Digital Gold, Real Impact: How the GENIUS Act Is Rewriting Liquidity
Summer’s in full swing, but if you thought markets would take a holiday, think again. This week, the news cycle was more about slow drifts than sharp pivots, but beneath the surface, the regulatory and digital finance currents kept moving. So pour yourself a double espresso and considering the hot temperatures, over ice, and let’s dig in.
Recap: Where We Left Off (Week 26)
Last week, we saw markets digest the Israel-Iran ceasefire, gold and Bitcoin holding steady, and the Circle IPO still echoing through the digital asset world. The big macro theme: liquidity remains the lifeblood of the system, and the Fed’s September rate cut remains the market’s favourite summer story.
Markets, like a good brunch, reward those who show up early and know when to linger. Last week’s lesson? Stay nimble, keep your eyes on the kitchen, and don’t be afraid to try something new on the menu.
If you missed last week's blog read it here
This Week: Quiet Moves, Regulatory Rumbles, and the Digital Gold Narrative
US & Global Equities:
S&P 500 and Nasdaq drifted higher, with tech continuing to lead. Volumes were light, but the “buy the dip” crowd is still in control.
FTSE 100 and DAX (Germany) were flat to modestly higher, as Europe digested a string of mixed economic data and the euro’s continued strength.
Gold inched up, still near record highs as investors hedge against both inflation and geopolitical risk.
Bitcoin consolidated, holding near highs as the digital liquidity narrative remains intact.
Macro & Policy:
Israel-Iran: Ceasefire remains intact, region tense but stable.
Oil: Prices range-bound, with supply fears fading and focus shifting back to demand and inventories.
Fed & Rates: Little new to report, September rate cut odds hold at ~71%, with the market now assuming two cuts in 2025.
GENIUS Act: The US Senate’s landmark stablecoin bill passed last month is now in the House, with debate heating up. The bill’s strict 1:1 reserve and audit standards are already shaping issuer behaviour and attracting new entrants.
Europe & UK: ECB and BoE remain steady; the euro’s strength is fuelling euro-backed stablecoin growth and cross-border capital flows.
China: Manufacturing PMI still in contraction, but digital asset adoption and tariff thaw hopes offer a glimmer of optimism.
Sometimes, the most important market move is the one that doesn’t happen. This week, investors are waiting for the next catalyst… be it policy, regulation, or a surprise from the digital frontier.
Weekly Market Table
What’s Pertinent This Week?
Ceasefire Holds: Israel-Iran truce remains, oil and gold markets calm, but the region is still on a knife edge.
Global Growth: World Bank projections unchanged; global growth stuck at 2.3%, with trade and consumer sentiment still soft.
GENIUS Act Moves to the House: The US Senate’s stablecoin bill is now up for debate in the House. The bill’s 1:1 reserve, monthly audit, and federal/state regulatory split are already shaping market behaviour and attracting new institutional players.
Stablecoin Expansion: USDC and other regulated stablecoins are gaining ground in Europe and Asia as MiCA and the GENIUS Act create a global regulatory standard. Circle, Tether, and new entrants are all jockeying for position.
Central Banks: No major surprises, Fed, ECB, and BoE all on hold, with the next real action likely in September.
Safe Havens: Gold and Bitcoin remain near highs, as investors hedge against policy missteps and the ever-present risk of a summer surprise.
The market’s message: the world is waiting for the next big move… but the infrastructure for digital liquidity and regulation is quietly being built beneath the surface.
Private Equity’s Macro Insights
From Wild West to Wall Street: How the GENIUS Act Is Rewriting Liquidity
The liquidity story this week is all about the GENIUS Act. Passed by the US Senate with bipartisan support and now in the House, the bill is already reshaping how stablecoins operate. Its requirements1:1 reserve backing (dollars or T-bills), monthly audits, and clear federal/state regulatory paths, are setting the bar for global stablecoin issuers. The bill also opens the door for banks, fintech's, and even major retailers to issue their own stablecoins, provided they meet the new standards.
Why does this matter for liquidity? And why are governments so interested in this new asset class? Because every new stablecoin minted under the GENIUS Act is a direct injection of demand for US Treasuries. Citigroup now projects stablecoin issuers could become the largest holders of US government debt by 2030, with over $1 trillion in new Treasury demand expected in the next five years.
For every $100 of stablecoins issued, issuers must hold $100 in short-term government debt or cash, unlike banks, which, since the elimination of reserve requirements in 2020, now hold as little as $1–$5 of Treasuries per $100 of assets. That’s why stablecoins are set to have a much bigger impact on Treasury markets than banks: $100 in new stablecoins = $100 in new demand for government debt, while $100 in new bank deposits creates almost no direct demand.
The upshot: stablecoins are no longer just a crypto story… they’re a core pillar of the global liquidity system, and the GENIUS Act is the blueprint.
Interest Rates: All Eyes on September
There’s little new to say here—September’s rate cut odds are unchanged at 71%, with the market still expecting two cuts by year-end. The Fed is in “wait and see” mode, and so is everyone else. For private equity, the playbook remains the same: get your deals lined up, but don’t chase yield at any price.
The “Picks and Shovels” Play in “Digital Gold”
Why Picks and Shovels?
During the California Gold Rush, the real fortunes weren’t made by prospectors panning for gold, but by those selling the picks, shovels, and blue jeans. The lesson: in any boom, the most reliable profits come from enabling the rush, not chasing the prize.
Digital Gold’s Infrastructure
Fast forward to today’s “digital gold” era… think Bitcoin, stablecoins, and tokenized assets. The modern picks and shovels aren’t physical tools, but digital infrastructure: exchanges, custodians, compliance analytics, wallet providers, and blockchain security firms. These businesses earn their keep no matter who strikes it rich, collecting fees, subscriptions, or transaction tolls as the digital asset economy grows.
The Private Equity Angle
For private equity, the picks and shovels play are about finding the toll booths and platforms that power the digital gold ecosystem. The GENIUS Act, MiCA, and global regulatory clarity mean the winners will be those with scale, compliance, and trusted brands. Whether it’s investing in regulated exchanges, qualified custodians, or KYC/AML analytics, the goal is to own the rails and not just ride the train.
The Gold Rush may be digital now, but the strategy is timeless: enable the rush, and you’ll profit in booms and busts alike.
Ed’s Final Word
Week 27 was a reminder that sometimes the most important changes happen quietly, as infrastructure and regulation lay the groundwork for the next wave. For private equity and risk asset investors, the lesson is clear: watch the rails, not just the riders. The digital gold rush is on, and the best returns may come from those who build and own the tools everyone else needs.
As always, these are the thoughts and opinions of mine and no one else’s, yes, not even Beaufort Private Equity Limited. Please do your own research before making investment decisions and reach out to your Beaufort relationship manager if you have any queries or follow-ups.
Further Reading:
Investopedia – The GENIUS Act Could Have Interest-Rate Implications
Finovate – The GENIUS Act Passes: 4 Things This Means for Banks and Fintechs
Europarl – Stablecoins and digital euro: friends or foes of European monetary policy?
Week 27, 2025: In markets, the only constant is change—so keep your wits, your watchlist, and your breakfast close at hand. And if you’re feeling adventurous, try that double espresso with a splash of grappa. You might just like it.
