Beyond a fintech innovation, USD stablecoins can be used by the US government as a tool of economic statecraft. They can direct foreign investment into strategic US sectors, create new demand for Treasury debt, and provide a mechanism to enforce sanctions by electronically controlling capital flows globally.
The idea of an independent Fed is a relatively modern concept, dating effectively to 1951. Historically, from its creation in 1913, the Fed has consistently acted as an arm of the state, financing wars and executing government policy, making the current shift towards explicit statecraft a return to its roots.
The rise of a US-dollar stablecoin system could provoke rivals like China and Russia to create a competing bloc based on a gold-backed stablecoin. This would lead to a fragmented global financial architecture, similar to the 1930s, with separate, non-interoperable currency zones and bifurcated supply chains.
The public threats of a military strike against Iran may be a high-stakes negotiating tactic, consistent with Trump's style of creating chaos before seeking a deal. The goal is likely not war, which would be politically damaging, but to force Iran into economic concessions or a new agreement on US terms.
When individuals in a foreign country adopt USD stablecoins, their central bank must exchange local currency for US dollars, depleting its foreign exchange reserves. This creates a feedback loop, weakening the local currency and pushing up dollar borrowing costs, making the stablecoin even more attractive and accelerating dollarization.
A US-endorsed stablecoin could offer T-bill-like security and yield directly to global consumers, bypassing banks. This poses a threat to the traditional financial system, which is viewed as inefficient, with 80% of its loans being non-productive (consumption or financial speculation) from a statecraft perspective.
The nomination of Kevin Warsh as Fed Chair is not a traditional hawk vs. dove decision. Instead, it signals the Federal Reserve's transformation into a subordinate arm of the Treasury, tasked with executing a nationalist 'economic statecraft' agenda rather than maintaining its theoretical independence and focusing on traditional inflation targets.
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.
A future trade settlement model involves US importers paying a stablecoin issuer, who buys a T-bill. A digital token, not the actual dollars, is sent to the foreign supplier. This keeps capital onshore funding the US government, while the foreign entity holds a digital asset that can be directed for US-aligned reinvestment.