Crypto is no longer the wild wild West as prominent figures in the DC establishment, seem to find a silver bullet to stave off a looming debt crisis: stablecoins. Paul Ryan’s recent piece on WSJ has shed light on the strategic importance of stablecoins in maintaining the US financial system.
The U.S. is headed toward a predictable yet avoidable debt crisis…With no fiscal solution in sight, the crisis is likely to start with a failed Treasury auction forcing an ugly surgery on the budget. As the economy contracts, the dollar will suffer a major confidence shock, further imperiling prospects for growth. We might start by taking stablecoins seriously.
Quoting data from the Treasury Department and DeFi Llama, Ryan noted that dollar-backed stablecoins are becoming a significant purchaser of U.S. government debt. If fiat-backed dollar stablecoin issuers were a country, they would rank just outside the top 10 in countries holding Treasurys—smaller than Hong Kong but larger than Saudi Arabia. As the crypto sector continues to grow, stablecoins could become one of the largest purchasers of U.S. government debt and a reliable source of new demand.
Following the WSJ post, crypto proponents believe that if the government allows it US private industry will dollarize every country on the planet via stablecoins, and domestic stablecoin companies can potentially buy all the debt the US needs to issue. If there was a Manhattan project for US dollar hegemony to maintain, this would be the top idea, wrote a user.
Post-Petrodollar Era: Can Crypto and Stablecoins Support US Economy?
The discussion comes after the Petrodollar agreement between oil-rich Saudi Arabia and the U.S. expired on June 9 with no renewal in sight. “Petrodollar” refers to the dollar’s role in crude oil transactions. Although the end of the agreement doesn’t imply the abrupt end of dollar payment, it could lead to Saudis selling oil in other currencies.
This could spell trouble for a U.S. government that relies on dollar dominance to support its borrowing and spending. For instance, China has been courting oil-rich nations like Saudi Arabia to accept yuan for oil, and the latter has reportedly shown openness to the idea. Moreover, Saudi Arabia’s membership in the BRICS bloc this year will likely strengthen the two countries’ economic ties.
With the evolving global financial landscape, stablecoins might be a vital tool for maintaining US economic stability and dominance.
