[Summary] Why Will the Dollar Become Stronger? U.S. Intentions Seen in the Stablecoin Law and Japan’s Four Discussion Points

（Original article in Japanese was published for FinTech Journal on July,30, 2025 by Makoto Shibata）https://www.sbbit.jp/article/fj/168793

The recently enacted GENIUS ACT, a comprehensive stablecoin regulation in the United States, has sparked global interest due to its potential impact on financial markets and international monetary dynamics. While Japan led the world in creating legal frameworks for stablecoins, it now finds itself lagging in actual implementation. This article explores the content and significance of the new U.S. legislation, its potential consequences for the global financial system, and the four key areas Japan must re-evaluate moving forward.

Overview of the GENIUS ACT: U.S. Stablecoin Law

Background and Definition

The GENIUS ACT was passed with bipartisan support, approved by the U.S. Senate on June 17, 2025, and by the House of Representatives on July 17, 2025, before being signed into law by President Trump. The law defines stablecoins as digital assets backed by highly liquid reserves such as U.S. dollars, short-term U.S. Treasuries, or central bank deposits, and redeemable at face value.

Issuer Qualifications and Regulatory Standards

Only financial institutions authorized by the Office of the Comptroller of the Currency (OCC) or federally licensed non-bank issuers are permitted to issue stablecoins. The law imposes strict requirements, including:

Full reserves backing all issued coins
Publicly disclosed redemption policies
Monthly reserve disclosures
Prohibition of rehypothecation (reuse of collateral)
Criminal penalties for false disclosures
Adherence to capital, liquidity, and risk management standards
Compliance with AML and sanctions regulations
Priority claims for users in case of issuer bankruptcy

Supervisory Scope and Timeline

Issuers with over $10 billion in circulation must be federally supervised, while smaller issuers may be overseen at the state level. Full enforcement begins in November 2026, and from July 2028, the sale of unauthorized stablecoins will be prohibited.

Three Global Impacts of the U.S. Stablecoin Law

1. Increased Demand for U.S. Treasuries

By institutionalizing U.S. Treasuries—particularly short-term notes—as reserve assets for stablecoins, demand for Treasuries is expected to rise. Currently, stablecoin issuers already hold around $182 billion in U.S. short-term Treasuries, equivalent to the holdings of countries like South Korea and the UAE. Approximately 99% of these reserves are controlled by Tether and Circle, potentially shifting U.S. debt market dynamics.

2. Strengthening the Dollar’s Position in Global Finance

Stablecoins pegged to the U.S. dollar offer low transaction costs, price stability, and real-time settlement, making them attractive for cross-border remittances and value storage—especially in emerging markets. This could accelerate the global use of the U.S. dollar and reinforce America’s financial presence internationally.

3. Strategic Approach to CBDCs

Rather than pushing for a government-issued Central Bank Digital Currency (CBDC), the U.S. now appears to embrace private-sector stablecoins as strategic tools to uphold the dollar’s global dominance. This pivot positions stablecoins as functional substitutes for a digital dollar, particularly as alternatives like China’s digital yuan remain limited and Europe continues to delay CBDC implementation.

Four Critical Issues Japan Must Revisit

Although Japan revised its Payment Services Act in 2022 to regulate stablecoins ahead of the U.S., implementation has been sluggish. The following four points merit urgent attention:

1. Regulatory Operations and Speed

Japan’s approval process for stablecoin businesses can take over two years, with the first U.S. dollar-pegged stablecoin service only launched in March 2025. No Japanese yen stablecoin is operational yet, highlighting the need for more agile regulatory procedures.

（JPYC Inc. was granted a license to issue stablecoin after this article was published and expected to issue Japanese Yen stablecoin in few months time.）

2. Flexibility in Reserve Asset Requirements

Current Japanese rules on reserve composition, transparency, and maturity limits restrict stablecoin structures. This makes it difficult for yen stablecoins to contribute meaningfully to global demand for U.S. Treasuries—a gap Japan may need to close through regulatory loosening.

3. Involvement of Financial Institutions

Unlike the U.S., where banks are explicitly expected to issue stablecoins, Japan faces hurdles such as unclear capital regulations and concerns over competition with bank deposits. It’s time to clearly define stablecoins as distinct “payment currencies” and encourage financial institutions to participate through measures like relaxed capital requirements.

4. International Cooperation and Cross-Border Frameworks

The U.S. law allows foreign issuers to sell stablecoins domestically, laying the groundwork for mutual recognition systems. Japan should also develop a cross-border acceptance framework, aligning with international rules and supporting the global use of yen-pegged stablecoins. In the long term, Japan needs a strategic approach to enhance the yen’s international presence through digital assets.

Conclusion

The enactment of the GENIUS ACT marks a major step in the U.S.’s stablecoin strategy—one that could reshape global finance, boost demand for U.S. Treasuries, and reinforce the dollar’s international dominance. For Japan, this signals an urgent need to rethink its regulatory approach and strengthen its digital currency ecosystem. While Japan was early to legislate, faster implementation, international coordination, and active market engagement will be essential to stay relevant in the evolving global digital finance landscape.