Stabledollars Reach Over $230 Billion in Circulating Supply
The evolution of the dollar can be summarized in three acts:
Act I: Eurodollar
- Off-shore bank deposits emerged in the 1950s London.
- Allowed the Soviet bloc and multinationals to hold dollars outside U.S. regulation.
- Created a multi-trillion-dollar shadow banking system.
Act II: Petrodollar
- Established after OPEC's decision in 1974 to price crude oil in dollars.
- Tied global energy demand to the U.S. currency.
- Provided consistent demand for U.S. Treasury bills.
Act III: Stabledollars
- Stablecoins, backed by T-bills and cash, exceed $230 billion in supply.
- Process more value daily than PayPal and Western Union combined.
- Function as a programmable monetary API that clears transactions quickly and cheaply.
Examples of practical applications include:
- A Lagos merchant using USDC for instant inventory restocking.
- A Singapore hedge fund utilizing tokenized T-bills for higher yields.
- A Colombian gig worker converting wages into digital dollars without delays or fees.
Stablecoins have not replaced banks but bypassed their slowest processes.
Legislation like the GENIUS Act aims to regulate stablecoin issuers and may lead to a $2 trillion market by 2028. Key players like Tether and Circle dominate the market, holding reserves in U.S. debt, effectively digitizing T-bills.
Concerns include governance issues surrounding private tokens and their implications on monetary policy. Proposed regulations include:
- Implementing Basel-style capital rules for issuers.
- Real-time reserve attestations on-chain.
- Ensuring inter-operability across blockchains.
- Providing FDIC-like insurance for tokenized deposits.
By establishing these regulations, the U.S. could maintain its digital dollar leadership against potential rivals. The future of financial transactions will likely integrate stablecoins seamlessly, with everyday use becoming unnoticeable. However, the U.S. must act decisively to guide this evolution.