The crypto market reaching $4 trillion – what a celebration this must be! Then, with President Trump signing the GENIUS Act, folks are jumping out of their seats and popping champagne, certain that crypto’s finally made it. Citigroup’s even forecasting a $3.7 trillion stablecoin market by 2030. But hold on. Before you run out and memecoin your whole credit card balance, let’s discuss what could go wrong. While my friend Chris Perkins at CoinFund views this as a building block in the right direction, my response is to see cracks on the foundation already. A big crack. Remember the 2008 financial crisis? After all, nobody expected mortgage-backed securities to be exposed to systemic risk until they were. Could stablecoins be the new subprime?
Centralization Is A Ticking Time Bomb
The GENIUS Act would help provide guidance in an otherwise confusing world of stablecoins. It might ironically produce the opposite, a centralized purview, where only a handful of giant corporations thrive. The Act requires monthly public disclosures of reserve composition by issuers whose market cap is over $50 billion. Further, these issuers are required to file annual audited financial statements. Okay, sounds reasonable. Think about it: the cost of compliance is significant. The new, higher costs may be out of reach for smaller players, forcing further consolidation. This is not simply a technicality or procedural exercise – this is about exerting power and influence.
Fast-forward to a world with three or four stablecoin issuers that dominate and possess 80% of the market. What do you do when one of them fails? A run on that single stablecoin would set off a contagion, collapsing the whole crypto house of cards. We’re not talking about a hypothetical risk here, we’re talking about an imminent systemic risk that would make the collapse of FTX look like a rounding error. This isn’t an anti-innovation agenda – it’s an innovation-stopping disaster that we’re trying to prevent. This isn't regulated decentralization, this is a new form of centralized financial power, and it's scary.
Regulatory Arbitrage Is Wide Open
We support bringing appropriate federal or state oversight to stablecoins that are pegged to the US dollar, which is what the GENIUS Act encourages. Here's the catch: what about stablecoins pegged to other assets? Now, what for the truly novel kind of algorithmic stablecoins that are not pegged to anything whatsoever. The Act fails to fill those gaps, thus creating an enormous hole for regulatory arbitrage.
Not learning their lesson, smart but unscrupulous crypto entrepreneurs will move on to unregulated stablecoins. This change will open up new avenues for fraud and abuse. We’ve gotten a taste of just how fast these folks are able to turn on a dime. Remember when ICOs were all the rage? Then DeFi? Now it's stablecoins. The constant theme beneath it all isn’t innovation, it’s regulatory evasion. As currently written the GENIUS Act does not do enough to truly protect us. It’s akin to putting up a fence around your backyard but leaving your front door open. You might feel safer, but you're not.
Trump's Meme Coin Conflict Of Interest?
Let's address the elephant in the room: President Trump's involvement in the crypto space. He's pushing the GENIUS Act, touting the US as the crypto capital of the world… and reportedly making a cool $150 million from trading his $Trump meme coin. The next “unlock” due in a few months could add another $100 million to his growing fortune.
It raises serious questions about his motivations. Is he really a proponent of creating good policy to help drive serious innovation, or is he just looking to promote his own bags? What assurances do we have that the GENIUS Act will be protective of investors’ dollars? The President himself stands to benefit from the very market it's attempted to regulate. This isn’t a political argument, but rather a transparency and accountability one. That’s not a good look, and it sours the entire pro-reform effort. This is nothing short of insider trading on a monumental scale, and that ought to infuriate every American.
Ken Mahoney is right to advise caution. The crypto craze will take a break once the novelty wears off. The GENIUS Act alone is not a silver bullet. It’s a good first step, to be sure, but a step that requires some serious reflection and possible amendments along the way. So before we all get swept away in this $4 trillion party, let’s be sure the house isn’t built on sand.
Ken Mahoney is right to advise caution. The crypto market will cool off after the initial hype subsides. The GENIUS Act is not a silver bullet. It is a first step, yes, but it's a step that needs to be carefully considered and potentially revised. Before we wholeheartedly embrace this $4 trillion party, let's make sure the house isn't built on sand.
