Introduction
The spring meetings of the International Monetary Fund (IMF) and the World Bank usually go unnoticed. However, this year was different. Several central bankers left with a palpable sense of fear. The reason? The looming approval of the GENIUS stablecoin legislation in the U.S. Congress, following President Donald Trump’s March 6 executive order establishing a strategic reserve of cryptocurrencies.
Central Banks’ Changing Perspective on Cryptocurrencies
Until recently, central banks viewed cryptocurrencies as a minor annoyance, lacking the capacity to cause significant disruptions in the monetary systems they oversee. However, now they believe that Trump’s team plans to use dollar-pegged cryptocurrencies as part of their strategy to reshape the global monetary system—and, notably, generate substantial profits for Trump and his family.
Implications of the Proposed Policy
What alarmed central bankers at this meeting was the implicit policy direction: a deliberate and chaotic dismantling of the 20th-century monetary order, in which central banks have been the sole architects of money. Just as the GENIUS Act would allow for the issuance of private stablecoins, another proposed bill would prohibit the Federal Reserve from issuing its own official digital currency. This would make corporate cryptocurrencies the new guardians of dollar hegemony.
This is not innovation; it’s the hostile takeover of monetary supply. Without any serious regulation, stablecoins are neither stable nor a genuine alternative to dollar-based payment systems. They’re a Trojan horse for the privatization of money.
European Central Bank’s Concerns
The European Central Bank (ECB) is aware of the threat. If financial instruments migrate to blockchain technology (tokenizing bonds, stocks, and derivatives), the next thing to follow would be settlements. The ECB’s solution is to “tokenize” the euro, ensuring that public money remains the foundation of finance. However, it has faced resistance from German and French private banks. Now, a more significant problem has emerged: the U.S. is moving in the opposite direction.
By prohibiting official digital currency issuance and greenlighting stablecoins, the Trump team not only rejects public digital money but also hands over dollar supremacy to the dark forces in the world of megatech. This is a grotesque irony, as libertarians who rail against the state now plead with it to make their stablecoins de facto currency and demand access to the Federal Reserve’s balance sheet for private issuers to back their tokens with central bank reserves.
Historical Context and Risks
It’s crucial to remember that in the 19th century, the U.S. was a monetary distopia with thousands of unregulated banks issuing private currencies, often causing financial panics that left people—especially the working class—holding worthless papers. Even J.P. Morgan was so disturbed that he pressured the federal government and other bankers to establish a public institution responsible for stabilizing money: the Federal Reserve.
Now, the U.S. is eagerly embracing its past, dragging the rest of the world along. In a stunning inversion of reality, Trump’s January 23 executive order on “strengthening U.S. leadership in digital financial technology” defines dollar-backed stablecoins as instruments to “promote and protect the sovereignty of the U.S. dollar.” However, the GENIUS Act (whose final draft is still unknown) is a formula for unleashing an unregulated digital era where stablecoins (pegged to the dollar but controlled by private actors) flood the global economy with pseudo-dollar digital currencies.
Europe’s Response and Challenges
Europe is scrambling for a response. The ECB recognizes the existential threat it faces and is accelerating the creation of an official digital currency for wholesale use: a hybrid, temporary system where a digital euro synchronizes traditional payments with blockchain infrastructure and buys time until private bankers’ resistance to change can be overcome and genuine atomic settlement mechanisms implemented.
However, it might already be too late. While Europe hesitates in committees, the U.S. acts. The Markets in Crypto-Assets (MiCA) regulation has already expelled Tether from Europe, not because it’s too strict but because EU political leadership still fails to grasp the stakes.
Developing Countries’ Dilemma
Developing countries face a harsh choice. They already have enough problems under dollar dominance and now must decide between banning stablecoins (losing access to cryptocurrency flows) or creating their own to counteract the network effects of the dollar. The unappealing third option is accepting a new, even more dangerous form of de facto dollarization.
The only central bank that prepared was China’s People’s Bank of China, which already has a functional digital yuan. The PBC can afford to ban stablecoins without legitimizing them. However, this reasonable defiance leaves an enormous dilemma unresolved: public and private Chinese institutions hold accumulated savings worth around $4.5 trillion. Should they liquidate them to facilitate Trump’s plan to devalue the dollar or preserve them and remain exposed to the turbulence Trump enjoys creating?
Long-term Risks and Geopolitical Implications
In the long term, the risk is that monetary bifurcation exacerbates geopolitical and geoeconomic uncertainty. Two parallel monetary systems would emerge—one based on publicly issued money in China, India, and possibly the eurozone, and another composed of privately held money, increasingly dominated by dollar-pegged stablecoins—destined to clash.
Central bankers aren’t the only ones who should be concerned.
