As long as stablecoins do not have minting rights or seigniorage, they are merely shadows of sovereign currencies, of course, algorithmic stablecoins are an exception. The reason for not encouraging algorithmic stablecoins and the skepticism towards them is that the value anchor of algorithmic stablecoins is not a sovereign currency. As long as it is not a sovereign currency, it inherently possesses invisible seigniorage and minting tax (crypto assets).
Furthermore, algorithmic stablecoins are anti-sovereignty; as long as there are sovereign financial states, no country likes algorithmic stablecoins unless capital forces the government.
Stablecoins fundamentally cannot possess 'minting rights' and 'taxation rights' in the traditional sense of sovereign state currency. This is determined by their decentralized (or privatized) attributes, lack of sovereign backing, and legal compulsion.
However, this does not prevent stablecoin issuers and ecosystems from attempting to simulate or partially realize similar economic effects.
1. Why stablecoins cannot possess traditional 'minting rights'
Core characteristics of traditional minting rights:
1. Sovereign monopoly: The central bank has a monopoly on currency issuance (e.g., the Federal Reserve issues dollars).
2. Legal compulsion: Legal tender has the characteristic of legal enforceability, mandatory for debt repayment and tax payments.
3. Non-anchor dependency: The value of sovereign currency is supported by national credit and taxation ability, without the need to bind to external assets.
4. Policy tool attributes: Central banks implement macroeconomic control by adjusting the money supply (e.g., QE/interest rate hikes).
Limitations of stablecoins:
Aspect Stablecoins Traditional Sovereign Currency
Issuing entities: Private enterprises (e.g., Tether, Circle) or DAO communities, national central banks (e.g., Federal Reserve, ECB)
Value basis relies on collateralized assets (such as US Treasury bonds, commercial paper, etc.) or algorithmic control of national credit and taxation capacity.
Legal status: Illegal tender, no compulsory circulation obligation; legal tender, with legal enforceability.
Monetary policy autonomy | No independent monetary policy, passively following the value of collateralized assets can autonomously adjust interest rates and money supply.
Circulation coercion: Relies on voluntary user usage; the state's coercive machinery (e.g., taxation, judiciary) ensures circulation | ✅ Conclusion:
Stablecoins are merely private certificates simulating currency functions, and their issuance fundamentally is 'collateralization of collateral', rather than creating independent monetary sovereignty. Issuers cannot 'print money out of thin air' like central banks (unless they detach from collateral backing, which would lose their 'stable' attribute).
2. Can stablecoins achieve 'quasi-seigniorage' revenue?
Definition of traditional seigniorage:
Central banks obtain revenue from the difference between the cost of issuing currency (almost zero) and the face value of the currency (e.g., printing a $1 bill costs 5 cents, the central bank gains 95 cents).
How stablecoin issuers obtain 'quasi-seigniorage' revenue:
1. Interest spread revenue:
Stablecoin issuers (e.g., USDT, USDC) invest users' deposited dollars in **low-risk assets** (such as US Treasury bonds, repurchase agreements).
Revenue sources: Yield from collateralized assets (e.g., government bonds annualized 4~5%) User interest on stablecoins (usually 0%) = Net interest spread of the issuer.
Scale effect: Taking USDC as an example (circulation of $32 billion), if the yield on collateralized assets is 4%, the annual revenue can reach $1.28 billion.
2. Transaction fees:
Fees are charged during stablecoin transfers and exchanges (e.g., sharing on-chain gas fees, exchange rate spreads).
3. Ecological power premium:
Issuers influence the liquidity distribution of the DeFi ecosystem by controlling the stablecoin protocol (e.g., prioritizing support for their own ecosystem projects), indirectly obtaining commercial benefits.
Note:
This revenue is not true seigniorage but rather revenue from financial intermediary services. Its sustainability depends on two points:
Credit risk of collateralized assets (e.g., holding bonds with default risks);
Regulatory tolerance (e.g., SEC may deem it 'unregistered securities').
3. Can stablecoins possess 'taxation rights'?
Core characteristics of traditional taxation rights:
The state enforces collection through sovereignty (e.g., income tax, value-added tax) for public services and fiscal expenditures.
The 'quasi-tax' attempts of stablecoins:
1. Protocol-level Fees:
Some algorithmic stablecoins (e.g., Frax Finance) charge a small fee for on-chain transactions (e.g., 0.06%) for token buybacks or distribution to governors.
Essence: A network usage fee voluntarily paid by users, not forcibly collected.
2. DAO treasury:
Decentralized stablecoin projects (e.g., DAI) decide the use of funds through DAO voting (e.g., development grants, liquidity incentives).
Funding sources: Protocol revenue (e.g., lending interest spread) or issuing governance tokens (effectively diluting the rights of token holders).
3. Key limitations:
No coercive power: Cannot forcibly tax like a state, can only rely on voluntary participation in the ecosystem;
Small scale: The size of DAO treasury (e.g., MakerDAO reserves $500 million) is much smaller than national finances (US tax revenue in 2023 is $4.9 trillion);
Legal risks: If deemed illegal fundraising or securities issuance, may face regulatory bans.
4. Future possibilities: Exceptions for nationalized stablecoins.
If a sovereign state directly issues a fiat stablecoin (e.g., digital dollar CBDC), it may possess both minting rights and taxation rights simultaneously:
1. Minting rights: The central bank directly issues digital dollars without the need for collateralized assets;
2. Taxation rights: Governments can programmatically automate tax deductions (e.g., smart contracts withholding income tax when paying salaries);
3. Case references:
China's digital yuan (e-CNY) supports precise distribution of government subsidies;
The Bahamas' 'Sand Dollar' is linked to the national tax system.
At this point, stablecoins are no longer 'private currencies' but are a digital form of sovereign currency.
Ultimate conclusion
Power type Can stablecoins possess Implementation methods and limitations
Currency minting rights ❌ No | Can only issue collateralized certificates, without sovereign credit support |
Quasi-seigniorage revenue | ⚠️ Partial implementation (not tax, but interest spread) | Dependent on the interest of collateralized assets, limited in scale and facing regulatory risks |
| Currency taxation rights | ❌ No | No compulsory collection capability, DAO fees ≠ tax |
| Nationalized stablecoin | ✅ Yes (if CBDC) | Requires direct issuance by a sovereign state and granting legal status |
Stablecoins are 'mimickers of currency', not 'sovereigns of currency'. Their issuers can earn profits from financial intermediation but can never obtain the unique coercive collection rights and unanchored issuance rights of the state—unless the state directly intervenes and incorporates them as 'digital legal currency'.
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