I stumbled upon an interesting discussion over brunch and later on with the Placeholder team about stablecoins and what major American political parties think about them.
Until centralized stablecoin issuers continue to dominate the stablecoin markets, why are they not being more aggressively welcomed by regulators? Major centralized stablecoin issuers (Tether and Circle) hold a decently large share of U.S. treasuries as collateral for their stablecoin issuing services. Demand for USD-denominated stablecoins are only increasing, so demand for U.S. treasuries by these issuers will also increase, thereby strengthening government economic security.
As stablecoins increasingly capture mindshare, it makes logical sense for regulators to step in and establish frameworks that support this cyclical value capture. Some of the cautious approaches entail capping how many dollars worth of stablecoins can be issued and who can issue them. This seems contradictory to the value stablecoins provide for the U.S Dollar, and its in U.S. government's interest to support them openly, while embodying some of the following values:
1:1 collateral backing with verifiable proof of reserves
Limit or prohibit rehypothecation of reserve assets
Compatibility with existing banking and issuance regulations
It seems that the value accrual of stablecoins are cyclical, and in direct benefit of the U.S. government. Stablecoins have found PMF and will be a major onboarding tool for global users onto crypto-native financial applications. If achieved at scale, not only does this proliferation eat away at foreign economy’s financial sovereignty, but it also strengthens the U.S. Dollar. This implies that stablecoin proliferation introduces awkward global economic ramifications and strengthens the centralized U.S. monetary system in an international economic context.
Isn’t the entire ethos of blockchain-enabled financial applications to rid individuals of centralized financial systems in favor of decentralized rails? How, then, can we not only promote global stablecoin proliferation, but tout it as one of the only valid use cases of the technology?
Regardless, it's surprising that both campaigns haven’t actively embraced stablecoins, especially considering its ability to serve as a vehicle to promote U.S. Dollar dominance within global markets.
The views and opinions expressed on this article are solely those of the original author and mentioned contributors. These views and opinions do not necessarily represent those of Placeholder Management LLC or its team.
