Stablecoins: A Solution to the US Debt Dilemma?

The adoption of dollar-pegged stablecoins could bolster the appeal of the American currency and alleviate the burgeoning national debt issue, according to former Speaker of the US House of Representatives, Paul Ryan, as reported.

In his article for the WSJ, the politician highlighted that the growth of the stablecoin market could generate demand for US government bonds.

“If other countries succeed in strengthening their currencies by shedding Treasury debt, the US will need to find new ways to enhance the dollar’s attractiveness. One answer lies in stablecoins based on it,” Ryan wrote.

He noted that China has implemented a CBDC in the form of a digital yuan and is “increasingly seeking payment options outside the dollar system.”

“The US cannot afford to sit idly by while its largest international competitor taps into the latent demand for safe and convenient digital money,” Ryan believes.

However, he is convinced that the United States should not pursue the issuance of a CBDC. In his view, stablecoins based on public permissionless blockchains “embody deeply American values of freedom and openness.”

While the politician did not specify which coins he was referring to, his stance was supported by Tether CEO Paolo Ardoino. He noted that USDT is used as a digital dollar by over 300 million people worldwide.

“Stablecoins backed by dollars provide demand for U.S. public debt”$USDt is being used by more than 300M people across the world as the digital dollar, providing a lifeline utility to entire communities in developing countries.
These people are underserved by the banking…

— Paolo Ardoino ?? (@paoloardoino) June 14, 2024

“By ensuring the dollar’s resilience in emerging markets through stablecoin, Tether ranks among the top three global buyers of short-term US Treasury bills and in the top 20 overall,” emphasized the company’s head.

At the time of writing, the total market volume of stablecoins stands at nearly $162 billion (CoinGecko). USDT dominates with a figure of $112.5 billion.

Earlier, Deutsche Bank Research analysts suggested that most existing stablecoins are doomed to lose their peg and disappear.