Stablecoins could be a game-changer

The US Genius Act is creating an opportunity for private sector stable coins.

What is the US Genius Act? What are Stable Coins? What does this mean for Bitcoin?

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Stable coins could be a game-changer
By Henry Cobbe CFA, Head of Research, Elston Consulting
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Bitcoin is a speculative token

Our position remains unchanged.  Bitcoin is a speculative asset where an object (be it an ounce of Gold, a tulip bulb, a coffee bean or a digital token) is given a notional value set between buyers and sellers, whilst lacking intrinsic value (generating income or capital growth).  Arguably Bitcoin has less intrinsic value than gold, tulip of a coffee bean because gold can be worn, tulips planted, and coffee ground and brewed.
In our 2022 article on Bitcoin, we made the following points that Bitcoin

1. It is not appropriate for retail investors
2. It is an instrument for speculation, with no intrinsic value
3. Understanding a bubble is possible.  Timing its end is not.

These three points remain the same today. 
 
We described Bitcoin as a digital pyramid: as long as it can keep drawing fresh money in for a technologically dwindling supply of tokens, the Bitcoin game can continue.  Like any other less sophisticated tokens, such as Pokemon cards, Bitcoin is worth whatever buyers and sellers are willing to pay each other to trade their respective greed and fear.  Its long-run intrinsic value Zero. The same cannot be said of shares or bonds. Their intrinsic value is linked to earnings and dividends (shares), and interest income and term (bonds).  Again, our position remains unchanged on this.
 
In the same article, we also argued that whilst we are positive on real assets as inflation hedges, Bitcoin isn’t one of them. It’s not really real, and it’s not really an asset.

We were then and remain very positive on the transformation that Blockchain technology can bring to finance.  Both for payment transactions and for fund tokenisation, Blockhain will have a massive role to play relative to traditional payment processing systems.

So what's different now?

Four things are leading us to consider Bitcoin and Stable Coins as an alternative asset class: firstly, debt indigestion is raising concerns around nominal assets which could see a steady swtich to alternative stores of value such as 1) Gold and 2) Digital Currencies, including Bitcoin; secondly, exposure to Bitcoin price action is available via regulated ETPs; thirdly, the UK regulator is considering ending the ban on such products; and finally the advent of the US Genius Act and Stable Coins, backed by short-dated US Treasuries which deliberately excludes the US Federal Reserve from issuing suche coins could be a game-change for digital currencies.

De-dollarisation spurring on digital currencies

In the wake of 2025’s currency volatility, interest in digital/crypto currencies has surged - not just as speculative assets, but increasingly as alternatives to traditional fiat currencies. The sharp decline in the US dollar earlier this year, driven by institutional hedging rather than structural weakness, sparked renewed scrutiny of fiat resilience. For some, this episode reinforced the fragility of government-backed currencies and bolstered the case for decentralized digital assets.
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While the transcript acknowledges the speculative nature of cryptocurrencies like Bitcoin, it also highlights a growing appreciation for the underlying blockchain technology. Blockchain’s potential to revolutionize administrative processes in banking and investment fund management is seen as a major innovation. Tokenization, in particular, is cited as a tangible example of blockchain’s utility beyond mere speculation.

Governments will remain cautious of crypto, but ok with stable coins?

The idea that governments - whether in the US, UK, or EU - would relinquish control of monetary systems to unregulated entities or collectives such as Bitcoin is dismissed as unlikely. Cryptocurrencies, in their purest form, lack intrinsic value and regulatory oversight, making them unsuitable as mainstream currency replacements.  Instead, the focus shifts to a more promising development: stablecoins.
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Governments have explored issuing digital currencies backed 1:1 to fiat currencies. 
Stablecoins represent a middle ground - privately issued digital tokens backed to real-world instruments like short-dated US Treasuries and money market funds. This backing provides stability and credibility, mitigating the wild price swings that plague traditional cryptocurrencies.

Is the US Genius Act a fact-changer for digital currencies?

The US Genius Act in the US could be a pivotal moment. Not only does this legislation allows stablecoins to be backed by government securities, it also explicitly prohibits the Federal Reserve from issuing them. In effect, it opens the door for private enterprises to lead the development of stable digital currencies.
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This shift could be a game-changer. By anchoring digital assets to tangible financial instruments, stablecoins offer the benefits of crypto - speed, transparency, and programmability - without the speculative risk. The Genius Act thus marks a significant regulatory endorsement of digital currency infrastructure, potentially reshaping the future of money.

UK regulatory landscape

In the UK, anticipation is building around upcoming FCA regulatory changes expected in October. These changes are likely to provide clearer guidance and oversight for digital assets, further legitimizing their role in diversified portfolios. While the transcript does not delve into specifics, it suggests that these regulatory developments could make digital currencies more accessible and acceptable for mainstream investors.

Portfolio perspectives

From a portfolio perspective, the rise of stablecoins and regulated digital assets is prompting a re-evaluation of alternatives. Gold remains a trusted hedge against fiat instability, but digital currencies - particularly those with regulatory backing - are emerging as credible complements. The transcript advocates for increased allocation to alternatives, including crypto, as part of a broader strategy to reduce reliance on traditional bonds and fiat-linked instruments.
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In summary, while pure cryptocurrencies remain speculative, the evolution of stablecoins and supportive regulatory frameworks in both the US and UK are driving a more serious consideration of digital assets. As fiat currencies face pressure from debt oversupply and geopolitical shifts, digital tokens - especially in its regulated, asset-​backed form of stable coins - are gaining traction as a viable alternative.