causing higher inflation. Still, there is probably some limit to how much the Fed would monetize the debt, so long as it maintains its independence. That leaves financial repression. Financial repression is defined as a formal requirement by the government that certain financial institutions purchase government debt. The government might prevent certain financial institutions from holding any financial assets other than government debt. Alternatively, the government could require financial institutions to hold a specific fraction of assets in U.S. Treasury securities. The effect of such policies is to increase the demand for the government’s debt, which weakens the tendency for rising debt issuance to lead to higher borrowing costs. Enter the GENIUS Act. Stablecoins are digital dollars, similar to the digital dollars in traditional bank accounts. Both are claims to a physical dollar issued by the financial institution. Whereas the digital dollars in one’s bank account reside on a ledger controlled by the financial institution and are transferred over the payment rails of the traditional financial system, stablecoins reside (and are transferred) on the blockchains of various cryptocurrency projects. Stablecoin issuers are financial intermediaries. One deposits a dollar to receive a stablecoin. The issuer sets aside a fraction of the dollars it receives to meet redemption requests and uses the remaining fraction to buy interest-earning assets. This is where the financial repression comes in. The GENIUS Act requires that these stablecoin issuers hold their assets in cash, short-term U.S. Treasury securities or as reserve balances at the Federal Reserve. The hope is that stablecoins will expand global access to dollars. The issuers will then invest a fraction of those dollars into U.S. government debt. To the extent that these stablecoin holders were not previously holding dollars or dollar-denominated assets, the new policy could significantly increase the demand for U.S. government debt and keep borrowing costs down. Every Choice Matters – Choose Federated® DriveSAFESM Federated DriveSAFESM Telematics can help your employees improve their daily driving habits. This combination of mobile app, in-vehicle tag, and online portal allows you to measure, rank, and provide feedback on employee driving behaviors so you can help them become safer drivers. Scan to learn more about Federated DriveSAFESM Telematics and how you can help your employee drivers stay safe behind the wheel. Federated Mutual Insurance Company and its subsidiaries* federatedinsurance.com | *Not licensed in all states. 25.08 Ed. 1/25 © 2025 Federated Mutual Insurance Company The content of this publication is for general information purposes only and should not be considered legal advice or an offer of insurance. Coverage will be determined solely by the terms of your policy, if approved for issue. Consult with a qualified professional to discuss questions specific to your circumstances. Helping Your Employees Stay Safe Behind The Wheel This isn’t mere happenstance. A number of current and former members of Congress are on record arguing that stablecoins expand the reach of the U.S. dollar globally, reinforcing dollar dominance, while also creating a growing, passive demand for U.S. government debt. In short, the GENIUS Act may look like a forward-looking regulatory framework for a new technology — and it is. But it is also a clear step toward a modern form of financial repression, which appears to be the government’s favored strategy for managing its increasingly unsustainable debt. 39 DEALERS’ CHOICE
RkJQdWJsaXNoZXIy MTg3NDExNQ==