Moneycontrol Pro Panorama | GENIUS Act: Why US stablecoin regulation could reshape global finance

Stablecoins pegged to the dollar must now comply with traditional regulatory norms.

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The GENIUS (Guiding and Establishing National Innovations for US Stablecoins) Act, passed last week, has done far more than legitimise a niche financial instrument. It might just have retooled the plumbing of global finance.

At first glance, it’s all about financial regulation. Stablecoins pegged to the dollar must now comply with traditional regulatory norms: full reserve backing, regular audits, anti-money laundering checks, and KYC protocols. But scratch the surface and the strategic play becomes clear: this is Washington laying the tracks for a dollarised crypto future. As our columnist Saibal Dasgupta notes, the ripple effects could reach India and beyond. The US legislation may wear the garb of domestic financial reform, but its ambitions are unmistakably global.

Stablecoins, now institutionalised under US oversight, will function globally as crypto-dollar proxies. Consider this: the US has no immediate plans to issue a CBDC (Central Bank Digital Currency), but with this law, it effectively outsources the task to compliant private issuers. Circle’s USDC and Tether’s USDT—already dominant—now extend US monetary influence. At a time when there’s much talk of a move away from the USD as a result of the weaponisation of tariffs by the Trump administration, the dollar-backed stablecoin will provide timely support for the dollar.

Indeed, if petrodollars and Treasury bonds underpinned the old financial order, stablecoins could reinforce the new faster and cheaper one. Their integration into global payment systems ensures the greenback’s relevance, even in a decentralised future. Rather than resist the crypto wave, the US has co-opted it. This provides regulatory legitimacy while also extending the country's reach.

For an emerging market like India, the implications are two-fold. On the one hand, stablecoins enable frictionless cross-border payments, reduce transaction costs, and support fintech innovation. Their use is rapidly shifting from crypto trading to real-world payments, trade settlement, and remittances.

On the other, the strategic risks are substantial. For countries that already grapple with high capital mobility and rupee volatility, the rise of dollar stablecoins could further erode monetary sovereignty. The BIS Annual Economic Report 2025 flags this concern: dollar stablecoins may facilitate “cryptoisation” in developing economies—creating a shadow monetary system that is mobile, hard to tax, and out of the central bank’s control. It could erode the central bank’s control over domestic money supply and monetary policy.

India finds itself at a crossroads. As stablecoin-based trade settlements become attractive for exporters, bypassing legacy systems and high fees, the RBI must tread cautiously. While the efficiency gains are obvious, so is the threat to the central bank’s toolkit in managing liquidity, capital flows, and interest rates.

There’s also the risk of financial destabilisation. Should confidence in a leading stablecoin falter—say, a sudden run on reserves—the resulting liquidity crunch could spill over across borders, especially in emerging markets where stablecoin usage is rising.

The Genius Act complicates the RBI’s stance on crypto. So far, India’s approach has been one of wariness bordering on hostility. But it must now rethink its regulatory posture. A ban-or-nothing approach won’t work. What’s needed is a framework that clamps down on speculative tokens but welcomes transparent, well-collateralised stablecoins.

The real question now is strategic: Does India open the gates to foreign stablecoins, or build its own rupee-pegged equivalent? India’s fintech ecosystem, among the world’s most vibrant, gives it a fighting chance.

Globally, countermeasures are forming. China is pushing ahead with the e-CNY. The EU is laying the groundwork for a digital euro. Some economies are even experimenting with gold- or commodity-backed stablecoins. The EU’s MiCA regime is enforcing licensing and disclosure norms. But none yet match the liquidity, trust, or network effects of the dollar.

The RBI’s e-rupee pilot projects are a step in the right direction, and as the BIS underscores, central bank digital currencies remain the only reliable bulwark against stablecoin-driven dollar hegemony.

The US has pulled off something remarkable: it has embraced a decentralised innovation while tightening its grip on the global financial order. It cements US dominance not by issuing a digital dollar, but by making the world accept digital dollar surrogates. It creates a new financial avenue through which the US can extend its influence.

For countries like India, the question is no longer whether to adapt—but how fast, and on what terms.

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