What the GENIUS Act and Stablecoins Mean for Non-Crypto and Crypto Investors.
What every investor, non-crypto and crypto, needs to know about the coming changes
"I remember the $0.05 hamburger and a $0.40-per-hour minimum wage, so I’ve seen a lot of inflation. Did it ruin the investment climate? I think not."
— Charlie Munger
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The U.S. dollar is at its most critical point since Nixon abandoned the gold standard in 1971. What started as a gold-backed currency, then evolved into a petrodollar system, now faces its biggest challenge yet in the digital age. The upcoming GENIUS Act legislation and the rapid rise of stablecoins could completely change the rules of monetary policy, with significant implications for non-crypto and crypto investors trying to navigate this new world.
1. The Dollar’s Three Ages: From Bretton Woods Gold to Petrodollar to the GENIUS Act and Stablecoins
History, for some, is boring. If that is the case with you, stay with me. It will be critical to understand the current amazing investment opportunities further explained down below, driven by the GENIUS Act & stablecoins. Investment opportunities that impact all investors; non-crypto investors and crypto investors.
1.1 The Bretton Woods Gold-Backed Era (1944–1971)
Towards the end of World War II, leaders from 44 countries met in Bretton Woods, New Hampshire, to come up with a new monetary system for the world after the war. They agreed to make the U.S. dollar the world’s anchor currency, with the dollar backed by gold at $35 an ounce, and other nations’ currencies pegged to the dollar at fixed exchange rates. This meant currencies weren’t allowed to float freely—their value was tied to the dollar, and the dollar was tied to gold.
However, if a country faced a fundamental disequilibrium, it could adjust its fixed exchange rate with approval from the International Monetary Fund (IMF). It’s a golden age—literally—for stability, as the dollar becomes the go-to for international trade and finance.
Sources and further reading:
https://www.federalreservehistory.org/essays/bretton-woods-created
https://www.sciencedirect.com/topics/economics-econometrics-and-finance/bretton-woods-system
But by the 1960s, things started to unravel. The U.S. was spending heavily on the Vietnam War (1955 to 1975) and domestic programs, printing more dollars than it had gold to back. Countries noticed and began exchanging their US dollars for the actual gold held in U.S. gold reserves thinking if the US prints more money than it has gold, let’s secure our gold just to be safe, putting pressure on the system. In 1971, President Richard Nixon pulled the plug on the gold standard in a move called the “Nixon Shock.”
Overnight, the dollar became a fiat currency, meaning backed only by trust in the U.S. government and nothing else. Gold prices exploded, rising from $35 an ounce in 1971 to about $875 by 1980, a 25-fold increase. That is huge. Currencies started fluctuating wildly, and investors learned a hard lesson: when monetary systems shifted, assets like gold could shine as hedges against uncertainty.
Gold Prices - 100 Year Historical Chart
Source: https://vaulted.com/nuggets/100-years-of-gold-price-history/
Sources and further reading:
1.2 The Petrodollar Era (1974–Present)
With gold out of the picture after 1971, the central role of the US dollar, while still strong at the time, was now more vulnerable. In order to prevent the US dollar from becoming just another currency, the US needed a new mechanism to secure the dollar’s global dominance.
Think of currency like a product. The more demand there is for them, the higher the value. For example, if there are more buyers than sellers for houses in a given neighborhood, prices will go up. And the reverse will also be true. Currencies, on a global stage, are just like real estate. Keeping a steady demand is critical. With Bretton Woods gone, and with it the central role of the US dollar in the global economy, the US government was worried about the demand for US dollar going down in the long term. What to do?
The answer arrived in 1974 with the emergence of the petrodollar system. The U.S. struck an informal but powerful arrangement with Saudi Arabia: oil would be priced and traded primarily in dollars, and OPEC countries would recycle much of their surplus dollar profits by investing heavily in U.S. Treasuries. This arrangement ensured that as long as the world needed oil, it also needed dollars, creating a constant, structural demand for the greenback. This was a huge change and effectively re-secured the anchor role of the dollar. It allowed the U.S. to run persistent trade deficits without facing immediate financial repercussions. Typically, countries with a consistent trade deficit would see the value of their currency drop. But as the dollar, thanks to the petrodollar arrangement, stayed in high demand, that protected the dollar from such pressure.
So far so good. But if there is one constant in human existence, it is impermanence. As other countries (e.g., China, India, etc.) grew economically, a lesser role for the dollar was to be expected. And that has happened, gradually, since 1971.
However, in addition, the worst wounds are often self-inflicted, and we created a number of them. As the Cold War ended, the need to maintain the global PR (Free World vs. Soviet Union) diminished, and actions were taken over the last 25+ years—like sanctions, freezing, seizing, and the weaponization of SWIFT—that made using the dollar increasingly less popular. Each action, as outlined below, was not definitive on its own, but the cumulative impact of these self-defeating moves led to a weakening of dollar supremacy.
Before we touch on that, please note that the following is not a political statement (for or against), but rather a cold, logical, matter-of-fact analysis. Each system, be it sailing, flying, or finance, has its own rules. The rules exist whether we like them or not. I may not like that sailing requires me to do certain things, but if I ignore them, I may not make it back. Finance is the same. Financial history books are full of countries who thought that global financial rules didn’t apply to them.
So what did happen? Over the last 25 years or so, the U.S. and its allies increasingly weaponized their financial infrastructure. Sanctions, asset freezes, and seizures became central tools of American foreign policy. The U.S. used its control over the dollar and Western banking systems to restrict adversaries’ access to global markets, as seen with Iran, Venezuela, Afghanistan, and most dramatically, Russia after the 2022 invasion of Ukraine. The freezing of Russian central bank reserves in 2022 marked an unprecedented escalation in the financial weaponization of the dollar, signaling to the world that even sovereign assets held abroad could be targeted for political reasons. This weaponization extended to the Western-controlled SWIFT network, the backbone of global interbank transactions. Russian banks were expelled from SWIFT, cutting them off from much of the international financial system. Earlier, similar tactics had been used against Iranian banks, demonstrating that access to the world’s financial plumbing could be granted or revoked at the discretion of Western powers.
Now, as an American, one may be tempted to say “so what.”
The “so what” is that the world is watching, and other countries have started to adjust their financial decisions, as previously sacrosanct values like property rights and the neutrality of global finance could no longer be taken for granted.
In response, countries began seeking ways to insulate themselves from the reach of increasing U.S. sanctions by developing a parallel financial infrastructure (a “Plan B” to SWIFT), reducing their exposure to US Treasuries, trading with each other in their own currencies, and moving central bank reserves from US dollars and euros to sanctions-proof gold.
Source: https://www.visualcapitalist.com/charted-30-years-of-central-bank-gold-demand/
Central Banks Gold Net Purchases
Source: https://en.macromicro.me/charts/93189/gold-demand-central-banks-and-other-inst
There is no fire rush, but rather a slow, deliberate movement away from the dollar as central bank reserves. The dollar is still strong in international trading, but more and more nations, mostly within BRICS, switch to trading in their local currencies. As of now, the US dollar is still going strong, but weakening as the pieces are being put in place—slice by slice.
Sources and further reading:
https://www.lse.ac.uk/ideas/Assets/Documents/updates/LSE-IDEAS-Weaponisation-Dollar.pdf
https://www.chathamhouse.org/2024/09/us-dollar-dominance-both-cause-and-consequence-us-power
https://theowp.org/how-the-weaponization-of-the-dollar-created-the-desire-for-de-dollarization/
https://www.scienceopen.com/hosted-document?doi=10.13169/worlrevipoliecon.15.4.0566
1.3 The Digital Dollar Era: Stablecoins and the GENIUS Act (Emerging Now)
As the petrodollar system wobbles and the long-term demand for dollar is expected to decline for the reasons outlined above, the US government is trying to create new demand for the US dollar by pivoting to a digital future.
Two forces are leading the charge: stablecoins and the proposed GENIUS Act. Stablecoins, like Tether (USDT) and USD Coin (USDC), are cryptocurrencies pegged 1:1 to the dollar, with a combined market cap of about $218 billion in June 2025, according to CoinMarketCap. Just to recap: with Bitcoin, as a buyer, one wants the value of Bitcoin to go up vs. the dollar. With US dollar stablecoins, one wants stability. The issuers of stablecoins achieve that by backing the issued stablecoins 1:1 with US dollars or US Treasuries kept at banks as collateral.
Top Stablecoins by Market Capitalization
Source: https://coinmarketcap.com/view/stablecoin/
Click here for a refresher on crypto (Bitcoin, Altcoins, Stablecoins, NFTs, etc.): “$Trump, Bitcoin & Altcoins – Back to the Future?”
US dollar stablecoins are a hit in places like Latin America, where high inflation in 2024 has businesses using USDT to dodge unstable local currencies, and Africa, where peer-to-peer stablecoin trading is booming.
Source: https://www.chainalysis.com/blog/2024-global-crypto-adoption-index/
These digital dollars are fast, cheap, and bypass traditional banks, making them “dollar ambassadors” in emerging markets.
Source: https://www.chainalysis.com/blog/stablecoins-most-popular-asset/
As the above graph shows, stablecoins are most popular in the
Middle East and North Africa (MENA)
Central & Southern Asia and Oceania (CSAO)
Eastern Europe, and
Latin America
In the US, stablecoins are roughly at par with Bitcoin in terms of popularity.
At the same time, the GENIUS Act—short for “Guiding and Establishing National Innovation for U.S. Stablecoins Act”—could turbocharge this trend toward more US dollar stablecoins.
This proposed law—the GENIUS Act—aims to finally give stablecoins a clear legal framework, moving them from a regulatory gray zone into the mainstream U.S. financial system. That’s a big deal. The crypto industry has exploded in growth, but regulations haven’t kept up. Under the previous administration, federal agencies were stuck in a bureaucratic turf war (SEC vs. CFTC (Commodity Futures Trading Commission)) over who should oversee crypto—leading to conflicting rules.
That mess pushed Coinbase to sue the SEC in 2023, basically saying: "We want to comply, but your regulations are conflicting and impossible to follow. Just tell us what the rules are!"
Source: https://www.reuters.com/legal/coinbase-files-legal-challenge-push-sec-write-rules-crypto-2023-04-25/
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) is part of the solution. It would:
Define stablecoins as payment instruments (not securities), ending the SEC vs. CFTC jurisdictional fight.
Require 1:1 reserves and regular audits, making them safer for everyday use. Collateral used for the 1:1 reserve needs to be US dollar, ultra-short term (93 or less days remaining) US Treasuries, or similar secure collateral.
Let banks issue stablecoins, bridging crypto and traditional finance.
Sources:
https://www.troutman.com/insights/the-genius-act-what-is-it-and-whats-next.html
https://tokeny.com/the-impact-of-the-stablecoin-genius-act-on-tokenization/
This isn’t just about cleaning up confusion—it’s about making dollar-backed stablecoins a core part of the economy. And after years of regulatory chaos, that’s a huge step forward.
In summary, the GENIUS Act establishes a clear federal regulatory framework that defines stablecoins as payment instruments (not securities), enforces strict 1:1 reserve and audit requirements to improve safety, and authorizes banks to issue stablecoins, thereby connecting crypto with traditional financial institutions.
For investors, this digital shift is a double-edged sword. Stablecoins and the GENIUS Act could keep the dollar dominant in a digital world, but they also risk disrupting banks and weakening the Fed’s grip on monetary policy.
2. The GENIUS Act: Redefining the Dollar’s Digital Future.
The GENIUS Act isn’t just a regulatory tweak—it’s a potential game-changer for how money works in America. Right now, stablecoins like USDT and USDC operate in a murky space, with issuers facing questions about whether their reserves truly back every digital dollar. The GENIUS Act would set clear rules, making stablecoins a legitimate part of the financial system. This could make them as mainstream as PayPal or credit cards, letting you pay for coffee or send money abroad with a few taps.
In the early days of the United States, the dollar wasn’t what it is today. Today every dollar is issued by the Federal Reserve Bank. Before the Federal Reserve existed (it started in 1913), believe it or not, private banks issued their own paper dollar—each note backed by gold or silver reserves. Using today’s bank names as an example, prior to 1913, you saw Citibank Dollar, Chase Dollar, Wells Fargo Dollar, and so on. Each back by some amount of gold or silver.
Source: https://ffus.substack.com/p/trump-bitcoin-and-altcoins-back-to
This decentralized system meant that the money in your pocket might be a note from a local bank, stamped with its unique design and reputation. Here is one example from a bank that no longer exists, the Canal Bank.
Louisiana, New Orleans, Canal Bank, $10 note, 1840s
Source: https://anythinganywhere.com/commerce/papermoney/papermoneypics/usa-la-h105-g22a-1.jpg
The creation of the Federal Reserve in 1913 changed everything. Designed to stabilize the financial system, the Fed was given exclusive authority to issue U.S. dollars, replacing the patchwork of private banknotes with a single, government-backed currency. At the time the dollar issued by the Fed was backed by gold.
The Fed though structured as a private entity—owned by its member banks—operates under congressional oversight, wielding immense power over the nation’s money supply. There is a whole deeper topic about ownership and control of the Fed, but that is a topic for another day.
Over time, the dollar shed its gold backing entirely, becoming purely a fiat currency controlled by the Fed’s monetary policies, as explained above.
The key takeaway is that the Fed is the only institution allowed to issue US dollars. Ever since 1913.
Another key thing to understand about the Fed is its role in the Treasury market. While U.S. Treasuries are normally bought by investors worldwide, the Fed also purchases them - but with an important distinction. It doesn't buy directly from the government. Instead, it operates in the secondary market, where it can step in to stabilize things when needed.
We saw this play out dramatically in March 2020 during the COVID panic. When investors started dumping Treasuries in a 'dash for cash,' the Fed acted as buyer of last resort, snapping up an unprecedented $1.5 trillion in Treasuries in just weeks to keep the market functioning.
Sources and further reading:
As of Q2 2025, the Fed holds about $4.2 Trillion worth of US Treasuries (about 14% of all US Treasuries excluding intragovernmental debt). That makes the Fed a critical buyer of US Treasuries.
The Total Face Value of U.S. Treasury Securities Held by the Federal Reserve
Source: https://fred.stlouisfed.org/series/TREAST
Let’s recap. Ever since 1913, the Fed is the only entity that can issue US dollar. In addition, the Fed is also an important buyer of US Treasuries.
With the stablecoin take-off and the stablecoin reserves – often held in US Treasuries – stablecoin issuers could become a critical new investor in US Treasuries as non-US investors are dialing back their investments in US Treasuries for the reasons outline above, and as shown in the graph below.
Federal Debt Held by Foreign and International Investors as a Percent of Total Publicly Held Debt
Source: https://bipartisanpolicy.org/blog/foreign-investors-hold-a-shrinking-share-of-u-s-debt/
Without the new stablecoin demand increasing the demand for US Treasury and filling the gap left by fewer non-US investors, the government would be required to pay higher interest rates to attract more non-US borrowers.
The current market value of the two major US dollar stablecoins, Tether (USDT) and USD Coin (USDC), is around $218 billion. A large sum, but compared to the current Fed holding of US Treasuries of $4.2 trillion, still comparatively small. But with the increased legal clarity coming with the GENIUS ACT, stablecoins should be set up for explosive growth.
In addition to being a buyer of US Treasuries, stablecoin issuers can now do something that has been illegal since the creation of the Fed in 1913: issue US dollars, albeit only in a digital format. And as any bank under the GENIUS Act can become a stablecoin issuer, we are in one respect returning to the days of free banking, when private banks could issue US dollars. However back then, they were backed by gold. Today, they are backed by US Treasuries. This is a monumental change in US monetary policy, similar to the change in 1913 when the Fed was created.
It is important to note that, while stablecoins have audited safeguards as explained above, they are not guaranteed by the US government.
So, if a stablecoin issuer were to go bankrupt, one only has a private claim against the issuer, and its worth is uncertain.
The auditing requirement is a significant improvement over the days of free banking, when most banks issued their dollars backed by gold or silver with varying state-by-state audit standards.
But in either case—whether a stablecoin issuer or a free banking note issuer—if the issuer goes bankrupt, you only have a private claim against the issuer. For a stablecoin issuer, the value of the US Treasuries backing the stablecoins will determine the recoverable value. Only US dollars issued by the Fed have the full faith and backing of the US government.
However, given the new safeguards in place with the GENIUS Act, in terms of certainty of existence of collateral, stablecoins can be seen as a significant improvement over the private bank-issued dollars during the free banking era.
Of course, any currency that is not backed by a hard asset like gold or silver will always decline over time in terms of purchasing power. One can be for or against it, but in the current monetary system (fiat currency system) that we live in, it is a fact of life.
And there is now a 2nd issuer of dollars, next to the Fed. Quite a sea change.
3. What It Means for Investors & How to Profit from It
To understand where the dollar’s headed, look at the British pound’s fall from grace. Around 1900, the pound sterling ruled global trade, backed by the British Empire’s might. In 1900 the British pound was where the US dollar is today. If you had talked with an average citizen of the British Empire back then, the thought that the British pound might in 40 years not be the global reserve currency would have been laughable. As any history buff knows, history is full of events that people just a few years earlier would have ridiculed as impossible.
That also happened to the British Empire. World Wars I and II drained Britain’s coffers, and by the 1940s, the U.S. dollar took over. The pound didn’t vanish overnight—it stayed relevant for decades, showing that reserve currency shifts are slow. So, no cause to hit the panic button. But cause, to take the long-term trend seriously.
Today’s dollar faces a similar transition, as explained above. The GENIUS Act and stablecoins could be the dollar’s answer to staying relevant, much like the petrodollar kept the dollar relevant after it stopped being gold-backed.
Change is an interesting thing. People who ignore change tend to be on the losing side of change. People who tend to accept change (like or dislike) tend to be able to profit from it.
Let’s take a closer look at what it means for investors in detail, and more importantly, on how to profit from this change as an investor on both sides (non-crypto and crypto).
