Jeff Cangialosi

On Tuesday evening (June 17th, 2025), the US Senate passed the GENIUS Act. This bill sets out legislation for the issuance and management of stablecoins in the United States. As a participant in the stablecoin payments industry, I have watched as this legislation has slowly made its way to the Senate floor over the last two years. It garnered a fairly bipartisan vote with 66 votes in favor and was co-sponsored by Hagerty (a Republican) and Gillibrand (a Democrat).

Immediately following the bill’s passage in the Senate, the New York Times released an opinion piece from economist Barry Eichengreen titled “The Genius Act Will Bring Economic Chaos.” It’s an intense critique of the bill, cautioning the House not to pass similar legislation. The House has its own version of stablecoin legislation (the STABLE Act), which it will now need to try and reconcile with GENIUS. As an admitted stablecoin enthusiast and someone deep in the space, my initial reaction to the Eichengreen piece was to dismiss it as a quick hit piece that attempts to lump stablecoins into the broader crypto narrative of grift and corruption. It certainly is trying to do that, but there are legitimate critiques in this piece that warrant more conversation.

Dr. Eichengreen is not a newbie on the topic of stablecoins. He has been writing about Central Bank Digital Currencies (CBDCs) and stablecoins for the last several years and has written several history books on currency standards. It’s worth giving his article a detailed read and engaging with it, rather than just yelling at him for not “getting it.” With that in mind, I want to summarize the 8 broad critiques he makes of stablecoins and share some of my thoughts on which ones are truly valid and how they might be addressed.

1) Stablecoins take us back to the “wild west” of free banking

As Eichengreen briefly highlights, there was a period in American banking history known as free banking from roughly 1836 to 1865. Andrew Jackson had killed the central bank in the US, and local banks in each state were free to issue their own currency notes.

Depending on who you ask, this was either the greatest period of financial innovation in the US or a downright disaster with various bank runs and inefficiencies as individuals and businesses had to deal with handling different currency notes state to state. George Selgin has written a book (Money: Free and Unfree) that deals extensively with this time period, which I have dipped in and out of. I am far from an expert on this time period, but I think Eichengreen picks a bit of a straw man by equating stablecoins to a return to the free banking era bringing us the “…most notorious features of the wild west.” It’s a scary sounding world with no guidelines.

While some crypto enthusiasts would certainly argue for a world without a central bank, that is not the mainstream consensus view of those building in the stablecoin space. If anything, stablecoins are heavily reliant on the central bank and the US Treasury as the most popular stablecoins (USDT and USDC) are backed by US dollars.

During the free banking era, local state banks were issuing currency against the supposed hard currencies (like gold, silver, etc.) that they had in a physical bank vault. You then needed to trust that the gold or silver was actually there. You can dispute the long-term reliability of the US dollar (a topic for another post), but mainstream stablecoin issuers (at least more recently since we’ve moved beyond algorithmic stablecoins) are backing up their digital assets with US dollars. Over 99% of the $250B in stablecoins circulating are US-dollar backed. These stablecoin issuers are also not engaging in fractional reserve banking. There are definitely fair criticisms of the risks of the underlying collateral of stablecoins, but I find the analogy to the supposed chaos of the free banking error to be strained. Crypto enthusiasts like to talk about the free banking era as a golden moment in banking history. I do think that requires further self-reflection by the industry in terms of what type of banking ecosystem we want.

2) Stablecoins could be issued by companies like Walmart or Amazon

Again, I find that Eichengreen sets up a bit of a straw man to make it easy for him to attack. When he says that the GENIUS will “…let thousands of cryptos flourish,” he evokes images of crypto bros launching the next memecoin or investors pumping up the value of XRP for no apparent reason. The current administration has done nothing to help this perception that there are just thousands of cryptocurrencies being issued as mini Ponzi schemes to enrich a small pool of influencers and creators.

With that said, I am going to put Eichengreen’s buzzy language aside and address the real point he’s making here, which is that we as an economy and society may not want Walmart to get involved in finance and product lines that appear to be the purview of banks. That’s an argument well worth having; however, to my understanding (based on my own reading of the bill and reading a few pundits), GENIUS would technically prevent a company like Walmart or technology companies like Amazon, Meta, Google, etc. from issuing their own stablecoins. Now, these tech companies could go partner with a bank or other “permitted payment stablecoin issuer” as defined by the bill, but to me, this appears akin to Apple partnering with Goldman Sachs to issue an Apple credit card. The branding is Apple, but the underlying financial product is issued and managed by a financial institution.

To my understanding, large retailers would need to either acquire a bank or partner with an existing bank, then create a subsidiary specifically for stablecoin issuance. This subsidiary would need approval from the bank’s primary federal regulator (like the Fed, OCC, or FDIC depending on the bank type). This isn’t unprecedented – Walmart actually tried to get a banking charter years ago (though it was denied), and many large retailers have financial services arms. With that said, I think Eichengreen’s critique is slightly off in that it portrays a world in which every mom and pop is going to start issuing a stablecoin. While we are certainly going to see a lot of stablecoin issuance, my sense is that GENIUS is attempting to put guardrails around that. We already live in a world where platforms offer just about anyone the ability to spin up their own stablecoin. Why not put some guardrails around how that is done?

3) Holding $1 worth of US treasuries is equivalent to the holdings of free banks back in the mid 1800s

I won’t spend much time on this critique as I talked about it a lot already with regards to the first point. GENIUS requires stablecoin issuers to hold reserves in the following assets on a 1:1 basis (i.e., no fractional-reserve banking):

• U.S. coins and currency (including Federal Reserve notes)
• Bank deposits at insured institutions or credit to accounts with Federal Reserve Banks
• Treasury securities with maturity of 93 days or less
• Repurchase agreements with overnight maturity backed by Treasury bills
• Reverse repurchase agreements with overnight maturity
• Money market funds invested only in these approved assets

I’m not an expert on analyzing asset risk, but my general take is that the asset mix proposed by the bill is generally higher quality than the asset mix of many of the free banks back in the mid-1800s.

4) Users and recipients of stablecoins will be confused about which stables are really worth a dollar

This was the first fair critique in the article. Over the last several months, I have been on the “stablecoin circuit” of events in New York, and this is the question that comes up on every panel and in every side conversation. Who will win, Tether or Circle? Can anyone challenge them? What about Ethena or Agora? How do yield-bearing stablecoins fit in? When will the big banks launch their own stablecoins?

Do we end up with 1 dominant stablecoin or 100,000 stablecoins? The answer is likely to be somewhere in between. There are varying opinions here, but I see two paths emerging:

1) Purpose-built stables

These will be stablecoins that have very narrowly defined use cases. For example, a stablecoin issued by a consortium of JPMorgan Chase, Citibank, and Bank of America to manage overnight fund settlement in a more efficient manner. Or the Depository Trust and Clearing Corporation (DTCC) issues a stablecoin to improve trade settlement times. Many of these stablecoin projects have been pie-in-the-sky ideas for years, but with regulatory clarity, I do think you could see some of these initiatives play out.

2) Payment tokens

I do not think you will be using the DTCC stablecoin to pay for your latte anytime soon. We are already entering a world though where Stripe is issuing a stablecoin via its acquisition of Bridge. While most payment volume is in USDC and USDT today, we will soon have dozens of stablecoins launched for the purpose of payments. This is going to create headaches. Assuming the end user knows that the stablecoin USDB is backed by Stripe and PYUSD is backed by PayPal, that user can likely trust the soundness of those stablecoins. But what about the stablecoin issued by a payment processor without a household brand name like Helcim (sorry Helcim, no disrespect intended)? The Helcim stablecoin may technically be just as financially sound as PYUSD, but I would be hesitant to hold it because I don’t know the issuer. You may argue that Helcim just shouldn’t issue a stablecoin, but why not? Stripe is already showing that there is a potentially transformative business model here. Other payment companies are going to follow suit. This is a real problem.

I think two things need to happen. First, we need a way to identify the “blue chips.” What are the class of stablecoins that all adhere to certain safety and soundness standards? Similar to bond ratings, I need to know which stablecoins are AAA, and those will be the stablecoins that dominate. I shouldn’t have to navigate to Tether’s website to review the asset reserves report it puts out and comb through those to figure out if I feel comfortable with the short-term treasury strategy they have. They either have the AAA rating or they do not. Of course, this is where regulation and standards come in. The crypto industry has done some self-policing and reporting after the blow-ups of algorithmic stablecoins, but we still have a ways to go here.

Second, we need an abstraction layer. If stablecoins are successful, in 5 years I probably should not know which stablecoins I am using when I make transactions. Sure, Stripe and PayPal can each have their own stablecoins, but the actual payment interfaces that everyday businesses and consumers use likely do not need to show me that. Swapping and settlement between the tokens can happen behind the scenes. I do not have all the answers around how this will work in practice, but this is where the industry needs to be spending time. We are already seeing activity here as companies make it easier to move from USDC and USDT into yield-bearing stablecoins and then back out again when it’s time to spend.

Ultimately, this is a fair critique, but my response is that we will see the plethora of stablecoins abstracted away. Once we can define what a “blue chip” or AAA stablecoin is, we can then make it easy for value to flow between these tokens without end users feeling the friction of moving between different tokens and blockchains. These stablecoins will move under the hood. The end user is still going to be spending dollars, not company-specific coins.

5) Stablecoins increase the general risk that we will see another bank run similar to Silicon Valley Bank 

Eichengreen’s concern is that we end up with thousands of stablecoins, regulators are overwhelmed, can’t keep up with the monitoring, and then one of these stablecoins runs into trouble. When the market cap of a stablecoin is a couple hundred million or a few billion, that’s not too serious, but when stablecoins reach the scale of a couple hundred billion, the equation changes.

The conception of a stablecoin as defined by the GENIUS Act would essentially be a narrow bank. That is a bank that takes in deposits but does not make loans. Deposits come in, and they are placed in a bank vault or short-term treasury. In other words, bad lending practices will not take a stablecoin down.

You might argue there is interest rate risk. This is what got Silicon Valley Bank (SVB) and others in trouble in early 2023. As interest rates started rising, SVB had to pay depositors more, but they were locked into treasuries with lower yield issued over the prior couple of years. Interest rate mismatch could be a very real concern for certain yield-bearing stablecoins, but GENIUS, in its current configuration, does not allow for yield-bearing stablecoins. It also caps the maturity of the treasuries that stablecoins can invest in. Stablecoin issuers are not going to be purchasing 5 or 10 year treasuries. For example, the weighted average maturity in the Circle Reserve Fund today is 13 days. To the credit of the GENIUS Act, it removes duration risk as far as I can tell.

I get Eichengreen’s concern that auditing and monitoring many stables adds a burden on the regulators, but having rules in place is more likely to reduce a stablecoin-related bank run instead of the current self-policing and self-attestation that is occurring today.

6) Stablecoins increase the risk of “economic contagion” due to the interconnected nature of the banking sector

This critique is similar to the one above. Eichengreen is concerned that if one stablecoin runs into issues, users will panic and start pulling funds from many stablecoins. This would create a scenario like 2023 where social media and digital banking interfaces contributed to the quick demise of SVB and First Republic.

There is a valid concern here, and this is one where I wish Eichengreen had spent more time. You could imagine a scenario where one bank is particularly friendly with the stablecoin industry. That bank is taking in deposits from 10 different stablecoin projects, and it suddenly finds itself in a position where 20% of its deposits are from stablecoin issuers. In a perfect storm scenario, all 10 stablecoins start to see mass liquidation. People are trading in their tokens and want their dollars back immediately. These stablecoin issuers would likely be fairly liquid, holding mostly short-duration treasuries (making up 80%+ of their reserves like Circle today), but they likely would start by withdrawing their cash to meet the immediate redemptions. That stablecoin-friendly bank now has a large portion of its deposit base quickly flowing out. Word spreads that this is happening, and maybe some of their non-stablecoin clients get cold feet and start withdrawing funds as well. You see how this could become scary and snowball.

While I’m sure some stablecoin maxis will push back on this point, I think bank concentration risk is a legitimate concern and one we should talk more about as an industry. While banks should be able to specialize and provide value-added services to certain sectors, concentration risk is as old as banking itself. That risk does not go away, and it is something to be cognizant of.

7) A stablecoin run could lead to the collapse of Treasury prices

Staying with the stablecoin run scenario above, Eichengreen highlights the risk to US Treasury prices due to outsized exposure to stablecoins. He cites Scott Bessent’s conception of a world where stablecoins have a market cap of $2T. If stablecoin issuers come under pressure and need to quickly liquidate treasuries, the price could collapse, and then the cost of US borrowing would increase. In other words, the market gets flooded with treasury bills, and the US government has to offer a higher interest rate on new debt to appeal to investors.

There are so many factors in play when it comes to treasury prices, ranging from Federal Reserve Policy to geopolitical developments. I’m not well-versed enough on the subject to have a strong take here; however, the counterpoint is that during a crisis, investors tend to flock to the highest quality, low-risk assets. When SVB was going through all of its issues in early 2023, capital flooded into the Too-Big-To-Fail Banks and US treasuries. I would suggest this would serve as somewhat of a counterweight to a selloff happening from stablecoin issuers.

A broader point here, though, is that stablecoins are intricately tied to the US financial system. Of course, this is fairly ironic given the origins of crypto and Bitcoin, which began in 2008 in the wake of lost confidence in the financial sector. Over 99% of the stablecoin market cap today is backed by US dollar reserves. I believe there will be some diversification over time, but stablecoins are deeply tied to the US financial system and its perceived long-term stability.

8) Stablecoins fracture the payments system which is already interconnected

As the article winds down to a conclusion, Eichengreen adds this last critique about stablecoins fracturing our already interconnected payment system. He writes:

“Virtually all economies, and not just that of the United States, have moved to create a  more uniform, reliable payment system suitable for a deeply interconnected economy. Fracturing the payment system would only undermine that economy.”

Eichengreen could have fleshed out this comment to draw a distinction between domestic and international payment systems. He has a point that domestic payment systems have already gotten pretty good at doing instant, low-cost transactions. It’s not the US, but rather countries like Brazil and India that are leading the way on this front. With Pix in Brazil or UPI in India, you can seamlessly send money between bank accounts 24/7.

We should not try to force stablecoins on a problem that does not exist. Where the problem lies, however, is primarily in cross-border transactions. There are other use cases as well for stablecoins (like interbank settlement, RWA settlement, etc.), but where stablecoins often provide the most value is when you need to move funds between Brazil and India. To make that transaction, funds may need to hit several different banking institutions and take days to arrive with hefty fees.

We do not have a globally interconnected payment system, and that’s the problem. Even Visa, which has already built a version of global payment rails, has come out in support of GENIUS and noted the vast potential of stablecoins. 

Conclusion

As I sit here in June of 2025, the hype around the potential of stablecoins is unprecedented. I’ve been around the crypto space long enough now to be cautious of the euphoria that can sometimes take hold when the industry believes it has now found the true “killer use case” of blockchain. With that said, we are finally at a point where stablecoins are providing true utility, and we are starting to be able to back that up with data (thanks Artemis), not just anecdotes.

Even with all the excitement, it is critical to keep kicking the tires and building out a view of the medium to long term impacts of stablecoins. While I find many of Eichengreen’s critiques to be a bit sensationalist, his article can be the starting point for additional dialogue. Ultimately, I walk away from his article wondering what alternative he would propose if the US does not adopt GENIUS. Would he argue for stablecoins to be banned? He does seem to imply that without explicitly saying that. Would he argue for a different piece of legislation that sets different guidelines for stablecoins?

As the article title states, Eichengreen believes “the Genius Act will bring economic chaos,” but I think the alternative of living with no stablecoin legislation in the US is worse and more chaotic. The genie is out of the box at this point. Europe, Singapore, and other regions are already crafting and implementing stablecoin legislation. This product is not going away. We need to figure out how to safely integrate stablecoins into our existing financial ecosystem.