GENIUS Act: How Washington Turns Stablecoins into Government Debt

The facts are well known and still hard to believe: the US has been living on borrowed money for decades.

• Billion-dollar deficits used to be the exception. Today they are background noise.

• The 2025 federal budget once again projects a deficit of several trillion dollars.

• The national debt passed the 35 trillion mark long ago.

There used to be willing buyers for this debt: Japan, China, the Gulf states, even Germany. Central banks piled up US Treasuries because they seemed safe, liquid and practically the global standard for reserves.

Those days are over. China has been cutting its holdings for years. Saudi Arabia and other oil states have long toyed with the idea of no longer pricing oil only in dollars. Even the Bank of Japan cannot keep piling up dollars forever.

In other words: the world's biggest debtor empire is losing its lenders.

And at exactly this moment, amid growing distrust of Washington, along comes the GENIUS Act.

Officially: a "framework law for regulating stablecoins".

Stablecoins are cryptocurrencies pegged to the US dollar, in other words "stable" digital dollars.

But the details of the law reveal its real purpose:

• Every stablecoin issuer must back its coins with safe assets.

• "Safe assets", as defined by the US Treasury, means: US Treasuries.

• And not long-term 10- or 30-year bonds, but short-term T-bills with a maximum maturity of 93 days.

The result: every dollar that flows into stablecoins is automatically channeled into US Treasuries.

Picture the situation:

• Bitcoin is at an all-time high again.

• Millions of investors want to lock in profits and park their money in stablecoins for a while.

• But from now on these stablecoins have to be backed by US Treasuries.

That makes every crypto investor, from the trader in Oslo to the entrepreneur in Zurich to the student in Amsterdam, a compulsory lender to the US government the moment they use stablecoins.

Genius, for Washington. Highly dangerous for everyone else.

So what does this mean in practice?

• You think you hold digital cash. In reality you hold short-dated US Treasuries.

• You think you are diversifying your wealth. In reality you are financing Washington's deficit.

• You think you are flexible. In reality you become part of the debt carousel that has to be spun again every three months.

The biggest risk lies in the design itself: under the GENIUS Act, stablecoins may only invest in ultra-short-term Treasuries.

That means:

• Every three months a gigantic block of debt matures.

• The Treasury constantly has to find new buyers.

• If even one percent of demand falls away, the system starts to wobble.

It is like building a giant skyscraper on a foundation of rolling marbles. That is not what stability looks like.

Many investors had hoped stablecoins could be a kind of safe harbor outside the traditional financial system.

The GENIUS Act shatters that illusion:

• Stablecoins are licensed by US authorities.

• From now on they answer to several regulators at once: SEC, IRS, FinCEN, CFPB.

• One phone call is enough, and your stablecoin account can be frozen, blocked or, in the extreme case, seized.

The promise of crypto (freedom, independence, control over your own money) is turned on its head.

Worse still: even if stablecoins look "safe", they remain pegged to the dollar.

• When the dollar loses purchasing power, so does the stablecoin.

• Inflation in the US automatically means inflation for every stablecoin holder.

• Holding stablecoins diversifies nothing at all.

It is like running from one deck of a sinking ship to another: you are still in the same hull.

For European investors who wanted to use stablecoins to build a bridge to the US, the consequences are dramatic:

• From now on they are part of the US debt system, whether they like it or not.

• They risk giving US regulators direct access to their assets.

• They underestimate how every bout of dollar inflation also erodes the value of their digital assets.

In short: the GENIUS Act is not a law for stability. It is a cage in digital form.

Anyone who believes today that stablecoins are the answer to inflation, currency crises or government overreach is falling for an illusion.

The real alternatives are the same as they have been for centuries:

• Gold and silver: timeless stores of value that have survived every inflation.

• Productive real assets: real estate, farmland, stakes in businesses.

• Diversification into other countries: bank accounts, brokerage accounts and company structures outside the US and the EU.

• Crypto beyond stablecoins: Bitcoin, Ethereum and the rest are volatile, yes, but they are not chained to the fate of the dollar.

And even more important: build legal structures that shield your assets from political reach, from the US LLC to the international holding company.

Let's take an example:

An IT entrepreneur from Munich sells his start-up, makes a profit of 5 million euros and wants to stay flexible. He converts 2 million euros into stablecoins to stay "liquid".

• Before the GENIUS Act, he held a kind of digital dollar: US-centric, yes, but not directly in the hands of the state.

• After the GENIUS Act, every one of his digital dollars sits in US Treasuries. He is financing the deficits of Joe Biden and Donald Trump alike.

• If sanctions, new tax rules or political pressure come along, his money is just one click away from being frozen.

He thought he was independent. In reality, he is sitting in a cage built of dollars, bonds and bureaucracy.

Plenty of people in Berlin, Brussels or Bern are rubbing their hands: finally, crypto is being tamed!
But be careful: the GENIUS Act shows how easily a state can hijack the innovative power of markets.

Today it is stablecoins. Tomorrow it could be Bitcoin ETFs, digital wallets or any form of tokenization.

Always the same pattern: "regulation" as the pretext, control and access as the result.

Europe will copy this course. And when Brussels reaches for crypto, it will be even more restrictive and even more intrusive.

The GENIUS Act is no masterpiece. It is a textbook case of political cynicism:

• Control is sold as security.

• Deficit financing is sold as innovation.

• Submission is sold as stability.

But look closer and you will see: this is not "regulating innovation", it is expropriating freedom.

For European entrepreneurs, this means:

• Hands off stablecoins as a diversification tool.

• Build genuine international structures.

• Invest in assets that are not built on US debt.

Because if you want to protect your wealth, you must not voluntarily lock yourself into Washington's debt trap.

We at Mount Bonnell Advisors have been watching developments in Washington for years. Even while the GENIUS Act was still in committee, it was clear: this is not about market order, it is about debt policy.

Our recommendation:

• Don't wait for Europe to follow suit.

• Don't believe inflation will stop.

• Don't think stablecoins are a way out.

Instead: act. Build structures. Protect your assets. Diversify.

Because once the state devours freedom, it is too late to start thinking about alternatives.

True stability does not come from Washington. It comes from smart planning, hard reality and the foresight to defend your own freedom.

For a sober breakdown of what the GENIUS Act actually regulates, read our article on stablecoin regulation in 2025; our overview of US crypto regulation gives you the bigger picture. If you want to set up your structures now, a consultation is the first step, and you will find more analysis in our News.

Consultation & implementation

If you'd like to find out what this means for your own situation, the best step is to book a consultation.