There’s nothing quite like a story with a surprising twist, and the real purpose behind stablecoin regulation is one that few saw coming.

President Trump signed the GENIUS Act in July 2025, establishing strict requirements for stablecoins to maintain “one-to-one” backing with low-risk liquid assets, including US dollars and short-term Treasury securities. It was the codification of an elegant financial strategy that de facto channels trillions of dollars in stablecoin reserves into American government assets.

Sounds like an easy US$2 trillion, right?

Today’s stablecoin market is estimated at approximately US$250 billion, with a significant portion of these reserves already invested in US Treasury bonds and repo operations. Tether, the largest stablecoin issuer, reports holding around US$120 billion in American government bonds. This genuinely places a private company among the largest holders of US debt alongside nations – for comparison, Germany holds approximately US$111 billion.

But it’s not just about current volumes. Analysts suggest that under favourable regulatory conditions, the stablecoin market could grow to US$2 trillion in the coming years. Put another way, this represents the US potentially selling trillions of its debt in the form of Treasuries to the rest of the world—with US-backed stablecoins serving as the top salesman. If this trend continues, stablecoins could become one of the largest classes of US debt holders, essentially transforming global digital payments into an automatic US debt financing mechanism.

The mechanics work simply: every USDT or USDC issued must be backed by assets, a significant portion of which consists of American government bonds. Every cross-border payment, every DeFi transaction indirectly supports demand for US debt instruments.

The global chessboard: Nations and financial self-interest

From my travels across Asia, where Venom Foundation works with various digital asset market participants, I see a twist in the story because the geopolitical implications are evident. It’s no longer academics waxing lyrical about ‘what to do’. It’s strategic government planning offices and central bank think tanks executing policy.

China is actively exploring yuan-backed digital currency possibilities. The People’s Bank of China has expanded digital yuan pilot programs and is studying mechanisms to reduce dependence on dollar-based payment systems in international trade.

Also Read: Stablecoins could unlock US$6.2T for ASEAN SMEs: Metacomp study

Hong Kong virtual asset regulators are in high gear working relentlessly with precision. Including, but not limited to creating a regulatory environment friendly to US dollar alternative stablecoins and asset classes.

The European Union, which has been gradually developing the digital euro, now has new momentum and funding which also involves policies to adopt non-US dollar digital currencies.

Various Asian jurisdictions are experimenting with national digital currencies. Singapore, Malaysia, Thailand, and other countries are exploring regional payment systems less dependent on dollar instruments.Digital financial infrastructure must be built domestically to ensure long-term economic autonomy.

While Western media discuss regulatory aspects, real changes are happening in trade corridors and payment systems. Through Venom Foundation’s engagement with SE Asia governments on blockchain, we observe firsthand how nations are prioritising technological sovereignty alongside financial independence.

While specific forecasts of mass deposit outflows vary, the trend is clear: stablecoins create alternative channels for storing and transferring value, bypassing the traditional banking system.

This isn’t an ideological choice, but pragmatic preparation for a changing financial landscape.

Once upon a time: There was a world reserve currency

A 2024 IMF Working Paper titled “Did the US Really Grow Out of Its World War II Debt?” by Julien Acalin and Laurence M. Ball challenges the common narrative that America simply “grew out” of its wartime debt burden. While the paper contains several nuanced arguments, one key point stands out: “surprise inflation” played a crucial role in debt reduction.

Once bitten, twice shy — every country and central bank is acutely aware of this history. As the US debt burden continues to grow with no signs of fiscal austerity, the only viable exit strategy appears to be more of the same monetary policy, with the ultimate price being paid by those holding US debt in the form of bonds and treasuries.

This historical context makes the current shift in central bank behavior appear entirely rational. For the first time since 1996, foreign central banks hold more gold than US treasuries. The remarkable pace at which central banks have been accumulating gold over the past decade represents a trend that shows no signs of slowing, according to sentiment expressed by central bankers worldwide.

Also Read: How stablecoins are quietly reinventing the global dollar system

The USD remains deeply entrenched in the global financial plumbing and will not be displaced anytime soon. However, clear signals indicate that nations are considering reducing their reliance on the USD as their settlement instrument of choice, shifting toward alternative methods such as gold as a neutral reserve asset.

When we layer blockchain infrastructure for settlement and payments over this geopolitical landscape and add regulatory compliance frameworks, we find ourselves staring at the dawn of a new global financial infrastructure. This transformation mirrors how the eurodollar system evolved during the early 1950s, but with exponentially faster implementation timelines.

But the kingdom needed a new ledger

Post-World War II, the Marshall Plan served as a catalyst for creating the colossal eurodollar system. These offshore bank liabilities have grown to several trillions of dollars and become mission-critical to the world’s financial system. The eurodollar is often misunderstood as a US Federal Reserve-controlled monetary system, but the reality is that no single entity controls it. History demonstrates mankind’s remarkable creativity – the eurodollar emerged through unspoken consensus since 1945, facilitating global trade when centralised financial systems proved inadequate for worldwide economic expansion.

Today, the US dollar is used in approximately 80 per cent of global trade payments and settlements, yet the US contributes only about 16 per cent of global manufacturing output. Meanwhile, China’s manufacturing output represents around 30 per cent of global production, but its currency accounts for merely five per cent of international trade flows. This glaring mismatch between economic activity and financial representation, combined with the immense friction of the banking system, is why the kingdom needs a shiny new ledger.

The incentives for other countries to develop their own digital currency systems is reaching an apex. For emerging market nations, the situation proves particularly complex. States already experiencing difficulties accessing dollar liquidity now face the prospect that even their digital payment infrastructure may reinforce dollar dependence rather than provide alternatives.

However, technological solutions for viable alternatives do exist. Successful experiments with regional digital currencies demonstrate that with sufficient political will and technical infrastructure, effective non-dollar payment systems can indeed be created.

A thousand ledgers bloom

We stand at the dawn of the protocol age in an exponential world of technological advancement. Unlike the eurodollar system, which required 75 years to fully develop, this new financial infrastructure will emerge with blinding speed. The incentives driving this transformation aren’t measured in hundreds of millions or even billions, but in trillions of dollars. When national self-interest combines with monetary sovereignty and cutting-edge technology, the pace of change becomes unprecedented.

This new ledger represents a multitude of interconnected ledgers, each communicating and settling with others in ways that create genuine alternatives to existing monopolistic systems.

Also Read: Stablecoins and Singapore: The path to mainstream adoption

Let the games begin!

The GENIUS Act has become an important symbol of a new era when digital currencies are explicitly recognised as instruments of state economic policy. By making this connection, America has accelerated a process whereby every major economy must now define its comprehensive digital currency strategy.

The United States made the right decision for its immediate self-interest. However, the outcome likely won’t unfold as many pundits predict. Rather than a straightforward channeling of global stablecoin reserves into American debt instruments, we’re witnessing the activation of unprecedented competitive dynamics – it’s “GAME ON” in the truest sense of global financial rivalry.

The era when digital currencies were considered mere technological experiments has definitively ended. For those building tomorrow’s financial infrastructure, this creates extraordinary opportunities in our rapidly evolving multipolar digital world. 

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