GENIUS – Backing Stablecoin & Funding Bitcoin Reserve as Way to Pay Off National Debt

By Richard Harvey | News Analysis

Editor’s note: The title of this new federal law is ‘Guiding and Establishing National Innovation for U.S. Stablecoins Act,’ which yields the catchy acronym GENIUS.

The White House categorically asserts the Genius Act, which President Trump recently signed, is an historical piece of legislation that will pave the way for the USA to lead the global digital asset revolution. It aims to protect consumers, safe guard the US financial system,  and promote the global use of the dollar in digital finance. US Dollar-backed stablecoin is a ‘genius’ way of bolstering the dollar.   

“A stablecoin is a type of crypto currency specifically designed to maintain a stable value unlike other crypto currencies, which often experience significant price volatility.  Stablecoins achieve this stability by pegging their value to a less volatile asset, most commonly a fiat currency such as the US dollar, but they can also be linked to commodities like gold or oil.” (AI Overview)

The global use of US Dollar-backed stablecoins renews the dollar’s utility and  prestige at a time when the dollar (according to banking titan Goldman & Sachs) is at the beginning of a down trend that will last for years.

 As  of  July 2,  the M2 money supply  (the amount of dollars in circulation globally) hit an all-time high of $55.48 trillion while our national debt approaches $40 trillion. As the reserve currency and primary medium for financial transactions, the USD is the linchpin of the US led global order. In the interest of perpetuating this, the US is asserting its influence in  the digital currency race. The Genius act might not just stabilize stablecoin, but redefine the future of the dollar itself.

Beneath the American financial architecture, new contenders are lining up. The Chinese in particular, want a Yuan-based stablecoin to be the linchpin of the emergent digital economic order. “The BRICS (Brazil, Russia, India, China, South Africa) philosophy of dethroning the USD is a real and credible threat to the United States,” said William Lee chief economist at the Milken Institute.

“If we lost the world-standard dollar it would be like losing a war, a major world war. We would not be the same country anymore,” President Trump, said recently.                                                                     

Underlying the tariff battle between the US and China is the currency battle. The $37 trillion – going on $40 trillion – of national debt is mostly in the form of Treasury bills. The largest holder of these Treasury bills is China. This represents a huge vulnerability. In the year 2024, interest payments on the national debt were $882 billion – greater than the $874 billion for the nation’s Military budget.

Any significant doubt with respect to the USD could lead to default on the debt. China knows this! The dumping of US treasuries at a point of dollar vulnerability is China’s financial nuclear option.   

The current situation calls for the US to find more non-Chinese, non-BRICS buyers to hold US debt and defend its reserve currency status in both the physical and virtual worlds. US Treasury backed stablecoins can theoretically enable unlimited, decentralized purchase of US treasuries. This is why it is called the Genius Act.

We are at interest rate ‘hero pass.’ Trump needs lower interest rates to maintain payments on the long term treasury bills in which the debt is denominated.  Unfortunately, this is the perennial path to hyperinflation. This is what has motivated me to put these thoughts down.                                                                                                                        

The Genius Act sets the architecture for USD-based stablecoin dominance. This initiative is a first step in resurrecting the USD. The global acceptance of a USD based stablecoin as the linchpin of the emerging cyber (or cyber/legacy)  economy would be furthered by its linkage to a real world asset-backed token. (RWA)

According to the Institute for Energy Research, the US sits atop a staggering reserve of 1.86 trillion barrels of oil, enough to last 227 years at current usage levels. This represents a 15 percent increase from 2011 estimates, and is over 5.6 times the proven reserves of Saudi Arabia.

At $100 per barrel, this represents a liquid asset valuation of $186 trillion. At a modest $80 per barrel, it comes to $148 trillion in unencumbered liquid real world assets (RWA).

PAX Gold (PAXG) and Tether Gold (XAUt) are examples of commodity-backed stable coins. The commodity? Gold.

As gold is a universally accepted Real World Asset, so is petroleum!! The tokenization of US petroleum reserves would provide more than enough liquidity to cover, among other things, the following :

• Obliterate the $37 trillion to $40 trillion national debt.
• Top up the National Bitcoin reserve  (Bitcoin has more than doubled in value every year since its inception in 2009)
• Back USD stablecoins with petro-backed RWA tokens.

A ‘stable’ coin pegged to a ‘vulnerable’ fiat currency is a contradiction of terms. The US dollar may be the best fiat — but it is only the best in a sorry basket of inflationary fiat currencies. But, pegged to petroleum, the US dollar stablecoin is essentially a ‘petro-dollar’ – its valuation of a huge  liquid asset grows in value due to new discovery and continued growing demand.

Suspension of the Gold Standard as Historical Precedent

On April 20, 1933, the U.S. officially suspended the gold standard, which had been in place since 1879. This meant that currency could no longer be exchanged for gold, allowing the government to increase the money supply to stimulate the economy.

Known as the FDR Gold Bill, suspending the gold standard came about due to the need to create liquidity unrestrained by gold to fund New Deal projects, and get  America back on her feet during the Depression. The bill mandated the confiscation of gold, which went into Fort Knox as strategic reserve, but not as a reserve to back the dollar. Thus began the decades-long slide to completely decouple the USD from gold, terminating in 1974 when Nixon removed all connection between the USD and Gold.

The US dollar in now backed by “The Full Faith and Credit” of the US Government. The key word here is ‘Credit.’ The principal creditor, i.e. holder of U.S  debt in the form of Treasury bills, is China. And, as mentioned above, China has its own stablecoin aspirations – to be backed by the yuan. The US stablecoins are primarily backed by treasury bills – in other words DEBT!! Hmmm . . . makes you wonder!    

We have proven, technically recoverable in-ground reserves of 1.86 trillion barrels of petroleum. There is no qualitative difference between Fort Knox and the North Slope. For simplicity, I have not included our huge reserves of natural  gas, but the two can combine into a national hydrocarbon strategic reserve. The Tokenization of US hydrocarbon reserves —  even though unredeemable  — are none the less representative of  quantifiable, liquid National Wealth .Tokenized Real World Assets are magnitudes more credible than “Full Faith and Credit”. Think on it.

In closing,  the same day in mid-July that the Genius bill advanced,  the House of Representatives passed a bill effectively banning the Federal Reserve from issuing a central bank-issued digital currency. Clearly the US wants private stablecoins rather than a central bank digital currency. This suggests a movement away from the Federal Reserve, which is in fact a consortium of international banks whose interests transcend those of the United States.

Email questions and comments to Mr. Harvey: arkgateway@live.com