The United States is facing a serious challenge, primarily manifested in the continuous increase in national debt, triggering a crisis that could have been avoided.
If action is not taken, the economy will stagnate, government commitments to healthcare and retirement benefits will be broken, and national defense will be compromised.
With economic contraction, the confidence in the US dollar will be shaken, hindering economic growth. There are many reasons for this, one of which is the need for reform in aid programs, but politicians lack the courage to take action.
What can be done?
One solution is to take stablecoins seriously. According to the Department of Treasury and DeFi Llama, USD-backed digital currency projects are significant buyers of US government debt. If these issuers were a country, their rankings would be just below the top ten holders of government securities. With the development of this industry, stablecoins could become the main buyers of US government debt, providing a reliable new source of demand.
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The United States benefits from the position of the US dollar as the primary international reserve currency, providing cheap financing for fiscal expenditures and holding significant global financial influence. However, countries like China and Saudi Arabia are reducing their holdings of US debt instruments and looking for alternatives to the dollar system, increasing the risk of US debt auction failures and weakening confidence in the US.
USD-backed stablecoins provide a solution
Most of which are held by economically weakened investors who are looking for a “better” form of currency. As Timothy G. Massad pointed out, stablecoins are similar to the European dollar that strengthened the dominance of the US dollar during the Cold War.
Promoting USD-backed stablecoins will increase demand for US debt, thereby reducing the risk of auction failures. Unlike China’s digital financial infrastructure, these stablecoins are issued on public blockchains, aligning with the US’s values of freedom and openness. A congress-supported robust regulatory framework will expand the use of digital dollars at critical moments, providing much-needed political success.
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