The Genius Act
The U.S. Treasury is likely to need to borrow approximately $15 trillion over the next decade. As incredible as that seems, the U.S. Treasury cares about the price of that debt, and therefore, since they are the seller, they need to attract as many buyers as possible to keep the cost of that debt as low as possible. Basic supply and demand at work. Reliable treasury bond buyers are pulling back, primarily China and, to a certain degree, Japan. The Genius Act permits private entities to issue their own stablecoins, provided they are fully backed by U.S. treasuries. That will open up a new set of investors for the U.S. Treasury as it issues its required bonds. On the one hand, it’s an interesting solution because the Treasury can access an expanding market that exists outside the banking system. Expect to see much more international capital flows in US dollars, as well as significantly increased shadow banking among large US-based corporate entities that engage in business with each other and internationally.