Will stablecoins eventually replace the US dollar?
Many people believe that stablecoins are just a type of cryptocurrency, seemingly no different from digital currencies like Bitcoin and Ethereum, but this understanding is completely wrong.
The introduction of stablecoin legislation can almost be understood as stablecoins being backed by the US government. Because they are pegged to the US dollar and US Treasury bonds, ordinary people find them easy to accept. With high credit and high stability, stablecoins are sure to defeat all competitors and become the king of digital currencies, but this is likely just the first step.
Stablecoins can achieve global fast payments via mobile phones, with cross-border payments arriving in seconds, while cross-border transfers using US dollars typically take hours or even days. Therefore, stablecoin payments are more efficient and faster, and it doesn't stop there. Due to the fact that cross-border transfer fees for US dollars usually range from 1% to 3%, the cost of cross-border payments with stablecoins is almost zero. Consumers and merchants are not foolish; the choice between the US dollar and stablecoins is an obvious one.
If the Federal Reserve does not intervene, it is expected that in the next five years, stablecoins will likely grow and gradually drive the US dollar out of circulation, potentially replacing it as the global currency within ten years.
However, whether stablecoins can succeed hinges on a critical point: there is a major bug in the genius bill, which is that stablecoins are pegged to the US dollar and short-term US Treasury bonds. This is a balance point that both the Federal Reserve and the Trump administration currently accept. However, since administrative power is in the hands of the US government, if Congress ultimately transitions the pegging of stablecoins to US Treasury bonds, it would mean that stablecoins have been crowned. This is certainly something that the Federal Reserve cannot accept.
The development of stablecoins will not be smooth sailing, and the dominant position of the US dollar is not easily replaceable. The struggle between the two may even be resolved in extreme ways. Trump seems to need to learn something from the experiences of his predecessors, Lincoln, Kennedy, and others.
