The following is an opinion piece by Tom Howard, head of financial products and regulatory matters at Coinlist.
Stablecoin Act designs that the Tether and other non-US Stablecoin expenditure of the American market would effectively prohibit circulating offshore activities.
This approach is an important policy error.
A robust global reserve currency thrives through export themselves to foreign markets, not going home.
Proberen om alle door USD-gecenomineerde stableCoins te dwingen om deposito’s aan Amerikaanse banken te herhalen, negeert een kritisch monetair principe dat bekend staat als ‘Triffin’s Dilemma’, dat beschrijft hoe exporterende valuta in het buitenland de internationale vraag versterkt maar de binnenlandse inflatie riskeert als te veel van die valuta terugkeert.
Although re -renting innovation is an excellent economic policy, the reshores of USD are relating to monetary policy and it is generally undesirable for the nation.
In fact, the Stablecoin innovation offers a chance to export more USD offshore and to increase the power and liquidity of USD as a global reserve currency.
But why cannot the above be achieved with issuers based in the US?
The market wants non-us issued stabilecoins
It is clear that USDT is the global stablecoin of your choice in non-American markets, from Asia to Africa to Latin America. This is not due to lack of effort by the number two competitor, Circle, who has made substantial efforts to compete in those markets.
In my user research that built a stablecoin and stablecoin wallet, I discovered that stabilecoins with the US bancing are often seen as a direct expansion of the US government, while non-US Stablecoins are considered more autonomous. Apart from the practical way, this is the perception on the ground.
Users often choose to use Stablecoins because their own government has been insulting with monetary or bank policy, and they have a strong fear of potential abuse of government. They want access to USD, but no exposure to our banking.
These fears are only perpetuated by events that are as great as the observed excessive use of sanctions and the more usual problems with the freezing of money transfer in cross -border or transfer payments.
Stablecoins give users more confidence that their money will be safe, and have a substantial market in the actual user data that they prefer non-us-emensents above American emennials. This preference was even clear for Tether started publishing audits of their reserves.
Tether probably acknowledges that moving their system to full onshore American banking would ensure that they lose a considerable user base and open market opportunities for other market participants to fulfill that clearly defined demand.
What does “prohibition” mean “
A few different designs circulate that have the potential to influence different types of prohibitions.
Firstly, a non-American registered Stablecoin would be forbidden to publish the Stablecoin from the US. This is of course the right thing to do; A Stablecoin issued by the US must absolutely be regulated to us!
Another prohibition is on “for use” of a non -registered stablecoin. This can mean everything, from use through payment providers to trade on exchanges to transactions from person to person. Such a prohibition limits the market to choose what it would like to use, has international negative external effects and cannot even be -unable to do so.
The third type of prohibition would be exclusion from financial services with American entities. In this case, non-compliance with the American financial institutions should be to take all activities out of board, including the purchase of American treasury bonds. In the case of Tether this would be a disinvestment of more than $ 100 billion in American treasury bonds.
Any kind of prohibition would be counterproductive
- Worldwide reduced USD -Liquidity: Trade bans would reduce the liquidity of a stablecoin compared to the dollar. This would harm users through increased transaction costs and weaken the global demand for USD.
- Inflation risks: Reducing foreign bank USD Holdings risks to increase inflation at home
- Geopolitical risks: Foreign opponents can take advantage of the non-filled market demand to create USD Stablecoins, supported by non-usd-assets
Reserve of the foreign bank reserve
If forced to move reserves to American institutions, Tether would import significant amounts of USD back into the US, making it possible to aggravate domestic inflation. In the meantime, the international demand for offshore USD tokens would continue to exist, so that competitors fill the void of Tether abroad.
When USD is withdrawn from international circulation to domestic banking, this increases the loan from domestic banks, which can contribute to inflation.
This also reduces the USD companies from foreign banks, which are crucial for international USD liquidity and help to increase foreign trade. It also creates more buyers for us treasuries because those banks invest their deposits in risk -free offers.
Apart from Tether, other issues can increase the USD market in certain segments. For example, countries like Cambodia are notorious for having a “dollarized” economy. That is, they have issued their own currency, but the economy is actually on USD transactions, mainly cash in cash.
If a company or bank in such a country wanted to have a digital dollar to increase the acceptance of the USD within that economy, Stablecoin innovations would be a great way for them to achieve this. It is unlikely that such stablecoins would work under the same standards as the American or EU -Stabilecoin supervisors; However, it would still be beneficial for the US to encourage those stablecoins to exist if it increases the foreign bank USD reserves.
Opponents can move USD
As Tether and other Stablecoin companies have discovered, the market for non-us-published Stablecoins is considerable.
A ban on non-American emennials could create opportunities for foreign opponents to replace the US dollar by offering to USD-foromed tokens that are supported by foreign currency, gold or other assets.
This would effectively eat USD question, while the USD offer is being moved that, if it grew up, the US dollar would considerably weaken.
China is already actively developing financial alternatives for the USD, as demonstrated by the recent deals with the Saudi government for a $ 100 billion USD-driven bond supported by Chinese Yuan (RMB).
If a market opportunity presented, China could introduce a stablecoin mixed by USD, supported by gold or RMB that they fully checked. Other countries can also take the opportunity.
American policy must in fact encourage more USD companies in foreign banking reserves to strengthen the USD worldwide.
A better path forward
Changing the Stablecoin Act to create exemptions for foreign published Stablecoins would avoid these pitfalls.
Let these stablecoins work, act and are used in the US, but label them clearly as unregistered alternatives with a higher risk compared to fully regulated Stablecoins. Powerful Stablecoins registered by the US to have benefits that is proportional to their reduced risks.
Such an exemption:
- Encourages global innovation to meet the demand for offshore USD.
- Improves the global use of USD without importing the inflatoid pressure.
- Keeps market -based competition alive and lets consumers choose based on transparent risk provisions.
This could be achieved by explicitly explicitly excluding foreign -issued stablecoins from the definition of the “payment staboin” or even by using a lighter registration process that only requires disclosures, but not the higher standards (or benefits) that are delivered with a Stablecoin approved by the US.
By allowing regulated coexistence instead of forbidding Stablecoins such as Tether, the US can strategically strengthen the global position of the dollar, protect against inflatory risks and encourage continuous innovation in financial technology worldwide.
