Seizing the Opportunity to Future-Proof the US Financial System

The establishment of the Securities and Exchange Commission in 1934 was a response to the shortcomings of an outdated financial system. The resulting regulatory framework laid the groundwork for nearly a century of US financial dominance. Today, Congress is faced with a similar opportunity: modernizing America's financial infrastructure for the digital era. Two key pieces of legislation currently before lawmakers - the GENIUS Act on stablecoins and comprehensive market structure reform - represent a chance for the US to respond to a fundamental shift in global financial transactions. The $240 billion stablecoin market, projected to reach $3.7 trillion by 2030, has emerged as crucial financial infrastructure, largely outside formal regulatory frameworks. With nearly all major stablecoins pegged to the dollar, private companies are developing complex technologies to enhance the global functionality of American currency. This development comes as the US faces its most significant challenge to monetary hegemony in generations, with China's digital yuan initiatives, BRICS alternative payment systems, and growing reluctance among trading partners to transact in dollars. Stablecoins offer an effective response, expanding dollar accessibility globally while maintaining the transparency and rule-of-law advantages that make the US financial system attractive. The GENIUS Act would formalize this system, establishing reserve requirements, audit standards, and consumer protections that make dollar-backed digital assets safer and more attractive than alternatives. However, currency infrastructure alone is insufficient. The current approach of applying 20th-century regulations to 21st-century technology has driven innovation to jurisdictions with clearer and more welcoming rules. The recent federal court ruling that vacated the SEC's expanded dealer definition highlights the problem. Regulators had stretched statutory language beyond its original intent, prompting judicial intervention. Digital asset platforms integrate functions that traditional finance separates, creating new efficiencies and risks. Forcing these platforms into regulatory categories designed for different business models produces neither clarity nor protection. Comprehensive market structure legislation would establish bespoke registration frameworks that correspond to how these businesses operate, addressing a long-standing demand from the crypto ecosystem. The integration of digital dollar infrastructure with market structure reform is crucial. US financial supremacy in the 20th century resulted from systematic coordination across monetary policy, market regulation, and institutional oversight. Today's challenge demands similar coherence. The absence of a proper market structure leaves innovation vulnerable to regulatory uncertainty, while market structure reform without stablecoin clarity limits the global reach of US monetary policy. International competition intensifies this urgency, with the European Union's Markets in Crypto-Assets regulation, the UK's stablecoin framework, and similar initiatives across Asia posing direct challenges to US leadership in financial technology. These frameworks may not be superior to what the US could construct, but their existence often provides a decisive advantage in attracting global investment and innovation. To ensure the promise of crypto is not undermined, American lawmakers can take an additional step: pass legislation prohibiting the development of a central bank digital currency in the US. The Senate's passage of the GENIUS Act suggests growing recognition of crypto's policy significance and the realities of international competition. Even skeptical Democrats acknowledge the state of play, with Senator Mark Warner observing that if US lawmakers fail to shape cryptocurrency regulation, others will - and not in ways that serve US interests or democratic values. The commitment to sign legislation before the August recess creates both opportunity and deadline. The political foundation appears solid, with bipartisan support, industry consensus on key principles, and competitive pressure that occasionally motivates effective governance. However, significant obstacles remain, including limited congressional capacity for technical legislation in a heated partisan climate and the temptation to pursue symbolic rather than systematic reform. The choice facing Congress is straightforward: lead the development of global digital finance infrastructure or cede that role to competitors. For the first time in years, economic logic, political momentum, and strategic necessity align. Whether US lawmakers can capitalize on this convergence will determine not only the fate of cryptocurrency regulation but also America's role in the next generation of global finance.