Cryptocurrency, known for its volatility, is something of a misnomer. The one exception to the rule of crypto volatility is stablecoin. A cryptocurrency in the strictest sense, stablecoin is pegged to a fiat currency like the dollar, affording it the stable value it needs to serve as a medium of exchange, a store of value, and a unit of account.
Stablecoin issuers will eventually emerge as the largest owners of U.S. treasuries, surpassing even the Federal Reserve. The proliferation of dollar stablecoins presents a historic opportunity to exponentially expand the market for US Treasuries and to radically reinforce the status of the US as the world’s financial superpower and the US dollar as the world’s reserve currency.
The rapid growth of dollar stablecoins creates rapidly growing demand for U.S. treasuries. The higher the demand for U.S. treasuries, the lower the interest we pay on our debt. As the financial superpower of the world, with the world’s reserve currency, the US is in a unique position to drive up the demand for its own treasuries and drive down the cost of its own debt. Congress can make it so that every purchase of a dollar stablecoin by a stablecoin user automatically means a purchase of a US Treasury by a stablecoin issuer. We can require stablecoin reserves to be exclusively backed by U.S. treasuries on a 1:1 basis. Not only would binding a dollar stablecoin to a treasury make the dollar more accessible abroad; it would make our debt more affordable here at home.
Requiring stablecoin reserves to be backed by U.S. treasuries would not only make debt cheaper for US taxpayers; it would make deposits safer for both stablecoin issuers and users. The safest place to hold stablecoin reserves is not a bank, which is susceptible to a bank run. It is the federal government through the purchase of U.S. treasuries. ‘Too-big-to-fail’ is no match for ‘the full faith and credit’ of Uncle Sam.
America ought to embrace the proliferation of dollar stablecoins as a projection of American soft power. It is in America’s interest to make the world dependent upon dollar stablecoins pegged to a currency that we control, backed by treasuries that we issue. If the US were to regulate dollar stablecoins out of existence, we would be doing the bidding of America’s leading foreign adversary, the Chinese Communist Party (CCP), which is intent on winning the digital currency space race.
The dollar should become America’s greatest export to the world. There are billions in the Global South for whom access to a stable currency like the dollar is an American dream that would save them from the nightmares of runaway inflation and currency depreciation. (Nowhere has a stable currency been more elusive than in Venezuela, which had an inflation rate of more than 53,000,000%).
Dollar stablecoins could be the great equalizer that delivers something radically progressive and inclusive: the transformation of a stable currency from a privilege to a right. The proliferation of dollar stablecoins—rendered possible by the ubiquity of smartphones and the cryptography of blockchains—could become the greatest experiment in financial empowerment humanity has ever undertaken. Imagine a world where everyone has access to a stable currency in the form of a
stablecoin, where the unbanked and underbanked have access to something approximating a bank account in the form of a digital wallet. Stablecoin is both the great stabilizer and the great equalizer for billions of people in emerging markets where stable currencies and reliable banking are as elusive as unicorns.
A dollar stablecoin is as stabilizing to foreign users in need of a stable currency as it is destabilizing to the corrupt foreign governments that steal from their own people. Blockchain protects the property rights of the least propertied, who often fall victim to theft at the hands of their own corrupt governments. Chris Dixon often distinguishes between ‘don’t be evil’ and ‘can’t be evil.’ Instead of trusting corrupt governments not to be evil, trust blockchains where corrupt governments cannot be evil.
The truest form of cryptocurrency, dollar stablecoin, has the power to unlock the holy grail of financial inclusion for the financially excluded everywhere on earth. The stablecoin revolution is here. What we simply need is the political will to harness its creative disruption for the greater good of humanity while serving the strategic interests of the United States. We must do well and do good at the same time, as only America can.
Torres is a congressman from the Bronx.
