Wall Street Split Over GENIUS Act Impact on USD Pickup
The GENIUS Act — the United States’ new regulatory framework for fully reserved payment stablecoins — is sending shockwaves through Wall Street. While some institutions are celebrating it as one of the smartest monetary moves in decades, others warn it could reshape dollar liquidity, disrupt bank funding, and create new forms of instability. The result is a sharply divided financial sector debating whether the Act will amplify global demand for U.S. dollars or unintentionally fragileen parts of the financial system.
Why Some view the GENIUS Act as a Dollar Supercharger
Supporters argue that the GENIUS Act effectively modernises the U.S. dollar for the blockchain era. By granting federal supervision to fully reserved stablecoins, the law allows regulated issuers to hold reserves primarily in short-term U.S. Treasuries and insured bank deposits. This effectively channels billions — and potentially trillions — into U.S. government debt instruments as stablecoins scale globally.
In this view, every stablecoin transaction becomes an on-chain extension of the dollar system, reinforcing USD dominance in cross-border payments, DeFi markets, tokenised assets, and global liquidity networks. Wall Street firms bullish on the Act believe it will Increase foreign demand for digital dollars backed by U.S. Treasuries, Boost Treasury liquidity as stablecoin issuers expand, Position the U.S. as the global hub for tokenised finance, Integrate stablecoins into mainstream clearing, settlement, and institutional payment flows.
To them, the GENIUS Act is not merely regulatory reform — it is a geopolitical power play designed to cement U.S. monetary influence.
Why Others Fear Liquidity Distortions and Collateral Stress
Skeptics, however, view risks lurking beneath the surface. If regulated stablecoins become a preferred way to hold dollars, they may drain deposits from commercial banks — particularly regional and community banks already struggling with tightening margins. This could shrink the deposit base that supports traditional lending, raising borrowing costs for households and small businesses.
There is also concern about how stablecoins would behave during market stress. A sudden spike in redemptions could force issuers to liquidate Treasuries rapidly, potentially amplifying volatility in government debt markets. Critics warn that stablecoins operate 24/7, unlike traditional money-market funds, which could intensify liquidity shocks during crises.
For trading desks, the GENIUS Act introduces uncertainty. While tokenised dollars and Treasuries create arbitrage and yield opportunities, they also require new infrastructure, compliance processes, and risk models. Several banks worry that the Act accelerates a shift toward non-bank intermediaries controlling key monetary plumbing.
The split on Wall Street reflects a deeper question: does embedding the U.S. dollar into blockchain rails strengthen or complicate America’s financial system? The answer likely depends on how the Act is implemented — including reserve requirements, redemption rules, bank partnerships, and supervisory tools.
If executed carefully, the GENIUS Act could supercharge demand for U.S. assets, modernise payments, and pull global tokenisation efforts toward the United States. If mismanaged, it could stress collateral markets, destabilise bank funding, and create new 21st-century liquidity risks.
Regardless, one thing is clear: the Act confirms that tokenised dollars will play a central role in the future of global finance — and Wall Street is bracing for the transformation.
