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“The dollar is our currency, but your problem.”

— US Treasury Secretary John Connolly (1971)

The real case for stablecoins: Better money

In 1995, Bob Rubin began a tradition of treasury secretaries repeating that the US wanted a strong dollar, whether they meant it or not.

Whenever anyone would ask Rubin about currency markets, he responded with the same eight words: "A strong dollar is in our national interest."

His mantra, repeated ad-nauseam, represented a “de-weaponization” of the US dollar, as Marc Chandler framed it: “a signal to the world that the US would no longer seek trade or financial advantage…by depreciating or threatening to depreciate the dollar.”

Just 10 years earlier, Rubin’s predecessor — Treasury Secretary James Baker — had negotiated the “Plaza Accord,” in which Europe and Japan agreed to coordinate a devaluation of the dollar.

(Fun fact: The Plaza Accord is named after the Plaza Hotel, which is better known for a future President’s cameo in Home Alone 2.)

They may have over-clubbed it because by 1995, the dollar had fallen to an exchange rate of just 95 yen (from 250 yen in 1985), and the world’s primary concern was that the US government let it keep going. 

To keep markets reassured, subsequent treasury secretaries stuck to Rubin’s singular talking point, paying lip service to a strong dollar even when their administrations’ policy choices suggested they wanted a weak one. 

That convention held until 2017 when President-elect Trump emphatically re-weaponized the dollar: “Our currency is too strong,” he told the Wall Street Journal just days before his inauguration. “And it’s killing us.”

(Fact check: It wasn’t, and isn’t, killing us.)

The messages have been more mixed in President Trump’s second term.

There has been talk of a “Mar-a-Lago Accord” that would repeat the trick of convincing foreign governments to reset exchange rates to their disadvantage by selling most of the dollars they hold. 

(Why anyone thinks China would agree to this remains unexplained.)

But the president also noted at Blockworks’ Digital Asset Summit that he intends to “expand the dominance of the US dollar for many, many years to come.”

And that he’d do it with stablecoins.

That is a much-repeated talking point in crypto circles: The US government, they say with some exasperation, should of course promote stablecoins because they create demand for the mountains of debt they have to sell.

It’s a great talking point.

It’s also wildly exaggerated.

Treasury Secretary Bessent goes so far as to suggest that stablecoins are the way to extend the dollar’s dominance: “We are going to keep the US the dominant reserve currency in the world and we will use stablecoins to do that.”

But the dollar doesn’t need any special help to stay dominant.

JP Koning explains that the dollar remains the world’s reserve currency “because of rule of law, low corruption, stability and strong investor protections.” 

(“All of which are being eroded,” he adds.)

Similarly, Cullen Roche argues that the world demands dollars because "the USA is the largest and wealthiest economy on Earth with the most trustworthy financial system.”

In other words, the government doesn’t need stablecoins, eurodollars or petrodollars to manufacture demand for its currency.

It only has to keep the US economy thriving and open to the world.

This could change — possibly starting today.

President Trump declared April 2 to be Liberation Day in the US, and if his intention is to liberate the dollar from being the global reserve currency, he might achieve it.

“Virtually all economists think that the impact of the tariffs will be very bad for America and for the world,” according to Joseph Stiglitz (and virtually any other economist you might ask).

Tariffs, then, would be a good way to undermine the dollar.

And if the natural demand drivers of economic growth, the rule of law, low corruption, stability and investor protections were undermined, no amount of stablecoin issuance could ever hope to offset it.

Fortunately, there are much better arguments in favor of stablecoins, many of which were outlined in Circle’s S-1 form filed with the SEC yesterday.

The filing helpfully explains that stablecoins "raise global economic prosperity through the frictionless exchange of value.”

Circle’s USDC in particular “enables businesses to offer payment connectivity and dollar-backed financial services to more people in more places,” they say.

"We believe an internet-native US dollar can increase the velocity of M2 money stock, resulting in a corresponding increase in total value of transactions and GDP."

There is no mention of stablecoins rescuing the dollar’s reserve status in Circle’s 225-page S1 filing.

Instead, its arguments amount to the idea that stablecoins can be a better, more useful form of money.

This argument should be made more often.

On his first-ever trip to Washington DC, Tether CEO Paolo Ardoino recently argued that stablecoins can forestall a "DeepSeek" moment for the US in which the world suddenly stops buying dollars.

I’m not sure how effectively that argument will land with politicians who so recently printed $6 trillion without undermining the world’s demand for US debt to any perceptible degree.

Many of those politicians will be more concerned about the growing scourge of money laundering, which is more easily done with stablecoins (being irreversible and free of KYC) than it is with bank deposits.

Circle’s S-1 form makes a good case for why the benefits of stablecoins may outweigh the serious disbenefit of more easily laundered money.

The standard talking point about dollar demand does not. 

So here’s my four-word mantra that I think the crypto industry should repeat as stubbornly as Bob Rubin: Stablecoins are better money.

— Byron Gilliam

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Today Kinto lists $K pioneering fair tokenomics in DeFi.

It marks a major milestone in Kinto’s growth, following a successful ICO that raised $3.84 million from over 2,700 participants paired with a $20m deployment by Brevan Howard Digital in their mining program.

Kinto is the modular exchange enabling users to access the best opportunities in DeFi while keeping full control of their funds — join today to earn $K via their mining program.

1. US equities, cryptocurrencies fall on Trump’s sweeping global tariffs 

2. Post meme-ism: Solana’s quiet pivot to utility

3. Circle plans an IPO, but faces a competitive landscape

4. Trump gears up to unveil ‘Liberation Day’ tariffs 

5. [Sponsored] WCT’s Role in the Onchain Economy

Liquidity Is Breaking and the Economy Is Next

Michael Howell discusses the Fed and Treasury’s hidden stimulus tapering off, why we need more liquidity in the financial system to refinance debts, and why the Fed’s QE & duration goals are unrealistic. 

Listen to Forward Guidance on Spotify, Apple Podcasts or YouTube.

NO SLEEP TILL BROOKLYN

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