This Crypto Asset Is Uncle Sam’s New Best Friend
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| By Juan Villaverde |
Last week, the U.S. passed a landmark piece of legislation:
The Guiding and Establishing National Innovation for U.S. Stablecoins Act.
Better (and more cheekily) known as the GENIUS Act.
The law does exactly what it sounds like: It legitimizes stablecoins, bringing them squarely into the regulated world of traditional finance.
This gives them a formal role in the U.S. financial system. Not as rebels, not as disruptors, but rather as institutional-grade instruments.
From a user’s perspective, it’s a massive win. The GENIUS Act:
- Requires stablecoin issuers to hold an official license from the U.S. government,
- Mandates monthly audits
- Requires strict 1-to-1 dollar backing for every token — either in cash or in Treasury securities and …
- Forces issuers to redeem stablecoins at par, on demand.
Let that sink in …
Thanks to the GENIUS act, holding a regulated stablecoin (like USDC) is now safer than keeping dollars in a bank — domestic or foreign.
That’s because, unlike traditional banks, stablecoin issuers aren’t allowed to lend out your money. And there are no fractional reserves backing them.
Every token is backed, in full, at all times. No funny business.
But let’s not kid ourselves. This law wasn’t enacted out of concern for the safety of average crypto users. Nope.
It’s about funding the U.S. government.
Washington finally caught on to something most crypto market participants have known for a long time. That stablecoins represent sticky, dependable demand for U.S. Treasury bonds.
Why? Because the basic stablecoin business model is brilliantly simple:
- Collect dollars from users.
- Mint crypto tokens at a 1-to-1 ratio.
- Park the real dollars in short-term T-bills.
- Collect the yield.
It’s rather like a bank — only with fewer regulations and higher returns.
Take Tether, for example. This is the company behind one of the largest dollar-backed stablecoins in the world, USDT.
And with $125 billion in total assets, it's now the largest non-sovereign private holder of U.S. Treasurys in the world.
That’s right: Tether owns more Treasurys than Germany, Spain, Australia or the UAE.
By 2024, it was already the seventh-largest buyer of U.S. government debt. And it continues to grow as the marginal buyer of last resort.
Tether’s business model requires buying Treasury bonds. The more people mint USDT, the more Treasurys it has to buy. As long as demand for stablecoins increases, so does Tether’s appetite for U.S. debt.
Let the sheer irony of this fact marinate for a moment:
Crypto, designed to escape the fiat money system, is now propping it up!
We used to hypothesize the U.S. government would someday run out of buyers for its debt. Not anymore.
Between the GENIUS Act and the Fed’s lowering of the Supplementary Leverage Ratio (SLR) … stablecoin issuers have become Uncle Sam’s newest best friends!
And so, these children of the crypto revolution — whose very DNA was hedging against government excess … are now financing it.
Take a moment to realize that we’re seeing stablecoins evolve into the most efficient debt-distribution engine the U.S. government has ever seen.
God truly has a sense of humor!
And the implications? As the U.S. leans more and more on stablecoins to finance its ballooning deficit, we see a self-reinforcing loop form:
- Growing demand for stablecoins fuels growing demand for Treasury bonds. Which leads to …
- More spending and money printing. Which leads to …
- Further currency debasement. Which leads to …
- A stronger case for owning crypto. Which leads to …
- Growing demand for stablecoins!
Welcome to the permanent crypto bull market — funded by the very system crypto was built to escape.
The road to a $10 trillion Bitcoin market cap … runs straight through the heart of Washington.
And it's paved with stablecoins.
How to Profit from a Stable Asset
While stablecoins themselves don’t accumulate gains, there are ways you can make this stable asset boost your portfolio.
Namely, through liquidity providing.
By using stablecoins to lend liquidity to DeFi platforms, you can target DeFi’s impressive yield opportunities … all while keeping your principal safe from market volatility.
My colleague and DeFi expert Marija Matić breaks it down for you here.
Best,
Juan Villaverde
