint and "Devil's Details"

The regulatory framework design of the "GENIUS Act" attempts to walk a tightrope between "encouraging innovation" and "preventing risks," with its core provisions summarized into the following six pillars:

Dual Regulation and Issuance Threshold

Stablecoins with issuance scales exceeding $10 billion will be federally regulated (led by the Office of the Comptroller of the Currency, OCC), while those below $10 billion may opt for state-level regulation, provided state standards align with federal ones. This design reassures state autonomy while delineating red lines for giants, seen as a de facto protection for Circle (USDC) and Tether (USDT).

1:1 Reserves and Asset Segregation

Stablecoins are required to be fully collateralized by cash, short-term U.S. Treasury bonds, and other highly liquid assets, with reserve assets strictly segregated from operating funds. This provision directly targets the 2022 Terra collapse but allows for the inclusion of "risk assets" like money market funds in reserves, criticized as "laying mines."

Tech Giants' "Tightening Spell"

Non-financial tech companies (such as Meta and Google) must obtain approval from a newly established "Stablecoin Certification Review Committee" (SCRC) to issue stablecoins and meet data privacy and antitrust requirements. This provision is interpreted as a "targeted strike" against Trump ally Musk's (X platform's stablecoin plan).

Consumer Protection and Bankruptcy Priority

In the event of issuer bankruptcy, stablecoin holders can redeem their assets first, and reserves will not be included in the bankruptcy estate. However, Democrats argue that this provision is weaker than traditional bank FDIC insurance mechanisms, posing a "fund freezing" risk.

Anti-Money Laundering and Transparency

Stablecoin issuers will be subject to the Bank Secrecy Act, mandating compliance with KYC and suspicious transaction reporting obligations. However, a loophole exists: decentralized exchanges (DEX) are not bound, leaving a backdoor for illegal fund flows.

Presidential Family "Exemption Loophole"

The bill does not explicitly prohibit members of Congress or presidential relatives from participating in stablecoin businesses, allowing the Trump family's World Liberty Financial (WLF) to legitimize the USD1 stablecoin (market cap of $2 billion). Democratic Senator Warren angrily denounced: "This is a green light for Trump's 'crypto corruption'!"

III. Controversy Maelstrom: Trump's "Crypto Gold Mine" and Bipartisan Fracture

The greatest resistance to the bill's advancement does not stem from policy details but from the Trump family's deep involvement in the crypto industry and the resulting conflicts of interest. Three major points of contention have escalated the political struggle:

"Legalization Arbitrage" of USD1 Stablecoin

WLF's USD1 has injected $2 billion into Binance through an Abu Dhabi investment firm, allowing the Trump family to earn over $80 million annually from transaction fees. More critically, once the bill passes, USD1 will automatically gain federal recognition, potentially skyrocketing its market cap to the tens of billions.

Ethical Crisis of "Pay-to-Meet"

Trump offers holders of Meme coins (like TRUMP Coin) the chance to attend a "presidential dinner," which Democrats accuse of "securitizing national power." Senator Jeff Merkley bluntly stated: "This is the most blatant quid pro quo in history!"

"Revolving Door" of Legislative and Executive Power

One of the bill's core drafters, Republican Senator Hagerty, has been revealed to have political donation ties with WLF. Democrats attempted to push an amendment to prohibit public officials from participating in stablecoin businesses but were collectively blocked by Republicans.

Although the two parties reached a compromise on May 15, removing provisions directly targeting Trump, Warren and others still launched a "final fight" in the Senate, demanding transparency on the funding flows between the Trump family and WLF. This moral battle is, in fact, a prelude to the 2026 midterm elections.

IV. Market Turbulence: Compliance Dividends and the "Oligopoly Era"

If the "GENIUS Act" is ultimately enacted, it will trigger a structural reshuffle in the stablecoin market:

Top Players "Coasting"

USDC (Circle) and USDT (Tether), having already established compliant reserves (80% in short-term U.S. Treasuries), will directly obtain federal licenses, further squeezing smaller issuers. Goldman Sachs predicts their market share may rise from 94% to 98%.

Traditional Finance "Cross-Border Harvesting"

Institutions like JPMorgan and Wells Fargo have applied for "limited purpose stablecoin licenses," planning to encroach on cryptocurrency exchange shares through on-chain payment services. The provision in the bill allowing insurance companies to issue stablecoins further opens the floodgates for traditional giants.

"Cure or Poison" for U.S. Treasury Crisis?

The bill requires stablecoin reserves to be primarily in U.S. Treasuries, which may temporarily alleviate liquidity crises but could exacerbate "maturity mismatches" in the long run—investors favoring short-term bonds may lead to dwindling demand for long-term Treasuries, worsening fiscal deficits.

Global Regulatory "Domino Effect"

The EU, UK, and Singapore have indicated they will adjust policies in reference to the "GENIUS Act," forming a "U.S. dollar stablecoin alliance." The renminbi and yen stablecoins may be squeezed out of the cross-border payment market, reshaping the global monetary landscape.

V. Future Battle: House Negotiations and Trump's "Final Judgment"

Although the Senate has given the green light, the bill still needs to pass through three hurdles:

"Simplified Passage" in the House

The Republican Party controls the House with a 220:215 majority, requiring only a simple majority (218 votes) for passage. However, the House version of the "STABLE Act" contains key differences from the Senate version: the former demands complete federal regulatory authority and prohibits tech companies from issuing stablecoins. Coordination between the two chambers may drag on until the August recess.

Presidential "Interest Balancing"

Although Trump publicly supports the bill, his family's interests are deeply intertwined with legislative details. If Democrats push an "anti-corruption amendment" in the House, it could trigger a presidential veto, leading to legislative failure.

Judicial Challenge "Gray Rhino"

The U.S. Constitution's "Emoluments Clause" prohibits the president from profiting from foreign governments, and since 20% of USD1 users are located in sanctioned countries (Iran, North Korea), this may provoke Supreme Court intervention.

VI. Conclusion: "Dollar Hegemony 2.0" in the Crypto Era

The ultimate ambition of the "GENIUS Act" is not merely to regulate the market but to embed dollar hegemony into the DNA of blockchain. By tying U.S. Treasuries to stablecoins, the U.S. is building a "digital dollar empire"—every on-chain transaction globally is, in effect, reinforcing the dollar's reserve status. However, the risks of this gamble are equally immense: if DeFi (decentralized finance) bypasses compliant stablecoins or if China accelerates the internationalization of the digital yuan, the bill could become a "house of cards."

The games of politicians, the lobbying of interest groups, and the waves of technological revolution—at this historical crossroads, the ultimate fate of the GENIUS Act will determine who dominates the financial order of the next decade.