THE SINISTER SIDE OF THE GENIUS ACT

While most folks were trying to forget the horrific news it seems we are being spoon-fed daily and enjoy their summer, Congress and the Executive were busy legislating, once again, in favor of oligarchic interests, and, in the long-run, against the better interests of the majority of common everyday citizens. The legislation in question is at the heart of one of the more obscure goals that Donald Trump set out for his administration from the start of his second term in office. In the early days after his election triumph, Trump made fleeting mention of his objective of launching the US into the crypto era. That’s what the law in question is about. 

Little has been made of this point. In fact, mention of it has been pretty much negligible compared with stunning daily news of heavy-handed immigration enforcement, or of the president’s personal war on anybody who ever said an unkind word about him, or of Trump’s connection to child sex-trafficking monster Jeffrey Epstein, or of his disemboweling of, almost literally, every government office that ever provided assistance to the least fortunate sectors of the population. But it is something that affects us all, whether we realize it yet or not.

If information about this new law has been scant, it is probably because it has been little analyzed by the mainstream media, which have plenty of sensational headlines and shocking new revelations with which to flesh out their daily news schedules. And for many common ordinary people, it seems all too technical and obscure to attract their interest. But this is major news and it has happened, fait accompli, right under our noses.

I am referring here to the so-called Genius Act, which, with little fanfare, passed in the Senate by 68 to 30 on June 17, and, after grueling marathon debate, passed in the House 308 to 122 a month later. Donald Trump, with unaccustomed low-key publicity, signed it into law on July 18, a day after it passed in the House. In both houses of Congress it had obvious support from lawmakers on both sides of the aisle, despite having the Trump GOP’s fingerprints all over it. But seen from a critical viewpoint, this cannot, by any stretch of the imagination, be considered a law with bi-party support based on its clear-cut benefit to everyone. In all honesty, this is a law that provides yet another leg up to tech giants and the wealthy, as if this administration were not already doing their bidding to an enormous degree. And I’m going to attempt to explain why it is so dangerous, in terms that everyone can understand.

Known as the Genius Act, the actual name of the law is The Guiding and Establishing National Innovation for US Stablecoins Act. The original bill was introduced in the Senate by Bill Hagerty, a Republican from Tennessee. The ostensible aim of the law is to provide a regulatory framework for so-called “stablecoins”. Stablecoins are basically a cryptocurrency supposedly backed by “reliable assets”, such as commodities or strong currency.

Stablecoins are typically used as a vehicle for transfers between other types of cryptocurrency. The core idea of the Genius Act is to ensure that US stablecoins are backed by dollars on a one-to-one ratio, or by “other low-risk assets.” Prior to the Genius Act’s  passage into law, stablecoins weren’t subject to rules regarding one-to-one backing by “low-risk assets”.

That all sounds pretty straight-forward and positive. But one of the first red flags raised to its passage came from a major nonprofit consumer group, Consumer Reports. According to their study of the law, its provisions not only fail to provide sufficient consumer protection, but also hand a blank check to Big Tech to engage in activities that compete with commercial  banking, but which are not subject to the stringent standards or practices to which banks must adhere.

This would be alarming enough, but it is only the tip of the iceberg. While the alleged aims of the Genius Act include the fostering of innovation and decentralization, it will, in effect, promote shifting control over the monetary system from public to private hands, but often in collusion with the short-term political goals of individual administrations.

How so?

First, the Act clears the way for “further study” of digital dollar frameworks—basically meaning government-backed cryptocurrencies. The problem with that is that this opens the path to the complete replacement of traditional cash with digital coins that the Treasury or Federal Reserve would presumably issue. But here the role of Big Tech firms as government partners and contractors is as yet unclear.

Additionally, the law calls for “modernization of the monetary system,” making use of accounting technologies that would provide for real-time tracking, surveillance and management of all digital transactions. These are aspects that are completely absent from current cash transactions. And if cash is phased out, digital will be the only sort of transactions available.

Further complicating matters is that, while stringent government control over digital transactions is the apparent aim, the law nevertheless calls for public-private partnerships to develop crypto tools. What this means in practical terms is that Big Tech firms will have a key to national monetary policy and infrastructure.

At a grassroots level—how the law affects you, the individual—in  the absence of cash money, every single transaction you make will be subject to oversight, presumably not only by the government, but also by its crypto business partners. In short, everyone would end up being subject to a surveillance-based financial system in which any presumed right to privacy would go right out the window.

Another consequence would be the marginalization of unbanked and underbanked populations. No one would have the freedom to remove credit card type activity from their life, or to merely have a savings account and operate on a day to day basis with hard cash. You may think no one does this either intentionally or because of their particular social situation any longer. But in fact, government statistics show that the unbanked and underbanked population in the US totals nearly six million households.

These are mostly people who are, in some sense, already marginalized to a greater or lesser degree. These people are, for instance, the elderly, low-income wage-earners, rural residents, and undocumented immigrants working in a variety of American sectors—farming, hotels, packing, etc. Already vulnerable, these people would simply be written off by an all-digital system, since they rely on cash for their daily needs, and the Genius Act does little or nothing to protect them and their way of life.

The law also does little to mitigate the risk of government overreach. On the contrary, it opens a door to it. And in an autocratic climate like the current one, and in an era in which the Executive has ever greater power in detriment to the other branches of government, this feels like a major vulnerability. Suffice it to say that, in any “politically sensitive” context, government policy could very well program spending restrictions in accordance with political goals, a restriction that is impossible when cash is freely available and usable.

Nor does the Genius Act provide, within the context of eventual cash restrictions, for the preservation of tools such as ATMs, cash-handling services (PayPal etc.), or even cash-acceptance mandates for businesses. Clearly, this has the makings of a catalyst for banks and retailers to accelerate the removal of cash operations, permitting them to cite “modernization mandates” espoused by the Genius Act.

Also of no little concern are cybersecurity and stability issues. If all money is rendered “electronic,” the entire monetary system would become vulnerable to such threats as algorithmic errors, power outages and hackers of all sorts. Unlike cash, which is undeterred by war, natural disasters, blackouts, etc., solely digital systems are eminently vulnerable to any and all of these contingencies.

In short, a crypto-based financial and monetary system promises to further undermine civil liberties, exacerbate state control over people’s personal finances, and vastly increase inequality. And, bottom line, whoever manages to gain control over the monetary system will also have control over the distribution of wealth, in a world where some people are already clearly “more equal” than others.