The American political landscape and the world of cryptocurrency are intertwining in unprecedented ways. Recently, Tesla CEO Elon Musk expressed his deep disappointment with the "Beautiful Act" promoted by the Trump administration, stating publicly that if the bill passes, he will establish the "America Party" the following day, calling for a break from the bipartisan coalition to give a voice to the people. Meanwhile, the White House is actively pushing to include key cryptocurrency tax provisions proposed by Senator Cynthia Lummis in the bill. This financial experiment, born out of a $36 trillion national debt crisis, is attempting to transform the crypto world into the "buyer" of U.S. Treasury bonds, and its far-reaching implications could reshape the global monetary system.
On June 30, Republican senators in the U.S. Senate were working hard to expedite the passage of the "Beautiful Act," with a full chamber vote expected as early as July 1. However, this bill, which aims to combine approximately $4.5 trillion in massive tax cuts, some spending reductions, and additional funding for defense and border security, has sparked strong dissatisfaction from Musk.
On the morning of July 1, Musk posted on the X platform: "If this crazy spending bill passes, the America Party will be established the next day. Our country needs a new choice that truly allows the people to have a voice, replacing the Democratic-Republican coalition." This post attracted millions of views within just a few hours, igniting discussions about the potential emergence of a third force in American politics.
Musk's disappointment with the "Beautiful Act" is not unfounded. As early as May, he clearly expressed concerns about the bill, believing it would lead to an increase in the budget deficit and effectively "undermine" the work his team has done to save costs for the government. Critics estimate that the bill could add $3.3 trillion to the U.S. national debt over the next decade, with the Congressional Budget Office (CBO) estimating an increase of about $3.8 trillion. For a long time, Musk has warned that if the deficit issue is not controlled, the U.S. could face the risk of "bankruptcy." His remarks clearly echo these concerns about soaring deficits.
During the deliberation of the "Beautiful Act," the fate of the cryptocurrency tax provisions has also garnered significant attention. On June 30, crypto journalist Eleanor Terrett revealed that despite temporary disagreements on Sunday, the amendment related to cryptocurrency taxation in the "Beautiful Act" continued to be discussed. More importantly, the White House has intervened, actively pushing to include key provisions proposed by Senator Cynthia Lummis (the proponent of the Bitcoin Reserve Act) in the final version of the bill.
On July 1, CoinDesk reported that Lummis proposed on Monday to include relevant provisions in the "Beautiful Act" aimed at reducing the tax burden arising from basic cryptocurrency activities. These provisions include:
Tax exemption for small transactions: Exempting small crypto transactions under $300 from taxes and suggesting an annual cap of $5,000 for small transactions. This would significantly alleviate the burden of calculating capital gains tax for those who only engage in a small number of digital asset transactions, removing many potential users' concerns about trying cryptocurrencies.
Streamlining taxation on staking and mining: Clarifying the current practice of taxing core cryptocurrency activities—staking and digital asset mining—at both the beginning and end of the activities.
Lummis's proposed amendments also address tax issues related to cryptocurrency lending, wash trading, and charitable donations. If these provisions can pass smoothly, they will undoubtedly bring significant benefits to the U.S. cryptocurrency market, lowering the participation threshold for users and promoting the compliant development of the crypto industry.
Deutsche Bank's latest report characterizes the "Beautiful Act" as the "Pennsylvania Plan" for the U.S. to address its massive debt—by mandating stablecoins to purchase U.S. Treasury bonds, integrating digital dollars into the national debt financing system. This bill forms a policy combination with the "GENIUS Act," which has already mandated that all dollar stablecoins must be 100% backed by cash, U.S. Treasury bonds, or bank deposits.
The goals are clear:
Alleviating pressure on U.S. Treasury bonds: Mandating that stablecoin reserve assets be directed towards the Treasury bond market. The U.S. Treasury Department predicts that by 2028, the global stablecoin market will reach $2 trillion, with $1.6 trillion flowing into Treasury bonds, providing new financing channels for the U.S. fiscal deficit.
Consolidating dollar hegemony: Currently, 95% of stablecoins are pegged to the dollar. The bill creates a closed loop of "dollar → stablecoin → global payments → Treasury bond repatriation," reinforcing the dollar's "on-chain minting power" in the digital economy.
Promoting interest rate cut expectations: The Deutsche Bank report indicates that the bill will pressure the Federal Reserve to cut interest rates to lower the financing costs of Treasury bonds while guiding the dollar to weaken, enhancing U.S. export competitiveness.
The total U.S. federal debt has surpassed $36 trillion, with principal and interest repayments reaching $9 trillion by 2025. Faced with this "debt dam," the Trump administration urgently needs to open new financing channels. Stablecoins, once floating on the edge of regulation, have unexpectedly become a lifeline for the White House. Currently, the total market value of stablecoins is $256 billion, with about 80% allocated to U.S. Treasury bills or repurchase agreements, amounting to approximately $200 billion. Citibank predicts that by 2030, the market value of stablecoins will reach between $1.6 trillion and $3.7 trillion, at which point the amount of Treasury bonds held by issuers will exceed $1.2 trillion, enough to rank among the largest holders of U.S. Treasury bonds.
The "Beautiful Act" and the "GENIUS Act" form a sophisticated policy combination, with a core design full of political wisdom: when users purchase a stablecoin for $1, the issuer must use that $1 to buy Treasury bonds. This not only meets compliance requirements but also achieves fiscal financing goals. Tether, as the largest stablecoin issuer, is projected to net purchase $33.1 billion in U.S. Treasury bonds in 2024, rising to become the seventh-largest buyer of U.S. Treasury bonds globally.
The deeper strategy of the bill lies in the digital upgrade of dollar hegemony. With 95% of stablecoins pegged to the dollar, a "shadow dollar network" is constructed outside the traditional banking system. This "informal dollarization" accelerates the dollar's penetration into emerging markets and embeds various distributed payment systems through the form of "on-chain dollars," achieving an upgrade in "digital hegemony."
However, the bill also embeds three structural risks:
Death spiral of Treasury bonds and stablecoins: If users collectively redeem USDT, Tether would need to sell Treasury bonds for cash, potentially triggering a sharp drop in Treasury bond prices, which could lead to the devaluation of reserves held by other stablecoins, causing a total collapse.
Amplified risks of decentralized finance: Once stablecoins flow into the DeFi ecosystem, they become leveraged through liquidity mining, lending, and staking operations. If the value of underlying assets plummets, it could trigger a chain of liquidations.
Loss of monetary policy independence: The Deutsche Bank report directly points out that the bill will "pressure the Federal Reserve to cut interest rates." The Trump administration indirectly gains "printing power" through stablecoins, which could undermine the independence of the Federal Reserve.
In response to U.S. actions, three major camps are forming globally: the alternative camp (where citizens of high-inflation countries view stablecoins as a "safe-haven asset") and the potential acceleration of a split between the dollar, euro, and BRICS currency camps. The Deutsche Bank report predicts that as the "Beautiful Act" is implemented, the Federal Reserve will be forced to cut interest rates, leading to a significant weakening of the dollar. By 2030, when stablecoins hold $1.2 trillion in Treasury bonds, the global financial system may have quietly completed an on-chain reconstruction—dollar hegemony embedded in every transaction on the blockchain, while risks spread to every participant through decentralized networks.
Musk's strong dissatisfaction with the "Beautiful Act" and his warning about establishing the "America Party" reflect deep concerns within the U.S. about fiscal deficits and government spending. Meanwhile, the White House's push to include cryptocurrency tax provisions in the bill suggests that the compliance process for the crypto industry in the U.S. may be approaching a significant turning point. This financial experiment driven by the massive national debt crisis is attempting to deeply bind the crypto world to U.S. finances through stablecoins, thereby consolidating dollar hegemony. However, the potential structural risks and far-reaching impacts on the global financial system still require us to remain highly vigilant.
Related: U.S. Deficit Soars: How Trump's "Beautiful Act" Benefits Bitcoin?
Original article: “Musk Threatens to Establish the 'America Party'! The Fate of Trump's 'Beautiful Act' and Cryptocurrency Tax Reform Intertwined”
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