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.

By creating a regulatory framework that requires private stablecoins to be backed 1-to-1 by U.S. Treasuries, the government can prop up demand for its ever-increasing debt. This strategy is less about embracing financial innovation and more about extending the U.S. dollar's lifespan as the global reserve currency.

To extend the solvency of U.S. debt, create a one-to-one stablecoin backed by treasuries. This would grant global citizens, particularly in countries with unstable currencies, a direct way to save in a dollar-denominated asset. This new demand could lengthen the runway for U.S. fiscal policy.

Framing Bitcoin as a store of value ("digital capital") and stablecoins (backed by US Treasuries) as the transactional currency is a brilliant political strategy. It reassures the US government by creating new, global demand for its debt, thus avoiding an antagonistic relationship.

For hundreds of millions in developing nations, stablecoins are not an investment vehicle but a capital preservation tool. Their core value is providing a simple hedge against high-inflation local currencies by pegging to the USD, a use case that far outweighs the desire for interest yield in those markets.

While fast-moving, unregulated competitors like FTX garner hype, a deliberate, compliance-first approach builds a more resilient and defensible business in sectors like finance. This unsexy path is the key to building a lasting, mainstream company with a strong regulatory moat.

In a novel attempt to delay a debt crisis, policymakers are pushing for regulations that would force stablecoin issuers to back their digital dollars one-to-one with U.S. Treasuries. This cleverly creates a new, captive international market for government debt, helping to prop up the system.

For stablecoin companies like Tether seeking legitimacy in the US market, the simplest path is to back their assets with US treasuries. This aligns their interests with the US government, turning a potential adversary into a welcome buyer of national debt, even if it means lower returns compared to riskier assets.

As foreign nations sell off US debt, promoting stablecoins backed by US Treasuries creates a new, decentralized global market of buyers. This shrewdly helps the US manage its debt and extend the life of its reserve currency status for decades.