As stablecoins become increasingly popular in the global crypto market, a seemingly far-fetched theory is quietly emerging: 'Is it possible for stablecoins, through their issuance and reserve mechanisms, to invest in US debt while circulating in digital currency, allowing one dollar to create two units of currency value? Could they even become a political tool for the US to achieve 'debt conversion' and ultimate financial decentralization?''
Dual currency effect: How can one dollar turn into two dollars?
According to crypto analyst @CryptoPainter_X on X, Tether has invested a large amount of received dollars into US Treasury bonds by issuing equivalent USDT, which means these dollars have become both Treasury assets and returned to the market in digital currency form via USDT. On the surface, this seems like normal operation, but it may actually create a replication effect of 'one dollar turning into two dollars':
In other words: Users buy USDT Tether with one dollar, Tether uses that dollar to purchase Treasury bonds, and USDT can still be used as a payment tool in the market.
He believes that this move, although it does not currently violate existing regulations, effectively creates a form of dual circulation of currency, similar to the reserve amplification principle of traditional banks, only the issuing entity has changed to private enterprises.
When Tether becomes a bank: Is USDT a digital version of the 'fractional reserve system'?
This mechanism is similar to China's early financial tool 'Yu'ebao', launched by Alipay, or the M2 system in the banking system that creates deposits through credit. However, the difference is that the circulation of stablecoins is entirely structured on blockchain and digital transaction systems, outside the purview of central banks:
When USDT circulates only in the crypto market, the effect of this 'currency multiplication' is not obvious due to the closed system; but once it enters the real economy, such as being used for consumption in the US, it could lead to an expansion of the dollar's monetary base, which can be seen as an alternative 'hidden printing of money'.
(Circle plans to apply for a US banking license; will stablecoin issuers become crypto banks?)
Treasury bond vacuum cleaner? Stablecoins become an export of US fiscal pressure.
As the seventh largest buyer of US debt globally, Tether currently has about 80% of its reserve assets in US debt, exceeding hundreds of billions of dollars. This means that the popularity of stablecoins actually guides global dollar liquidity to support US fiscal policy, indirectly becoming a 'Treasury bond vacuum cleaner'.
In this scenario, the US not only further consolidates dollar hegemony through stablecoins but also avoids domestic inflationary pressure. This dual effect of capital repatriation and leveraging makes stablecoins a highly potential policy tool in the US economy.
(Is Tether really too big to fail, being the seventh largest buyer of US Treasury bonds last year?)
CloverAI founder @JackyYi_06 pointed out that stablecoins could indeed become a new tool for the US to 'convert debt':
If the US government adopts a more open policy, such as the crypto-friendly direction advocated by Trump, stablecoins might become a 'debt outsourcing tool' globally.
Looking back at Trump USD1: Does the US want to reshape dollar hegemony through stablecoins?
@JackyYi_06 then stated that if Trump successfully gets re-elected and vigorously promotes the legalization of stablecoins, this strategy may quickly take shape, with potential advantages including:
Promoting stablecoins as 'decentralized dollars' globally.
Shifting debt to stablecoin holders.
Continuing dollar dominance while diversifying inflation risk.
Although Trump has clearly opposed central bank digital currencies (CBDCs), it does not rule out the possibility of him using his own (USD1) or private stablecoins as tools to promote a political strategy more closely tied to blockchain.
(Is the WLFI airdrop of USD1 and BitGo's launch of locked staking services paving the way for WLFI to enter the institutional market?)
Can stablecoins become the new stars of finance? Central banks won't sit idle.
Jacobmei.eth, chairman of StreetPay, believes that even though the value amplification effect created by stablecoins is similar to the credit creation mechanism of banks, their attempt to break through the central bank's control over the money supply and payment systems may be difficult to challenge successfully:
Central banks are unlikely to allow any private currency to replace the status of legal tender, otherwise tax revenue and financial sovereignty may collapse. This also explains why there is a global acceleration in launching CBDCs and stablecoin regulatory drafts to seize the dominant power of the financial future.
And added, 'Even though stablecoins like USDT or USDC have been applied in many payment systems like Pay or Visa, the actual transaction settlement process still often involves intermediaries exchanging them for fiat currency for settlement.'
This design reduces the impact of price fluctuations on both parties in a transaction while also avoiding the direct use of stablecoins as the final medium of payment, thus not touching the central bank's sensitive red line on monetary sovereignty.
The leverage truth of stablecoins: innovation, illusion, or risk?
In summary, the stablecoin mechanism could indeed create an asset effect that seems like 'double currency', assisting the US government in implementing a 'debt conversion' strategy without inflation risk. However, without transparent regulation and international cooperation, it could ultimately become the trigger for the next financial storm.
Are stablecoins a leverage tool for the new monetary era, or a bubble trap under the illusion of monetary power? What is certain is that this is a three-way game among national sovereignty, financial innovation, and market trust.
This article 'One dollar becomes two? How stablecoins quietly replicate the US monetary system, converting debt and printing money?' first appeared in Chain News ABMedia.
