GENIUS or Just Hype? The Risky Wrappers of Modern Finance

 

                                   Source: The Economist

Despite the GENIUS Act, stablecoins and tokens are ticking time bombs—hyped-up gimmicks wrapped in code, riddled with risk, and dripping with legal and financial uncertainty.

On July 18, 2025, President Donald Trump signed the GENIUS Act into law, giving stablecoins a legal green light. These are digital tokens backed by traditional assets, usually U.S. dollars. The law confirmed they’re not securities and must be fully backed by safe, liquid assets. Wall Street jumped in with both feet. JPMorgan rolled out its own version called JPMD. Robinhood launched 200 tokenised products in Europe. Amazon and Walmart are reportedly cooking up their own coins too. On the surface, it looks like crypto has grown up—but dig deeper, and the shiny packaging starts to peel.

For all the fanfare, stablecoins and tokenised assets still walk on shaky ground. Despite the legal stamp of approval, their real-world use is small. Stablecoins account for less than 1% of financial transactions globally. Their biggest selling point? Fast, cheap cross-border payments. But even that comes with strings attached. Without proper regulation, speed becomes recklessness, and a fast horse without a saddle will buck its rider.

Tokenised assets are digital twins of real-world investments—stocks, funds, even commodities. But here’s the catch: owning the token doesn’t always mean you own the asset. Robinhood’s new tokens, for example, let you track the value of stocks but strip away your shareholder rights. No votes. No direct ownership. If the issuer tanks, you’re left fighting with other creditors. That’s not investing—it’s gambling in a suit.

Just ask the customers of Linqto, a fintech firm that offered tokenised shares in private companies through special-purpose vehicles. When Linqto filed for bankruptcy, buyers weren’t even sure if they legally owned anything at all. Their “investment” turned into a courtroom guessing game. When the smoke clears, it’s often the small investor choking on the dust.

Even money-market tokens, which are backed by government bonds and offer juicy returns (around 4% compared to the 0.6% in average savings accounts), are not risk-free. They may beat the bank, but they don’t come with deposit insurance or legal clarity. BlackRock’s tokenised fund may have hit $2 billion, but if things go sideways, don’t expect the FDIC to save your skin.

The problem isn’t just about risky bets—it’s systemic. If just 10% of America’s $19 trillion in retail deposits slide into stablecoins and tokens, bank profits take a hit. The American Bankers Association says average funding costs would rise from 2.03% to 2.27%. That’s not pocket change. If banks are the heart of the economy, these tokens could be the cholesterol clogging their arteries.

And then there’s the regulatory headache. Tokenising private shares sounds cool—retail investors getting slices of unicorn startups—but it opens a can of worms. Unlike public companies, private firms don’t have to disclose much. So retail investors could be tossing cash into black holes. The SEC is worried. Even Hester Peirce, nicknamed “crypto mom” for her pro-digital stance, warned on July 9 that “tokenised securities are still securities.” No matter how slick the wrapping, the law still applies.

The real danger? Tokens pretending to be something they’re not. Without guaranteed liquidity like ETFs, without disclosures like public stocks, and without protections like insured deposits, these shiny coins could melt in your hands when the heat turns up. Regulators are already struggling to keep up, playing catch-up in a game that moves at blockchain speed.

So here’s the paradox: the more useful stablecoins and tokenised assets become, the more they threaten the system. Their promise is speed, flexibility, and access—but their shadow is chaos, confusion, and collapse. They’ve gone from memes to mainstream, but at what cost?

Despite the GENIUS Act’s big promises, stablecoins and tokenised assets remain risky. Their real-world adoption is small. Their ownership rules are murky. Their legal footing is slippery. And their value? Still mostly hype. These aren’t digital breakthroughs—they’re rat poisons of modern finance: sleek, seductive, and gnawed through by doubt.