US Dollar Stablecoin Bill: The Prelude to On-Chain Hegemony

Written by: Sanqing

🇺🇸 Stablecoin legislation breaks the ice: The GENIUS bill passes procedural vote in the Senate

WASHINGTON, May 19, 2025 – The U.S. Senate passed a procedural vote on the U.S. Stablecoin National Innovation Steering Act (GENIUS Act) by a vote of 66 to 32 late Monday, clearing the biggest hurdle to the bill's eventual passage. This bill establishes a comprehensive regulatory framework at the federal level for the issuance, storage, redemption, compliance, and consumer protection of stablecoins in the United States.

The bill originally faced political resistance due to its involvement with the cryptocurrency business interests of former President Trump's family, failing to enter the voting process in early May. After revisions to the provisions, new restrictions on foreign issuers and a ban on major tech companies dominating the issuance of stablecoins were added, leading some moderate senators to support it, allowing the bill to surpass the procedural threshold of 60 votes in the Senate. A final vote in the Senate is expected this week, followed by a review in the House of Representatives.

Overview of the Bill: In the name of "stability," it acts as regulation.

The GENIUS Act defines stablecoins as "digital assets that are promised to be redeemed at a fixed amount and used for payment and settlement," excluding central bank digital currencies and forms like bank deposits.

Overview of Key Provisions of the GENIUS Act

After the passage of the bill, compliant stablecoin issuers such as Circle (USDC) and PayPal (PYUSD) will benefit, while entities like Tether (USDT) and most DeFi structured stablecoin projects (such as RAI, USDe) may face a legitimacy crisis in the U.S. market.

Background Deepening: The Moment of Confirmation for On-Chain US Dollars

Structurally, the GENIUS Act is not a tolerance for stablecoins, but rather a institutional confirmation of the sovereignty of the U.S. dollar in the blockchain space, representing the American expansion of digital currency. By legalizing compliant stablecoins, it extends the dollar's issuance rights into the Web3 ecosystem: although the on-chain settlement unit is issued by Circle, it essentially functions as an "on-chain dollar clearing bank."

This means:

The US dollar has become the pricing benchmark for all on-chain assets, with dominance continuing to rest within the Federal Reserve system.

Compliance stablecoins gain clearing privileges, while other algorithmic stablecoins and structured financial tokens will be marginalized or exit the U.S. market;

Web3 is losing its potential as an "independent value system" and is gradually being incorporated into the digital extension of dollar hegemony.

The GENIUS Act is gradually transforming blockchain from a "currency-neutral platform" into a "settlement vassal of the US dollar."

The profound impact of Web3 and decentralized finance

Decentralized Vision vs Compliance Reality

1. DeFi yield-bearing assets have been marginalized:

A ban on "interest payments" means that structural stablecoins are difficult to sustain. Designs like sDAI and USDe are limited and may face securitization risks, eroding the core business logic of DeFi.

2. KYC compliance drives centralization in DApps:

The compliance of stablecoins will force DApps to introduce AML/KYC mechanisms, thereby violating the original intent of decentralized design, and DAOs may have to legally establish representative entities.

3. The stablecoin market is highly centralized:

Stablecoins like USDC and PYUSD, which have the "passport" of U.S. regulation, will absorb market liquidity, leading to a sharp increase in costs for new projects and raising the threshold for innovation.

4. On-chain collaborative units find it difficult to form a closed-loop economy:

Projects like PAYFi that attempt to build non-pegged value unit structures will struggle to gain mainstream user trust due to a lack of fiat currency exit, facing a credit bottleneck in a closed-loop economy.

5. The "Financial Resistance Laboratory" is being incorporated into the "Digital Dollar Interface":

The GENIUS Act represents that Web3 is no longer viewed as a threat to the old order, but is instead forced to become a sub-module of its infrastructure. This is not the overthrow of hegemony, but rather its "protocolized extension."

Conclusion: From gray area currencies to regulated finance, is the next step for Web3 compromise?

The GENIUS Act is a milestone in stablecoin legislation and a on-chain confirmation of "the dollar as a global value anchor." In the short term, it enhances compliance clarity and opens the green light for institutional entry; in the long term, it builds a firewall for the value system, making Web3 increasingly resemble TradFi and less like the world it was originally meant to replace.

If Bitcoin once dreamed of breaking the monopoly of sovereign currency, then the GENIUS bill declares:

The currency has not been restructured, it has just gone on the chain; Web3 has not gained freedom, it has just changed regulators.