Dollar Stablecoin: The East India Company of a New Era

History always repeats itself in unexpected ways. When Trump signed the "Genius Act", I thought of the state-sanctioned business giants of the 17th and 18th centuries - the Dutch and British East India Companies. This bill, which seems merely a technical adjustment in financial regulation, is in fact granting a charter for the "new East India Company" of the 21st century, and a transformation reshaping the global power landscape has begun.

The Charter of New Power

Four hundred years ago, the Dutch East India Company ( VOC ) and the British East India Company ( EIC ) were not ordinary trading companies. They were special entities authorized by the state, embodying merchants, armies, diplomats, and colonizers. The Dutch government granted VOC the power to recruit armies, issue currency, sign treaties, and even wage war. Queen Elizabeth I of England also granted EIC the power to monopolize trade in India and establish military administrative functions. These companies were among the earliest multinational corporations, controlling the lifeblood of globalization in that era - maritime trade routes.

Today, the "Genius Act" is granting legitimacy to the power giants of the new era - stablecoin issuers. On the surface, the bill aims to regulate the market and mitigate risks by setting reserve standards and requiring asset certification. However, the actual effect is to create an oligopoly of "legitimate" stablecoin issuers recognized by the U.S. government. These "crowned" companies, such as Circle(, the USDC issuer), and future Tether(, if they choose to comply), along with Internet giants like Apple, Google, Meta, and X, which have billions of users, will no longer be the wild-growing crypto rebels but will be formally incorporated into the U.S. financial strategic landscape as "chartered companies." They will control the global trade routes of the new era - a 24/7 uninterrupted, borderless digital financial track.

From Trade Routes to Financial Tracks

The power of the East India Company stemmed from its monopoly on physical trade routes. They secured the exclusive rights to the spice, tea, and opium trades with gunboats and fortresses, reaping huge profits from it. The "digital East India Company" of the new era exercises power by controlling the financial tracks of global value flows. When a dollar stablecoin regulated by the U.S. Treasury or specific agencies becomes the default settlement unit for global cross-border payments, decentralized finance lending, and real-world asset trading, its issuer gains the power to define the rules of the new financial system. They can decide who can access this system, can freeze the assets of any address based on directives, and can set compliance standards for transactions. This is a deeper and more intangible power than controlling physical trade routes.

The Ambiguous Symbiosis and Confrontation Between Nations

The history of the East India Company is an epic that evolves with its mother country. Initially, they were agents of the nation implementing mercantilism and competing against rivals. However, the company's profit-driven nature quickly inflated it into an independent center of power. For profit, the EIC did not hesitate to wage wars and engage in unethical trade, repeatedly dragging the British government into unwanted diplomatic and military quagmires. Ultimately, when the company was on the brink of bankruptcy due to mismanagement and excessive expansion, it had to seek aid from the state, leading the government to gradually strengthen regulation through a series of acts, culminating in the complete deprivation of its administrative powers after the Indian Rebellion of 1858, with its territories returned to direct rule by the crown.

This history foreshadows the potential dynamic relationship between future stablecoin issuers and the US government. Currently, these companies are viewed as strategic assets in promoting dollar hegemony and countering China's digital yuan. However, once they grow into "too big to fail" global financial infrastructures, their own institutional interests and shareholder demands will become critical. They may make decisions that contradict US foreign policy for commercial interests.

Global Currency Tsunami

The "Genius Act" has given rise not only to a new power entity but also to a monetary tsunami that will sweep across the globe. The energy for this tsunami originates from the collapse of the Bretton Woods system in 1971. It was that historic "liberation" that paved the way for today's global conquest of the US dollar stablecoin. For countries with inherently fragile sovereign credit, the future will no longer be about whether the government chooses to use the national currency or traditional US dollars, but rather about the people choosing between a collapsing local currency and an easily accessible, frictionless digital dollar. This will trigger an unprecedented wave of super dollarization, completely ending the monetary sovereignty of many nations and bringing them devastating deflationary shocks.

The Ghost of the Bretton Woods System

To understand the power of stablecoins, we must return to the moment of the collapse of the Bretton Woods system. This system linked the US dollar to gold, while other currencies were pegged to the dollar, forming a stable structure ultimately anchored in gold. However, this system contained a fatal contradiction known as the "Triffin Dilemma": as the global reserve currency, the dollar had to continuously flow into the world through the trade deficit of the United States to meet the demands of global trade development; yet the persistent deficit would undermine confidence in the dollar's ability to be exchanged for gold, ultimately leading to the collapse of the system. In 1971, President Nixon closed the gold exchange window, signaling the death of the system.

However, the death of the US dollar marks the beginning of its rebirth. Under the subsequent "Jamaica System," the dollar was completely decoupled from gold, becoming a purely fiat currency. It was liberated from the "chains of gold," allowing the Federal Reserve to issue currency more freely to meet domestic fiscal needs and the global demand for dollar liquidity. This laid the foundation for the dollar's hegemony over the past half-century—a hegemony that relies on global network effects and the comprehensive national power of the United States, without a peg. Stablecoins, especially those recognized by US law, represent the ultimate technological form of this post-Bretton Woods system. They elevate the liquidity supply capability of the dollar to a new dimension, enabling it to bypass the layers of regulatory governments, circumvent the traditional, slow, and costly banking systems, and directly penetrate into every capillary of the global economy, into the mobile phones of every individual.

The Arrival of Super Dollarization

In countries like Argentina and Turkey, which have long been plagued by high inflation and political turmoil, people spontaneously exchange their local currency for US dollars to preserve their wealth, which is known as the "dollarization" phenomenon. However, traditional dollarization has many obstacles: you need a bank account, face capital controls, and bear the risks of holding physical currency. Stablecoins completely dismantle these barriers. Anyone with a smartphone can, in just a few seconds and at a very low cost, exchange their depreciating local currency for a US dollar-pegged stablecoin.

In Vietnam, the Middle East, Hong Kong, Japan, and South Korea, U stores are rapidly replacing traditional exchange shops. Real estate offices in Dubai have started accepting Bitcoin payments, and small shops in Yiwu can now use U to buy cigarettes.

These pervasive payment infiltrations will turn the process of dollar stablecoinization from a gradual process into an instantaneous tsunami. When a country's inflation expectations rise slightly, capital will no longer be "outflowing," but rather "evaporating" - disappearing instantly from the local currency system and entering the global crypto network. We can define this attribute as "enhanced substitutability for sovereign currency."

For those governments whose credit is already on shaky ground, this will be a fatal blow. The status of the local currency will be thoroughly shaken, as the public and businesses have a more perfect and efficient alternative.

Hyperdeflation and the Erosion of National Power

When an economy is swept by the wave of super dollarization, its sovereign nation will lose two of its most core powers: the first is the power to print money to cover fiscal deficits (, which is the seigniorage ); the second is the power to regulate the economy through interest rates and money supply (, which is the independence of monetary policy ).

The consequences are catastrophic.

First, as the local currency is abandoned on a large scale, its exchange rate will spiral downwards, leading to hyperinflation. However, at the level of economic activity priced in dollars, there will be a severe deflation. Asset prices, wages, and the value of goods, when measured in dollars, will plummet.

Secondly, the government's tax base will evaporate. Taxes denominated in a rapidly depreciating local currency will become worthless, leading to a collapse of the national finances. This death spiral of finances will completely destroy the country's governance capacity.

This process, starting with Trump's signing of the Genius Act, will be accelerated by bringing real-world assets on chain (RWA).

White House vs. Federal Reserve: The Power Struggle Within the United States

This currency revolution is not just about striking at America's opponents; it will even trigger a crisis within the United States.

Currently, the Federal Reserve, as an independent central bank, controls the monetary policy of the United States. However, a privately issued digital dollar system regulated by a new agency under the Treasury or the White House would create a parallel monetary track. The executive branch could indirectly or even directly intervene in the money supply and flow by influencing the regulatory rules for stablecoin issuers, thereby circumventing the Federal Reserve. This could become a powerful tool for the U.S. executive branch to achieve its political or strategic goals, such as stimulating the economy in an election year or precisely sanctioning opponents, thus potentially triggering a profound crisis of trust regarding the independence of monetary policy in the future.

The Financial Battlefield of the 21st Century

If the stablecoin bill represents a restructuring of power domestically, then externally, it is a crucial piece in the chess game of great power competition between the United States and China: through legislation, supporting a private, public blockchain-based "free financial system" centered on the dollar.

The Financial Iron Curtain of the New Era

After World War II, the United States led the establishment of the Bretton Woods system, which aimed not only to rebuild the post-war economic order but also to create a Western economic bloc that excluded the Soviet Union and its allies in the context of the Cold War. Institutions such as the International Monetary Fund (IMF) and the World Bank became tools for promoting Western values and consolidating the alliance system. Today, the "Genius Act" aims to build a new version of the "Bretton Woods system" for the digital age. It seeks to establish a global financial network based on the US dollar stablecoin, which is open, efficient, and ideologically opposed to the model led by the Chinese state. This is somewhat reminiscent of the arrangements of the liberal trade system that the United States set up to counter the Soviet Union, but the approach is more aggressive.

Open Siege vs. Closed: Permissioned vs. Permissionless

The strategic paths of China and the United States in digital currency show fundamental differences, representing an ideological war of "openness" versus "closure."

China's digital renminbi ( e-CNY ) is a typical "permissioned" ( Permissioned ) system. It operates on a private ledger controlled by the central bank, with every transaction and every account under the strict surveillance of the state. This is a digital "walled garden," whose advantages lie in efficient centralized management and strong social governance capabilities, but its closed nature also makes it difficult to gain the genuine trust of global users, especially those individuals and institutions wary of its surveillance capabilities.

In contrast, the stablecoins supported by the "Genius Act" in the United States are built on public blockchains such as Ethereum and Solana that are "permissionless" (Permissionless). This means that anyone, regardless of where they are, can innovate on this network - developing new financial applications (DeFi), creating new markets, trading - without needing approval from any centralized institution. The role of the U.S. government is not to be an operator of this network, but to be at its core.