THE passage last month of the Guiding and Establishing National Innovation for United States Stablecoins (GENIUS) Act marks a pivotal moment in global finance. This legislation lays the groundwork for legitimising and regulating the dollar-backed stablecoins, which are digital currency units or tokens tied to the US dollar (USD) that are issued by private companies and usable over the internet.

Unlike traditional dollars held in banks, USD stablecoins are programmable and transferable online. Besides, they are accessible via smartphones, bypassing the traditional banking channels.

In countries like Pakistan, where chronic rupee devaluation has eroded confidence in the local currency, both individuals and businesses already trust the USD with holdings in traditional commercial banks. However, access has always been via regulated banks, which are increasingly cumbersome for the younger population to navigate.

Now, USD-backed stablecoins open the door for anyone with a smartphone and internet connection to hold, save and transfer dollar-equivalent tokens without having to interact with a bank. This raises an urgent concern: the quiet dollarisation of economies like Pakistan — not through USD paper fiat or foreign remittances, but through apps and blockchain digital wallets.

Now that the stablecoins are backed by a legal framework — and with the US government increasingly unable to rely on foreign buyers, like China, which has recently been offloading US Treasury bonds, to finance its deficits — the GENIUS Act appears to be a strategic move.

By encouraging the global use of digital dollars, the US can create a new source of demand for its currency. In return, the US government can require USDD stablecoin issuers to hold US Treasury bonds as backing, thereby indirectly boosting demand.

While Central Bank Digital Currencies (CBDCs) are still being explored by several sovereign governments, including Pakistan, they are state-issued and limited in scale. In contrast, USD stablecoins are already in use globally and growing rapidly. What happens when young freelancers or even domestic staff in Pakistan start asking to be paid in USD stablecoins instead of rupees?

It raises crtitical questions not only about monetary sovereignty, but also about the fiscal and data transparency as Pakistanis move savings into a foreign currency managed on a public blockchain ledger due to its ease of access and use.

US Treasury Secretary Scott Bessent had stressed that “dollar-stable coins could grow into a $3.7 trillion market by the end of the decade”. That scenario now becomes more likely with the passage of the GENIUS Act.

While the USD stablecoins may offer short-term financial freedom, they risk accelerating capital flight from vulnerable economies, like Pakistan, and entrenching US financial dominance for another generation — this time in a digital form.

Adil Hanif Godil
London, UK

Published in Dawn, August 16th, 2025