USDT is a stablecoin issued by Tether, widely used in the cryptocurrency market. According to Tether's financial report for the first quarter of 2025, by the end of that quarter, Tether held a total of over $98.5 billion in U.S. Treasury bonds, accounting for more than 80% of its total assets.
$Tether's operating model is: Users deposit US dollars and other fiat currencies into Tether, and Tether issues an equivalent amount of USDT at a 1:1 ratio. The received US dollars are mainly used to purchase highly liquid assets such as U.S. Treasury bonds to ensure the stability and convertibility of USDT.
In this process, the issuance of USDT is based on the actual deposits of users, rather than being created out of thin air.
However, if USDT mainly circulates within the cryptocurrency market and does not enter the U.S. real economy, its impact on the money supply is relatively limited. But if USDT is widely used for payments and transactions domestically in the U.S., it may lead to the following situations:
l1. A user purchases 1 USDT with 1 dollar, and Tether uses that dollar to buy U.S. Treasury bonds.
2. USDT re-enters the market, used for payments and transactions, equivalent to that dollar re-entering circulation.
This means that the original 1 dollar supports both the circulation of USDT and the purchase of U.S. Treasury bonds, effectively becoming 2 dollars, potentially increasing liquidity in the market in the short term. This mechanism is somewhat similar to the money multiplier effect in traditional finance. The logic is similar to the financial operations of Alipay and Ant Financial, where cycles are leveraged multiple times... With the existence of dollar stablecoins, 1 dollar creates 2 dollars in currency, while the new 1 dollar may also partially become stablecoins again, creating more new liquidity... This could lead a stablecoin issuing company to become a small central bank or a mini Federal Reserve.
However, unlike central banks, Tether, as a private company, lacks the regulation and transparency of traditional central banks.
The disturbing thought is that Trump's strong promotion of the stablecoin strategy is to allow the domestic economy to accept the internal circulation of stablecoins. With just a few simple operations, a large amount of US dollars circulating domestically can be converted into stablecoins, which can then be used to purchase Treasury bonds, achieving ultimate debt finalization! In this case, stablecoins and dollars will become the new mainstream currency, circulating within the U.S. without causing inflation, while the dollars in the hands of the American people are effectively transformed into Treasury bonds!
The U.S. is also set to become the first major country to adopt stablecoins on a large scale, which could lead to a new 'digital Bretton Woods system.' This way, the U.S. is expected to maintain its dominant monetary hegemony in the digital age.
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