1/ I’m no @LynAldenContact , just a guy trying to make sense of all this stablecoin, debt, and monetary chaos. Think of this as a sanity check—let’s unpack the new era of money:
2/ Backdrop:
US institutions, boxed in by massive debts and fragile bond markets, are searching for digital “exit ramps”: Bitcoin as a hard, scarce digital reserve; USD stablecoins as frictionless digital dollars. The aim: preserve US monetary power, delay collapse.
US institutions, boxed in by massive debts and fragile bond markets, are searching for digital “exit ramps”: Bitcoin as a hard, scarce digital reserve; USD stablecoins as frictionless digital dollars. The aim: preserve US monetary power, delay collapse.
3a/ Stablecoins as Shadow Banks:
Modern stablecoins (USDC, Tether, PayPal USD) are on-chain digital dollars—held outside official Fed liabilities. Issuers park reserves (mainly Treasuries) offshore or via proxies.
Modern stablecoins (USDC, Tether, PayPal USD) are on-chain digital dollars—held outside official Fed liabilities. Issuers park reserves (mainly Treasuries) offshore or via proxies.
3b/ Stablecoins as Shadow Banks:
This is “shadow banking 2.0”: a parallel, less-regulated digital money system, hard for central banks to control.
This is “shadow banking 2.0”: a parallel, less-regulated digital money system, hard for central banks to control.
4/ Exporting USD Demand:
Stablecoins circulate globally, especially in emerging and inflation-prone markets—propping up dollar demand, even if faith at home wanes. Each USDC/USDT is a dollar not on a US bank balance sheet.
Stablecoins circulate globally, especially in emerging and inflation-prone markets—propping up dollar demand, even if faith at home wanes. Each USDC/USDT is a dollar not on a US bank balance sheet.
5/ Who now buys Treasuries?
If traditional buyers (banks, funds, foreign states) step back, stablecoin issuers and new digital ETFs act as buyers of last resort—printing new tokens to mop up government debt. Stablecoins help manage US government borrowing costs.
If traditional buyers (banks, funds, foreign states) step back, stablecoin issuers and new digital ETFs act as buyers of last resort—printing new tokens to mop up government debt. Stablecoins help manage US government borrowing costs.
6a/ Stablecoins as “Private CBDCs”:
Stablecoins can be surveilled, frozen, blacklisted—offering programmable control just like a central bank digital currency, but in private hands.
Stablecoins can be surveilled, frozen, blacklisted—offering programmable control just like a central bank digital currency, but in private hands.
6b/ Stablecoins as “Private CBDCs”:
The infrastructure for digital money control is built, sidestepping political headaches of a purely public, state-issued CBDC.
The infrastructure for digital money control is built, sidestepping political headaches of a purely public, state-issued CBDC.
7a/ Trump and the GENIUS Act:
Trump’s 2025 GENIUS Act rewires the system: stablecoin rules shift oversight from the Fed to the Treasury, OCC, and states—constraining the Fed’s speed and power.
Trump’s 2025 GENIUS Act rewires the system: stablecoin rules shift oversight from the Fed to the Treasury, OCC, and states—constraining the Fed’s speed and power.
7b/ Trump and the GENIUS Act:
Reserves must be held in highly liquid assets (Treasuries, MMFs, deposits)—directly boosting demand for government debt, helping lower US rates without explicit Fed action.
Reserves must be held in highly liquid assets (Treasuries, MMFs, deposits)—directly boosting demand for government debt, helping lower US rates without explicit Fed action.
8a/ Trump’s Strategic Play:
Trump is not simply anti-Fed; he’s using digital finance to weaken the Fed’s dominant grip on money and rates. Mainstream stablecoins, regulated by the Treasury, create structural demand for Treasuries.
Trump is not simply anti-Fed; he’s using digital finance to weaken the Fed’s dominant grip on money and rates. Mainstream stablecoins, regulated by the Treasury, create structural demand for Treasuries.
8b/ Trump’s Strategic Play:
This applies market-based pressure to bring down rates even if the Fed holds back. This is “guerrilla finance” and a calculated shift in monetary power.
This applies market-based pressure to bring down rates even if the Fed holds back. This is “guerrilla finance” and a calculated shift in monetary power.
8c/ Trump's Strategic Play:
Some nice insights by @profstonge
Some nice insights by @profstonge
https://x.com/profstonge/status/1949794466895700449
10/ Fed’s New Role:
The Fed loses some power as activity migrates to stablecoins. Still vital as regulator/referee/last-resort backstop, it yields direct levers over money and credit to a more modular, competitive system.
The Fed loses some power as activity migrates to stablecoins. Still vital as regulator/referee/last-resort backstop, it yields direct levers over money and credit to a more modular, competitive system.
11a/ Stress Test – Inflation & Crises:
Early on, stablecoins (being 100% backed by reserves) slow credit growth—appearing safer, less inflationary.
If standards loosen (re-leveraging, lending against reserves), bubbles and asset price surges can return.
Early on, stablecoins (being 100% backed by reserves) slow credit growth—appearing safer, less inflationary.
If standards loosen (re-leveraging, lending against reserves), bubbles and asset price surges can return.
11b/ Stress Test – Inflation & Crises:
If confidence cracks (doubt in stablecoin backing), redemption runs could force mass sales of Treasuries—sparking market crashes, feeding panic back to banks, and causing digital and traditional contagion.
If confidence cracks (doubt in stablecoin backing), redemption runs could force mass sales of Treasuries—sparking market crashes, feeding panic back to banks, and causing digital and traditional contagion.
11c/ Stress Test – Inflation & Crises:
Crisis management: regulators may freeze stablecoin redemptions, launch official digital currencies, or step in with new backstops—blurring lines between “public” and “private” money.
Crisis management: regulators may freeze stablecoin redemptions, launch official digital currencies, or step in with new backstops—blurring lines between “public” and “private” money.
12a/ Global Fallout – EU:
EU—The ECB can print money but not coordinate fiscal rescue at the EU level. This slow, fragmented power makes the eurozone vulnerable in crisis.
EU—The ECB can print money but not coordinate fiscal rescue at the EU level. This slow, fragmented power makes the eurozone vulnerable in crisis.
12b/ Global Fallout – China:
China—Maintains strong PBOC control but faces declining US Treasury importance. Pilots digital yuan to counter dollar-based stablecoins and digital dollar dominance.
China—Maintains strong PBOC control but faces declining US Treasury importance. Pilots digital yuan to counter dollar-based stablecoins and digital dollar dominance.
12c/ Global Fallout – Japan:
Japan—Locked in fiscal dominance with high government debt and endless BoJ support. Any shift in global capital flows or rates could shake an already wobbly yen stability.
Japan—Locked in fiscal dominance with high government debt and endless BoJ support. Any shift in global capital flows or rates could shake an already wobbly yen stability.
13a/ China’s Gold Accumulation:
China’s enormous gold buying precedes this but matters nevertheless:
As US debt/backing for stablecoins becomes suspect, China hedges against dollar debasement and US financial power.
China’s enormous gold buying precedes this but matters nevertheless:
As US debt/backing for stablecoins becomes suspect, China hedges against dollar debasement and US financial power.
13b/ China’s Gold Accumulation:
Gold is their own perceived shield against a future where Treasuries or “digital dollars” might lose status—or where reserve credibility comes from real assets, not just US debt.
Gold is their own perceived shield against a future where Treasuries or “digital dollars” might lose status—or where reserve credibility comes from real assets, not just US debt.
14a/ Stablecoins: Inflation Catalyst or Temporary Dam?
For now, stablecoins delay the crisis by channeling demand for Treasuries and exporting US monetary dominance—creating a temporary dam.
For now, stablecoins delay the crisis by channeling demand for Treasuries and exporting US monetary dominance—creating a temporary dam.
14b/ Stablecoins: Inflation Catalyst or Temporary Dam?
If confidence fails, they become accelerants—fueling capital flight and global inflation as trust in digital dollars and Treasuries breaks.
If confidence fails, they become accelerants—fueling capital flight and global inflation as trust in digital dollars and Treasuries breaks.
15a/ The GENIUS Act’s 1:1 Reserve Mandate—System Reset?
With full-reserve stablecoins, the US moves away from fractional reserve banking (where banks multiply money).
This is a “reset”—cleansing the system, restoring trust after past excess.
With full-reserve stablecoins, the US moves away from fractional reserve banking (where banks multiply money).
This is a “reset”—cleansing the system, restoring trust after past excess.
15b/ The GENIUS Act’s 1:1 Reserve Mandate—System Reset?
History tells us this will not last:
Over time, pressure to support growth or confront new crises will drive a return to leverage, likely in new forms (fractionalization, lending, or shadow banks laden with derivatives).
History tells us this will not last:
Over time, pressure to support growth or confront new crises will drive a return to leverage, likely in new forms (fractionalization, lending, or shadow banks laden with derivatives).
15c/ The GENIUS Act’s 1:1 Reserve Mandate—System Reset?
Full-reserve is a phase, not an endpoint. When the next shock comes, policymakers will argue for “flexibility”—reopening the door to partial reserves and more risk.
Full-reserve is a phase, not an endpoint. When the next shock comes, policymakers will argue for “flexibility”—reopening the door to partial reserves and more risk.
15d/ The GENIUS Act’s 1:1 Reserve Mandate—System Reset?
Fiscal dominance (deficits overpowering central bank independence) remains a powerful incentive to eventually reintroduce money and credit creation for debt funding.
Fiscal dominance (deficits overpowering central bank independence) remains a powerful incentive to eventually reintroduce money and credit creation for debt funding.
16/ The Cycle: Reset, Re-lever, Repeat
Financial innovation, crisis, regulatory reset, and eventual return to leverage is a long-running historical pattern. The modern stablecoin regime merely updates the cycle using new tech—but the motives (trust, growth, fiscal need) repeat.
Financial innovation, crisis, regulatory reset, and eventual return to leverage is a long-running historical pattern. The modern stablecoin regime merely updates the cycle using new tech—but the motives (trust, growth, fiscal need) repeat.
17a/ Final Takeaways:
Trump is methodically shifting monetary power away from the Fed toward the Treasury and stablecoin issuers, lowering government borrowing costs through digital, market-based levers.
Trump is methodically shifting monetary power away from the Fed toward the Treasury and stablecoin issuers, lowering government borrowing costs through digital, market-based levers.
17b/ Final Takeaways:
The “1:1 stablecoin” system is both reset and prelude—it buys time but, as history shows, likely sets up the next round of re-leveraging when a new crisis calls for it.
The “1:1 stablecoin” system is both reset and prelude—it buys time but, as history shows, likely sets up the next round of re-leveraging when a new crisis calls for it.
17c/ Final Takeaways:
Stablecoins serve—for now—as a dam against inflation and collapse, but if trust falters, they become a channel for contagion, not constrained risk.
🧵/END
Stablecoins serve—for now—as a dam against inflation and collapse, but if trust falters, they become a channel for contagion, not constrained risk.
🧵/END
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