The IMF-World Bank Spring meetings are usually placid affairs that participating central bankers wish to forget soon after they are over. Not this Spring. This April the feeling several central bankers brought back home with them was not the usual relief but something far more visceral: dread, terror even. The reason? The spectre of the Genius Act—the U.S. stablecoin bill barrelling toward law in 2025, hot on the heels of Donald Trump’s January 23 executive order heralding a strategic cryptocurrency reserve.
Central bankers have hitherto seen cryptocurrencies as a nuisance whose upside is that, thankfully, they lack the capacity to cause serious raptures in the architecture of the monetary systems under their care. They no longer think now that President Trump’s team are counting on cryptocurrencies pegged to the dollar as part of their strategy to rejig the global monetary system.
What unsettled central bankers this Spring wasn’t just the policy itself, but its implications: a deliberate, chaotic unravelling of the 20th century’s monetary order where central banks reigned as the sole architects of money. The Genius Act doesn’t just allow private stablecoins—it prohibits central bank digital currencies (CBDCs), anointing corporate-issued tokens as the new guardians of dollar hegemony. This isn’t innovation; it’s a hostile takeover of money itself. Lacking anything resembling serious regulation, stablecoins are neither stable nor merely an alternative dollar payment option. They are a Trojan horse for the full privatisation of money.
The European Central Bank sees the danger. If securities migrate to blockchain, with bonds, stocks, and derivatives becoming tokenised, then settlement must follow. The ECB’s solution is a tokenised euro, ensuring public money remains the bedrock of finance. So far, the ECB had to face down resistance to this plan from the German and French banks who seek to maintain the status quo. Now, the ECB has another, a bigger headache: the spectacle of Washington racing in the opposite direction. By banning CBDCs and greenlighting stablecoins, Trump’s team do not just reject public digital money—they also outsource dollar supremacy to the darkest forces within Big Tech.
The irony is grotesque. The same libertarians who rail against government are now begging the state to anoint their stablecoins as de facto official currency. Worse, they demand access to the Federal Reserve’s balance sheet—allowing private issuers to back their tokens with central bank reserves. Imagine a world where Tether, Circle, or Elon Musk’s X Coin enjoys the implicit backing of the US Treasury while operating outside banking regulations. This isn’t just regulatory arbitrage; it’s monetary feudalism.
Lest we forget, there is a reason 19th century America was a monetary dystopia: thousands of wildcat banks issuing private notes, regular panics leaving the public, the working class in particular, holding worthless paper. Even J.P. Morgan was so appalled and threatened that he decided to strongarm the federal government and other bankers to establish the Federal Reserve as a public institution with a remit to stabilise money.
Now, we’re hurtling backward. The Genius Act, whose final draft we have not seen yet, could unleash a digital wildcat era, where stablecoins—pegged to the dollar but controlled by private actors—flood the globe with digital pseudo dollars. Even if well-intentioned stablecoins, like Circle’s USDC or Tether’s USDT, are run by privateers who stand no chance of maintaining their tokens’ dollar peg once their volume escalates after they receive the official imprimatur of the federal authorities. In what must surely constitute the grossest example of truth reversal, President Trump’s executive order ill-defines stablecoins as instruments that will “promote and protect the sovereignty of the US dollar.” Loosely translated this calls upon shady privateers to flood the world with private dollar proxies, ensuring that even if nations ditch the greenback, they’ll still be trapped in its digital shadow.
Europe is scrambling. The ECB, realising the existential threat, is fast-tracking a ‘wholesale CBDC’—a digital euro for institutional use that acts as a stopgap: a quick and dirty hybrid system syncing traditional payments with blockchain, buying time until true atomic settlement can be pushed past the vicious resistance of private bankers.
But it may already be too late. While Europe dithers with committees, the US is acting. The Markets in Crypto-Assets (MiCA) regulation has already driven Tether out of Europe—not because MiCA is too strict, but because the European Union’s political leadership still does not grasp the stakes. If stablecoins become the default money of crypto markets, DeFi, and emerging economies, the ECB’s half-baked digital euro will arrive to a battlefield where the war is already lost.
Meanwhile developing countries face a brutal choice. Already choking under the dollar’s dominance, they must now either ban stablecoins (thus forfeiting access to crypto capital flows) or create their own to compete with the dollar’s network effects. A third, unappetising alternative, is to surrender to a new – even more perilous – form of de facto dollarisation.
The only central bank that has planned ahead of this tsunami is China’s, along with some of the rest of the BRICS. Having the luxury of its own, already functioning digital yuan, China’s central bank can afford to refuse lending legitimacy to stablecoins by regulating them, preferring to ban them altogether to be on the safe side. But this sensible defiance leaves one gigantic dilemma still unanswered: China’s accumulated savings of approximately $4.5 trillion held by public and private institutions. Should they dump them, thus giving a boost to the Trump team’s plan to devalue the dollar? Or hold them, thus remaining exposed to the turbulence that Trump’s team is so adept at stirring up?
In the longer term, the real danger that looms is a bifurcation that fuels geo-monetary tensions, in addition to the existing geopolitical and geo-economic ones. Two parallel monetary systems seem to be heading for a clash: One made of public monies issued in China, India and, maybe, the Eurozone. And another comprising private money, increasingly dominated by dollar-pegged stablecoins colonising the dollar zone.
Is it any wonder that, this Spring, dread was the order of the day as our central bankers boarded their planes to return from Washington?
For the Project Syndicate site click here.
