New Strategy Aims to Establish US Dominance in Stablecoins

The Bitcoin Policy Institute (BPI) has unveiled an innovative proposal that seeks to ensure the United States leads in the realm of stablecoins. Released on Wednesday, this strategy is aligned with the recently passed GENIUS Act and lays out five critical policy areas that form the backbone of their vision.

Central to the BPI’s argument is the assertion that effectively regulated stablecoins can enhance U.S. control over offshore dollar markets. They believe this approach would mitigate systemic risks and counteract the advancing influence of China’s digital currency initiatives.

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The BPI highlights the issues posed by offshore banks, which create dollar-denominated credit independent of U.S. oversight. This practice allows them to profit from intermediation while relying on the Federal Reserve as an implicit safety net during financial strains.

This current framework, according to BPI, presents a significant threat to the American economy. Consequently, they propose that stablecoins, when regulated, could act as a mechanism to flip the dynamics of this situation, keeping financial stability within the U.S.

As detailed in the GENIUS Act, which became law in July 2025, stablecoin issuers are required to hold full reserves in federal instruments such as Treasury bills, repos, or insured deposits, while prohibiting lending against these reserves. This regulation ensures that when foreign entities hold compliant stablecoins, the corresponding Treasury securities strengthen U.S. financial institutions rather than the offshore financial system.

BPI argues that, while the dollar remains global, maintaining reserves domestically minimizes external vulnerabilities, addressing risks highlighted by the Triffin Dilemma.

In the context of competitive pressures in the digital asset landscape, the BPI points out the advancements made by China, where the digital yuan offers interest to holders, and the country’s Cross-Border Interbank Payment System facilitates transactions across numerous nations. They express concern that Europe’s MiCA framework for euro-denominated stablecoins could surpass U.S. advancements.

These developments, BPI contends, threaten U.S. dominance in the vital areas of financial infrastructure, which they describe as both highly contested and fragile.

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To combat these challenges, the institute has proposed a comprehensive framework to bolster stablecoin dominance, beginning with enhancing the implementation of the GENIUS Act through the establishment of a robust backstop infrastructure. This includes creating committed repo lines with primary dealers and ensuring access to the Federal Reserve’s Standing Repo Facility, thus making compliant stablecoins preferable to offshore options.

Additionally, the BPI advocates for U.S. stablecoins to be utilized in international trade settlements instead of Eurodollar deposits, intending to restore Treasury demand domestically and curtail offshore credit expansion.

The third recommendation focuses on developing a competitive fee and rewards structure for regulated stablecoins, allowing them to rival interest-bearing deposits while adhering to the GENIUS Act’s restrictions.

Furthermore, the BPI emphasizes the importance of addressing risks associated with decentralized finance (DeFi). They identify the potential for DeFi systems to replicate credit multiplication and call for stringent regulations at the smart-contract level to prevent unregulated protocols from undermining stablecoin effectiveness.

Lastly, the institute proposes supporting local monetary systems alongside stablecoin adoption to promote shared economic growth rather than imposing financial coercion. They believe these initiatives can be realized without increasing sovereign debt to foreign entities or enlarging the Federal Reserve’s balance sheet.