Key Takeaways

As Washington embraces stablecoins, other nations are on the back foot.

Lawmakers around the world are racing to respond to the U.S. GENIUS Act.

Even American allies are concerned about creeping dollarization.

Upon signing the GENIUS Act, Donald Trump stated that the legislation would be “good for the dollar [and] good for the country.”

From Ottawa to Beijing, American efforts to promote stablecoins have reignited longstanding debates about dollar supremacy and injected a new sense of urgency into policy conversations.

Long before the GENIUS Act was passed into law, lawmakers in Congress acknowledged that effective stablecoin regulation could promote U.S. economic interests.

Stablecoins “can reinvigorate the U.S. dollar as the world’s reserve currency,” Representative Ritchie Torres argued in 2021. Two years later, Senator Kirsten Gillibrand claimed that passing a regulatory framework for stablecoins was “absolutely critical to maintaining the U.S. dollar’s dominance.”

Such statements have raised alarm bells in parts of the world where U.S. economic dominance is more often cloaked in the language of supremacy and imperialism.

Writing in Beijing Daily, a communist party mouthpiece, JD.com Vice President Jian Guang Shen argued that “the Trump administration’s strategic intention is to establish USD stablecoins as a new pillar of global financial hegemony.”

An even more dramatic characterization was offered by Dr. Huang Ying, a researcher at China’s Ministry of State Security.

“The Genius Act has sounded the alarm for countries around the world: the United States is launching a new type of currency war,” he proclaimed in July.

If American stablecoin legislation is an act of war, Jian and Huang both acknowledged that Washington was provoked by China’s digital yuan.

While adoption of the central bank digital currency (CBDC) has been muted so far, its potential to reshape global trade shouldn’t be overlooked. In a world in which companies can pay Chinese suppliers at the click of a button without intermediaries, the greenback’s role in international supply chains is under threat.

Alarmed reactions to the U.S. stablecoin push aren’t limited to China.

In Europe, the recent events have rekindled debates about dollarization that many assumed were settled by the creation of the euro.

Viewing CBDCs as a crucial bulwark against the rise of dollar stablecoins, officials at the European Central Bank aim to accelerate the digital euro project.

In the meantime, some of Europe’s largest banks have thrown their weight behind euro stablecoins.

Across the channel, the Bank of England is keeping its options open for now as it explores the tradeoffs between CBDCs, tokenized deposits, and domestic stablecoins. While each approach to GBP digitization has its supporters, all sides agree that time is of the essence.

Representing team stablecoin, a September report from the Imperial Business School called for a legislative response to the GENIUS Act. Without regulatory support for pound-backed stablecoins, “digital dollarization” threatens to erode monetary sovereignty, they argued.

The same sovereignty arguments that are playing out in Europe have become increasingly prevalent in Canada as well.

The government there is reportedly consulting on new stablecoin rules, with a major announcement expected in November’s budget.

Around the world, the GENIUS Act “forces the hands” of lawmakers seeking to protect their national economies from foreign influence, observed Kevin Zhang, the CEO of Canadian stablecoin startup Loon.

“In order to protect the Canadian dollar,” having a CAD-backed stablecoin is “paramount to its survival,” he stressed.

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