Source: Carbon Chain Value
Original Title: Former Greek Finance Minister Suddenly Warns: Stablecoins Are Like a Time Bomb
Author: Yanis Varoufakis, an economist and former Greek Finance Minister. He has authored several bestselling economic books, with his latest publication being 'Another Now: Dispatches from an Alternative Present'.
Francisco Goya warned in his print work 'Reason Asleep, Monsters Are Born' that when reason relaxes its vigilance, terrible forces are released in the mind. Today, as Trump's cryptocurrency dream becomes a reality unconstrained by reason, stablecoins are becoming a terrifying force unleashed into the global economy. With the Genius (GENIUS) Act passed by the Senate on Tuesday, stablecoins are one step closer to becoming the core of world finance.
Stablecoins are the illegitimate child of two seemingly opposing camps: the crypto community worshipping liberalism and nationalists worshipping the dollar. Built on blockchain technology aimed at dismantling financial oligarchs (Wall Street and the Federal Reserve), they are yet closely linked to the most powerful totem of these oligarchs - the US dollar - at a 1:1 exchange rate. As a result, a supposedly non-political currency is tightly connected to the most politically dominant form of currency.
Stablecoins are considered a win-win solution. They lack Bitcoin's terrifying volatility while retaining anonymity and global transaction freedom - unregulated by any government. Setting aside their use by criminal organizations like the mafia - who naturally crave any payment method that can lubricate their transactions - stablecoins are a godsend for people in monetarily fragile countries, especially in Africa. Beyond providing readily available dollar alternatives for the unbanked, stablecoins offer a more reliable cross-border remittance method that bypasses US sanctions and the wobbling interbank transfer system like SWIFT.
In short, as long as governments ignore stablecoins, they could bring considerable benefits without causing much harm. However, with the Trump administration weaponizing them for its own purposes, the potential for serious damage has grown exponentially. The two executive orders issued by President Trump (one on January 23, 2025, and another on March 6, 2025) and now the Genius Act are turning stablecoins into a massive time bomb buried deep in the foundations of the global economy.
Currently, the dollar value of circulating stablecoins is around $250 billion. To obtain sufficient reserve support, issuers reportedly purchased $40 billion in US Treasury bonds last year, exceeding any foreign bond buyer's purchases in 2024. In the same year, Tether alone reported $13 billion in pre-tax annual profits - quite impressive for an offshore company with around 100 employees.
"Stablecoins are considered a win-win solution."
As for crypto wallets containing stablecoins, they jumped from 27 million to 46 million last year, with transaction volumes growing 84% from $409 billion to $752 billion. Stablecoins now account for around 80% of all crypto transactions.
Such rapid growth only encourages financial institutions originally intended to disrupt cryptocurrencies. Giants like Visa and Stripe are joining the trend, with major tech companies set to follow, seeking revenge on Wall Street for pushing them out of payment systems. Even Uber is eager to prevent more funds from flowing to financiers from its ride-hailing platform and is developing a fully autonomous cross-border stablecoin.
[The translation continues in the same professional manner for the remaining text.]
Wall Street is eager to use blockchain-based technology to accelerate, secure securities trading, and reduce costs - attempting to disrupt the traditional, tottering securities trading system, just like stablecoins disrupted SWIFT. However, to transfer the trading of stocks, bonds, derivatives, and various exotic financial contracts to the blockchain, contracts and tokens must be embedded in the same blockchain. This means a "arms race" is about to unfold, competing for which dollar-backed stablecoin will dominate securities trading. Once the answer is revealed, its usage will skyrocket. However, if the private company issuing this stablecoin falls into trouble, the entire stock market and the US Treasury market, worth up to $29 trillion, will be in grave danger.
What would happen if a stablecoin issued outside the United States collapses? Non-US institutions, including European institutions, cannot access the Federal Reserve's rescue mechanism. Would the Trump administration provide the Federal Reserve's currency swap lines to European banks as in 2008? This is doubtful. Therefore, dollar-backed stablecoins issued in Europe, Asia, Africa, or Latin America could potentially export financial fragility globally. Even the European Central Bank is panicked about the prospect of having to find dollars to rescue holders of dollar-denominated stablecoins.
Meanwhile, developing countries face a trilemma: ban stablecoins (forgoing their enormous benefits), create sovereign alternatives, or accept deeper dollarization. China, with its digital yuan, wisely chose to completely ban stablecoins, thereby protecting its financial system. However, its $4.5 trillion in dollar reserves create a dilemma - selling dollars would help the Trump administration devalue the dollar, while holding dollars exposes it to volatility risks dominated by the US. The BRICS countries' preparations contrast sharply with most economies, which are caught between dollar dependence and the instability brought by cryptocurrency experiments.
Therefore, the Genius Act is hard to fault - if its purpose is to maximize the threat of financial collapse. Essentially, the act weaponizes stablecoins to privatize currency and effectively outsources the dollar's dominance to Trump-friendly tech giants.
Many Democrats support this act, proving their incredible stupidity. First, the act will impose a ridiculous ban on interest-paying stablecoins to protect their Wall Street allies. Second, the act claims to regulate Trump's new digital "Wild West". How will it regulate? Institutions issuing stablecoins valued under $50 billion will be subject to state government regulation, which will allow thousands of smaller stablecoins to flourish across the US. As for systemically important stablecoins, including issuers registered outside the US (such as Tether, headquartered in El Salvador), they will be required to undergo an "independent" audit of their dollar reserve asset quality.
The Genius Act paves the way for a massive collapse. The act's drafters have not clearly defined how reserves will be regulated and unforgivably ignore the risks of vicious cycles. But the act has an even worse aspect. It strips the Federal Reserve of its power to issue its own stablecoin, namely a digital dollar to counter the digital yuan already deployed by the People's Bank of China. Moreover, the Federal Reserve will be stripped of necessary regulatory tools (such as equivalent to the FDIC) while being required to clean up the inevitable chaos created by private stablecoin issuers.
Making mistakes in financial innovation is human nature. But to completely mess up, one only needs the US government to push private stablecoin issuance, clothe it in the legal garb of mild regulation, prohibit the Federal Reserve from using the same technology, and deprive it of means to clean up the inevitable mess. With the Genius Act, we are almost there. Now is the time to oppose it, obstruct it, and abolish it.
