Wall Street analyst hints the GENIUS Act could indeed be genius originally appeared on TheStreet.
Crypto analyst and former CEO of BitMEX, Arthur Hayes, has revealed why the US government is so curious about stablecoins. Stablecoins are cryptocurrencies directly pegged to or backed by the US dollar.
In his blog, Hayes zeroed in on U.S. Treasury Secretary Scott Bessent's strong support for stablecoins, suggesting that this support may not be driven by a genuine interest in financial innovation, but rather by practical fiscal policy.
The U.S. government, Hayes notes, is under significant fiscal pressure due to growing deficits and debt and lacks a politically feasible way to raise taxes substantially. The US debt ceiling has reached $5 trillion as of July 8.
U.S. 10-year Treasury yields edge higher, approaching 4.42%, as markets react cautiously to government borrowing pressures. The government has traditionally financed itself by issuing bonds. However, the market has become increasingly hesitant to purchase long-term government debt without significantly higher interest rates.
However, substantially higher interest rates would also considerably increase government borrowing costs, something the Treasury is eager to avoid.
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The real strategy behind the GENIUS Act
This challenge led the Treasury to think about whether stablecoins could solve their challenges. Recently proposed in the GENIUS Act, with bipartisan support and the backing of Secretary Bessent.
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act aims to create a regulatory framework for stablecoin issuers. However, Hayes predicts it will enable many U.S. banks—not just fintech start-ups—to issue stablecoins at scale.
According to Hayes, the banks would then convert their enormous customer deposits into stablecoins, creating a relatively large new pool of money to be used for purchasing short-term U.S. government bonds, also known as T-bills.
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Stablecoins, in this context, would not pay interest directly to customers. Hence, banks could generate a profit by using stablecoin funds to invest in T-bills, which offer a solid yield with negligible risk.
Hayes argues that this monetary strategy serves several purposes: it enables banks to substantially reduce their compliance and operational costs through the operational efficiency of blockchain.
Hayes figures this would allow for the conversion of about $6.8 trillion in deposits from traditional banks into stablecoins and push them into treasury purchases. This increase in stablecoin-based funding would help keep government bond yields from rising, reducing borrowing costs, and preventing possible capital market chaos.
Story ContinuesWall Street analyst hints the GENIUS Act could indeed be genius first appeared on TheStreet on Jul 8, 2025
This story was originally reported by TheStreet on Jul 8, 2025, where it first appeared.
