The U.S. is approving stablecoins for a strategic reason: they require reserves, which must be U.S. treasuries. This policy creates a massive, new, non-traditional buyer for government debt, helping to finance enormous and growing fiscal deficits with a structural source of demand.

The dollar's role as a global payment medium may decline, but its reserve currency status remains secure. This is because its core function is a 'store of wealth,' guaranteed by the unparalleled depth and liquidity of the U.S. bond market. No other currency offers a comparable safe haven for emergency funds.

Despite massive deficits, the US Treasury market hasn't broken because the economy is in a depressionary state. Similar to the 1930s, the overwhelming demand for safety and liquidity from global investors surpasses concerns about the government's fiscal irresponsibility, keeping interest rates low.

The US government's backing of stablecoins is a strategic financial maneuver, not just a nod to crypto innovation. By promoting stablecoins backed by US Treasuries, it creates a new, frictionless global distribution channel to sell its debt at attractive rates to a worldwide audience.

A major shift in market technicals has occurred, with overseas investors becoming the dominant buyers of US corporate debt. Their share of net inflows jumped from a historical average of one-third to 45% in early 2024, providing a powerful tailwind for the asset class.

Despite its large collective economy and stable legal systems, Europe hasn't created a rival to US Treasuries because its government bond market is fragmented by country. Post-crisis austerity also discourages the large-scale borrowing needed to create a deep, unified, and liquid safe asset.

Foreign central banks, the Fed, and commercial banks—buyers who are insensitive to price—are shrinking their share of the Treasury market. This forces price-sensitive investors to absorb a massive supply of new debt, structurally increasing bond volatility and pushing institutions to adopt gold as a more reliable portfolio diversifier.

By making T-bill-backed assets easily accessible to retail investors worldwide via smartphones, stablecoins could unlock a massive new pool of capital. This would create trillions in indirect demand for US Treasury paper, helping to finance US debt at lower rates while simultaneously advancing US geopolitical goals.

Despite economic rivalry, China relies on the US dollar as a primary safe asset. The depth of the US market allows China to deploy its vast capital reserves in a way few other markets can accommodate.