The GENIUS Act was signed into law by U.S. President Donald Trump on July 17 to regulate stablecoins and their related technologies. At the bottom of the controversy and competition that surrounds the new law are China’s advances in blockchain (the technology that makes cryptocurrencies possible) – and why these developments need to be met with a bold response by the United States.
Would the U.S. have moved so definitively to control and regulate stablecoin if the other major player was France, for instance, or Japan? Would Washington have deemed the advances in financial technology to be a national security threat if those technologies were built in Singapore or Sydney? The answer to both is clearly and intuitively “no.”
As Igor Volovich, executive director of strategy for America First Technology Infrastructure & Innovation Initiative (AFTI³), told The Diplomat, “The GENIUS Act is not just about stablecoins – it’s about positioning the U.S. as the architect of the next financial era. It lays the groundwork for a digital ecosystem rooted in domestic jurisdiction, auditability, and constitutional access.”
When asked how the GENIUS Act changes things for the U.S., and for China, Volovish said: “Unlike China’s model, which centralizes control under the state, the GENIUS framework encourages individual sovereignty, market resilience, and permissionless innovation.
“If implemented with intention, it could redefine the global conversation – not by replicating China’s infrastructure with friendlier branding, but by offering a fundamentally different operating system for the digital economy.”
Not Just Crypto, But AI Also
It is important to remember that the United States and China are not only competing in the race to dominate cryptocurrencies. The two nations are also in a real-time run for global leadership in the development and usage of artificial Intelligence (AI). And although the two technologies are vastly different, when used together, they will be enormously influential.
As North Crypto pointed out, “In the coming years, we will see more and more projects that utilize the combination of blockchain and AI. At best, this could revolutionize finance, security, decentralized applications, and much more. In addition, the development of AI agents could introduce entirely new ways to use cryptocurrencies and various decentralized systems.”
Therefore, proactively considering the growing synergy between cryptocurrencies and AI, it is necessary to evaluate the state of the AI race, too, in terms of its impact on digital currency competition.
Brad Carson, a former congressman and former president of the University of Tulsa, now leads Americans for Responsible Innovation (ARI), an artificial intelligence-related nonprofit based in Washington, D.C.
Carson told The Diplomat, “The competition to develop advanced AI is asymmetrical, with the U.S. facing hurdles that China doesn’t and vice versa. The U.S. has traditionally benefited from advantages, including attracting global tech talent and investment capital as well as an entrepreneurial tradition embedded in American culture.”
“China,” Carson continued, “has the advantage of centralized infrastructure planning, direct government subsidies, permissive legal standards on data acquisition, and greater numbers of highly skilled engineers and researchers.
“Some of the hurdles the U.S. faces are there to protect people, like privacy standards and limited government surveillance. Others, like permitting challenges, need to be addressed by lawmakers as the U.S. looks to maintain its lead in AI.”
Pushback From China
Although the Chinese Foreign Ministry has not officially commented about the passage of the GENIUS Act, government proxies weighed in.
The South China Morning Post quoted Zhou Xiaochuan, former governor of the People’s Bank of China, as warning that “USD-backed stablecoins may facilitate U.S. dollarization” with potentially dire implications for China’s bid to shave away at global reliance on the U.S. currency. The World Economic Forum (WEF) reported that “Chinese state media called for yuan-backed digital currencies to be pursued ‘sooner rather than later’” after the GENIUS Act was signed into law.
Interestingly, China is not alone in its concern. The WEF also reported that Christine Lagarde, president of the European Central Bank, shared similar concerns, “emphasizing U.S. dollar-denominated stablecoins’ threat to monetary policy and European autonomy and pushing for the development of a digital euro.”
But other China-based analysts seemed less concerned about the GENIUS Act’s implications for China. A commentator from Beijing Taihe Institute wrote in a post: “While Washington continues to dress up its economic strategy as innovation-driven and market-oriented, the passage of the so-called GENIUS Act suggests the emergence of a desperation, leading to the reckless engineering of systemic financial instability under the guise of modernization.”
He went on to say that “the move has implications for geopolitical trends with consequences ultimately on economic stability in the United States and globally.” Saying that China’s leadership is likely “watching closely,” the fellow predicted that the GENIUS Act might be interpreted in Beijing “as both a desperate liquidity maneuver, and a dangerous sign of imperial overreach and financial rot.”
Next Steps
The United States is pushing ahead.
On July 30, the White House held an event, headed by Treasury Secretary Scott Bessent, introducing the recommendations made by the President’s Working Group on Digital Asset Markets to strengthen American leadership in digital financial technology
Bessent said, “The next step in strengthening the crypto ecosystem is shepherding must-pass market structure legislation through the Senate and delivering it to the president. Bipartisan legislation like the House’s CLARITY Act will capitalize on our recent victories by providing clear rules of the road for the entire industry.”
China may have other ideas.
“What concerns me most isn’t technical progress in China – it’s the value framework that underpins it,” said Volovich of AFTI³. “The development of the digital yuan, for instance, is not just a monetary innovation. It’s an extension of a surveillance-first model of governance that aligns with the state’s broader control apparatus.”
Volovich, who grew up in the Soviet Union, believes that China’s “unique” approach to human rights and intellectual property further complicates the regulatory climate.
“Under Xi Jinping’s consolidation of power, the boundary between commercial activity and state prerogative has blurred to a degree that should give pause to any nation considering deep alignment with Chinese infrastructure standards.”
He concluded with a recommendation for the U.S. government: “Infrastructure is policy. Whoever builds the rails effectively sets the rules. That means our priority must be to build digital systems that are secure, sovereign, and open by design.”