On July 18, President Donald Trump signed into law the boastfully named GENIUS Act. If the law wreaks havoc on the financial system, as seems highly likely, that name will become a grim joke: What genius thought that letting the cryptocurrency industry write its own rules would be a good idea?

The Guiding and Establishing National Innovation for U.S. Stablecoins Act purports to create a regulatory framework for a type of cryptocurrency called stablecoins. Despite their reassuring name, stablecoins—which promise a constant value relative to real-world currencies, usually the U.S. dollar—are by far the most dangerous form of cryptocurrency. Their danger lies in the way they are meant to be safe.

Most people understand that…