The GENIUS Act is being written for the wrong stablecoin customer

As Washington races to write the rules that will implement the GENIUS Act, the new federal law governing dollar-pegged digital tokens called stablecoins, almost every published critique has focused on what the law does for American consumers and American banks. However, more than 80% of stablecoin transactions happen outside the United States, much of it in countries where the local banking system has either collapsed or stopped working for ordinary people. The regulators writing these rules have never seen their own banking system fail the way Lebanon's did, and they are writing them for the wrong customer.

In October 2019, the banks in Lebanon, the country I am from, closed their doors to the public and have not properly reopened since. More than $70 billion in losses sit on the banks' books, more than triple the size of the economy, and depositors still can't get their savings back at their original dollar value. Many families lost access to their money and have not gotten it back. Today, Lebanese pay for a lot of things in Tether's dollar-pegged token, USDT, trading it between phones and cashing it out for dollars through brokers in Beirut. Importers prefer it because, unlike the banking system, it actually works. The customer Washington cannot quite picture is the one paying for groceries in Beirut.

Lebanon isn't the only example. Wherever a country's banking system breaks down, people move to stablecoins. In Argentina, where the peso has lost most of its value against the dollar, stablecoin purchases now make up more than half of all exchange purchases. In Brazil, the central bank governor Gabriel Galipolo has said that around 90% of the country's crypto activity now moves through stablecoins, mostly for payments. Even the US-Mexico remittance corridor, the largest in the world, runs increasingly on stablecoins. According to the Dallas Fed, Bitso alone moved over $6.5 billion across it in 2024, more than 10% of the entire corridor.

The GENIUS Act assumes a customer who keeps their dollars in a bank that gives them back. Tether and other foreign issuers, whose stablecoins move money in Lagos and Buenos Aires, get much softer rules. Timothy Massad, the former chair of the Commodity Futures Trading Commission, and two co-authors have called the foreign-issuer rule a loophole that"completely undermines the purpose of US stablecoin legislation." Foreign issuers can sell into the US if their home country claims similar rules, even though the law never says what similar means. In Lebanon and Argentina, people save in dollars and pay in dollars for anything that matters. For the user in Beirut, USDT is only safe if Tether is regulated like an American bank.

To be fair, the risks are real. Tether holds less of its reserves in plainly disclosed assets than any regulated American bank would be allowed to, which is why a sitting senator has moved to force foreign issuers like it to submit to audits. Stablecoins are also used to move money for sanctions evasion and money laundering, from Iran and North Korea to organized crime networks worldwide. And the spread of dollar-pegged stablecoins in countries like Argentina and Turkey weakens the only monetary tools their central banks have left. These are real risks that deserve proper regulation, and the people most exposed to them are not based in Manhattan, but in places like Lebanon and Argentina.

The implementing rules can still fix this. The "comparable regulation" language needs to spell out specific rules for foreign issuers like Tether. The redemption windows the FDIC has proposed only work for an American banking week, and they need to be redrawn for the global calendar Tether operates on. American banks report their reserves continuously. Tether only reports its once a quarter, and has never been fully audited. The Treasury, the Office of the Comptroller of the Currency, and the FDIC are writing all this into the rules now. None of these are unreasonable asks, just what the banking system requires of any American institution that handles people's money.

The people who live in countries with broken banking systems have been holding dollars through stablecoins for a while now. The rules being drafted in Washington are the first chance to recognize that, instead of writing them as if those users were an afterthought. Protecting the user in Beirut or Buenos Aires who holds USDT doesn't require new rules for foreign countries. It just requires holding Tether to the same standards American banks already meet.