Why Congress May Pass The GENIUS Act Rather Than Make A CBDC

This article originally appeared on Forbes.com.

This week, so-called “Crypto Week” on Capitol Hill faltered when the House failed to adopt the rule that would have cleared the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act for debate. As of Wednesday, with the support of the White House, discussions are continuing and the bill looks likely to advance. The bill is important for the the U.S. economy and has far reaching consequences beyond the financial system. 

Development of AI and energy resources are key national security concerns, and modernizing our financial rails allow the dollar to capitalize new businesses in these sectors at the speed of information. The Act opens a formal licensing path for banks and their subsidiaries to issue fully-reserved dollar tokens, which would confer a competitive advantage to dollar-capitalized businesses in a high-stakes global tech race where every advantage must be maximized. 

While lawmakers wavered this week, the global stablecoin float climbed past $251 billion and daily turnover hovered near $180 billion. Demand for a dollar that settles at internet speed keeps rising, and U.S. policy should lean in to that trend.

Accepting Reality About Modern Dollar Rails

Stablecoins meet the market demand for dollars that clear in seconds, provide final settlement, and do not require that payments move through a gauntlet of legacy financial plumbing that is expensive, slow, and inscrutable. Demand is strong – institutional USDC turnover has risen 29-fold this year, and Tether’s $160 billion supply and Circle’s $62 billion USDC together move more value each day than PayPal.

Global merchants already invoice in tokenized dollars. In Latin America roughly ninety percent of crypto activity flows through stablecoins, a response to high inflation and an unreliable wire network. Every invoice settled in dollars tightens the dollar’s grip on commodities, freight, and energy. Failing to pass the GENIUS act would allow rival jurisdictions to continue to win the market while the U.S. economy runs on outdated technology.

The dollar we all use when we deposit our paychecks to the bank and pay our bills is already digital, it’s just not modern or efficient. Opponents of GENIUS who frame the policy debate as a binary choice between today’s dollar system and a Fed-issued token are missing the forest for the trees. In the 2020s and beyond, Americans are going to use wallets that contain digital money. Here are the ways that could play out:

1. They could hold an account at the Federal Reserve. The U.S. government would issue a wallet app to every American. It would inevitably evolve into a platform for surveillance, control, and “compliance” that presents the government with the ultimate leverage over private affairs. This is the nightmare scenario that every constitutionalist wants to avoid by banning Central Bank Digital Currencies (CBDCs).

2. They could use today’s dollars and banking services which, as anyone who runs a business or has a bank account knows, is cumbersome and badly outdated. (People who build products in fintech and financial services have an even closer view of the convoluted and bizarre banking system.) In this scenario, we have implicitly decided that a drag on innovation and technological progress is worth avoiding the tiny risk that GENIUS somehow makes CBDCs more likely.

3. They could use bitcoin instead of the dollar for most economic activity. The transition would take time, but it will be unavoidable if the dollar loses its status due to unsustainable sovereign debt, or if it slides into irrelevance because it was never modernized. (Other cryptocurrencies will never be widely adopted for use as money because they lack bitcoin’s network effects and monetary properties.)

4. They could use dollar stablecoins issued by foreign governments and offshore corporations, as they do today.

5. They could use dollar stablecoins issued by chartered banks and other depository institutions in the U.S. that are subject to regulatory oversight, as the GENIUS Act provides.

Federalism Is The Secret Ingredient

GENIUS revives a classic American advantage: experimentation across sovereign states. A Wyoming trust company or a Texas depository institution would be able to issue up to $10 billion in payment tokens under local supervision so long as it meets a federal requirement for reserves. Reserve assets are limited to cash, Fed balances, and sub-93-day Treasuries, with no corporate credit allowed. If the $10 billion cap is exceeded, the institution may migrate to a federal charter. This structure protects consumers, encourages financial innovation, and keeps any single regulator from becoming a bottleneck as our economy inevitably transitions to digital currency.

Decentralized oversight also protects market continuity. If one jurisdiction tightens protocols, issuing activity can migrate rather than contract, preserving access for exporters, remitters, and everyday merchants worldwide. A decentralized digital dollar woven through many state charters becomes as resilient as the internet itself.

How Stablecoins Guard Against A CBDC

Skeptics inside the GOP warn that any stablecoin legislation might ease the path to a CBDC. The Anti-CBDC Surveillance State Act, which is already through committee, blocks the Federal Reserve from offering consumer accounts or programmable money. However, there is no reason that the GENIUS Act must pass at the same time, and the GENIUS Act does not undercut the Anti-CBDC Surveillance State Act in any way.

Although GENIUS does not explicitly forbid a CBDC, it makes the introduction of one much more difficult in practical terms. The market structure that GENIUS provides to stablecoin issuers will change how dollars flow through the U.S. using private and state-regulated institutions, creating facts on the ground that will make it more difficult for the government to ever force through a CBDC that violates the natural rights of Americans. Failing to integrate stablecoins with the U.S. banking system makes a CBDC more likely. If this session of congress demonstrates that it will not pass straightforward legislation on its own terms to modernize the dollar, a future session controlled by the opposition, which tends to be more amenable to centralized control, may advance a CBDC as the only viable solution to fixing our badly-outdated banking system.

Why Congress May Pass The GENIUS Act

Some critics object that the bill could enrich holders of crypto, including political figures. That argument confuses public infrastructure with private speculation. A robust highway network boosts every vehicle’s utility; mature financial rails for digital currency does the same for digital assets. Tens of millions of Americans already own bitcoin, stablecoins, and other digital assets. It is something they clearly want. A government that serves the people would be expected to facilitate lawful economic activity rather than stand in the way.

The choice before Congress is straightforward. Either cement the dollar’s leadership by embracing monetary technology that is already widespread and promises to underwrite the burgeoning tech boom, or watch foreign unregulated companies set the standard while domestic innovators stagnate. GENIUS pairs state-level innovation with clear compliance requirements and works in tandem with the Anti-CBDC firewall to safeguard financial privacy. It remains to be seen if Congress will prioritize innovation in artificial intelligence, energy networks, global trade, and more – all of which demand a flexible, fast, modern form of money.