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EXPLAINER: Why Trump thinks stablecoins are 'genius'

Michael Marillier in London

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02:52

"If crypto is going to define the future, it is going to be mined and minted in the USA." That was Donald Trump on the campaign trail last July.

Fast forward a year and Trump is putting his money where his mouth is. The American president is backing a bill that will provide support for stablecoin, a cryptocurrency pegged to a real-world asset, such as gold or the U.S. dollar.

Stablecoins are supposed to be more predictable than other cryptocurrencies because they're backed by assets that investors trust. This means a company selling a dollar-pegged coin would, in theory, keep reserves amounting to one dollar per coin. 

So if investors want to cash in, there would be enough dollars to pay them out.

Trump wants stablecoin laws as soon as possible, saying lawmakers must approve cryptocurrency legislation before their summer break in August. 

"Get it to my desk, ASAP - NO DELAYS, NO ADD ONS," he posted on Truth Social last month. "This is American brilliance at its best, and we are going to show the world how to WIN with digital assets like never before!"

There are some concerns about the impact of stablecoin on the global economy./ Reuters
There are some concerns about the impact of stablecoin on the global economy./ Reuters

There are some concerns about the impact of stablecoin on the global economy./ Reuters

'It could be genius, or it could be evil'

Lawmakers seem to be taking the president's lead. The U.S. House of Representatives is set to vote on the GENIUS Act (its actual name) later this week. The bill is designed to boost America's stablecoin sector by providing protections for investors.

Treasury Secretary Scott Bessent thinks those protections will boost investor confidence, saying the coins could "grow into a market worth $3.7 trillion by the end of the decade."

The Senate has already approved the bill, voting 68 to 30 in favor of the GENIUS Act. But some analysts say the rules may have unexpected consequences.

"It could be genius, or it could be evil," says Vincent Mortier, head of investment at Amundi Asset Management. "It could potentially destabilize the global payment system. I'm not so sure it's a good idea."

The truth is, no one is entirely sure if stablecoins will live up to their name. 

People in developing countries could, in theory, use the coins to preserve the value of their money. For example, Argentina's inflation rate in May was nearly 44 percent year-on-year. Inflation in the U.S. was just 2.4 percent. Buying stablecoin would allow people to 'dollarise' their money quickly and easily.

But there is a flipside. Some currencies could weaken if people try to transfer their money into stablecoins. That could impact entire economies, especially those that import commodities like oil or platinum, which are priced in dollars. Weaker currencies would make those imports more expensive for poorer countries.

The push by Trump for regulations could bring 'crypto' into the mainstream./ Reuters
The push by Trump for regulations could bring 'crypto' into the mainstream./ Reuters

The push by Trump for regulations could bring 'crypto' into the mainstream./ Reuters

Unstable coins?

Right now, there are lots of ifs and maybes. Still, some officials are raising the alarm. Italy's economy minister Giancarlo Giorgetti issued a warning in April, saying the coins posed a threat to Europe's financial stability. 

Giorgetti said Europe faced the prospect of U.S. tariffs, but stressed that it wasn't the only danger on the horizon.

"Even more dangerous is the new U.S. policy on cryptocurrencies," said Giorgetti. "In particular the policy on dollar-denominated stablecoins."

There's no doubt that stablecoins are still on the fringes of the global economy. Financial services firm J.P. Morgan says roughly 90 percent of transactions are still linked to trades in crypto markets.

But Trump's push for regulations could bring 'crypto' into the mainstream. He addressed a cryptocurrency conference in early June, saying he was honored to be called "the country's first crypto president."

Yet Trump is more than just a president who likes crypto. He is also, one way or another, a president who invests in crypto. He launched a cryptocurrency called $TRUMP in January. He also holds a stake in a crypto company registered as World Liberty Financial.

The White House says there is no conflict of interest as these assets are held in a trust managed by Trump's children. 

But that trust seems to be doing well - Forbes magazine estimates that it's made around $1 billion through crypto ventures.

Lawmakers must now decide if the future will be defined by 'crypto'. And - perhaps more pointedly - if 'crypto' will be defined by Trump.

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