The United States is facing a serious challenge, mainly manifested in the continuous increase in national debt, triggering a crisis that could have been avoided.
If no action is taken, the economy will stagnate, government promises in healthcare and pension provision will be broken, and national defense will be compromised.
As the economy contracts, the dollar will face a crisis of confidence, hindering growth. One of the main reasons is the need for reform in support programs, but politicians lack the courage to act.
What can be done?
One of the solutions is to take stable coins seriously. According to the Ministry of Finance and DeFi Llama, digital currency projects backed by dollars are significant buyers of U.S. government debt. If these issuers were a country, they would rank just below the top 10 holders of government securities. With the growth of the stable coin sector, these coins could become major buyers of U.S. government debt, offering a reliable new source of demand.
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The United States benefits from the status of the dollar as a primary international reserve currency, providing cheap financing for fiscal expenditure and significant global financial influence. However, countries like China and Saudi Arabia are reducing their holdings of U.S. debt instruments and seeking alternatives to the dollar system, increasing the risk of a failed U.S. debt auction, which would undermine confidence in the U.S.
Stable coins backed by dollars offer a solution
Most of them are held by investors in weaker economies seeking “better” forms of money. As Timothy G. Massad noted, stable coins are similar to eurodollars, which strengthened the dominance of the dollar during the Cold War.
Promoting stable coins backed by dollars would increase demand for U.S. debt, reducing the risk of a failed auction. Unlike China’s digital financial infrastructure, these stable coins, issued on public blockchains, align with American values of freedom and openness. A stable regulatory framework supported by Congress would expand the use of digital dollars at a critical moment, offering the necessary political success.
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