New Legislation Threatens Non-US Stablecoin Issuers
Recent drafts of the Stablecoin Act are causing concern among non-US stablecoin issuers, particularly Tether, as they could potentially be banned from the US market due to their offshore operations.
The Importance of Global Reserve Currency
- Exporting currency to foreign markets is essential for maintaining a robust global reserve currency.
- Forcing USD-denominated stablecoins to reshore deposits to US banks goes against monetary principles.
- Stablecoin innovation provides an opportunity to increase USD’s strength and liquidity globally.
The Market Preference for Non-US Issued Stablecoins
USDT has emerged as the preferred stablecoin in non-US markets, indicating a strong demand for non-US issuers.
Perception of Autonomy
Non-US stablecoins are often perceived as more autonomous than US-banked stablecoins, attracting users who seek independence from government control.
Implications of a Ban
- Reduced USD Liquidity Globally
- Inflation Risks
- Geopolitical Risks
Reshoring Foreign Bank USD Reserves
Forcing non-US stablecoin issuers to relocate reserves to US institutions could have unintended consequences, including exacerbating domestic inflation and reducing international USD liquidity.
Potential for Displacement of USD
A ban on non-US stablecoin issuers could create opportunities for foreign adversaries to introduce USD-denominated tokens backed by other assets, weakening the US Dollar in the global market.
A More Strategic Approach
- Creating exemptions for foreign-issued stablecoins under the Stablecoin Act.
- Encouraging global innovation without importing inflationary pressures.
- Promoting market-based competition and consumer choice.
