Will Stablecoins Replace the Dollar?

by Mario Lettieri and Paolo Raimondi * –

The cryptocurrency law, known as the GENIUS Act, has been approved by the US Senate. Now it is up to the House of Representatives to confirm it. To speed up the process, Trump would like to sign it by the summer. The few rules provided are intended to encourage their growth. In fact, it is stated that stablecoins must be guaranteed entirely by US dollars or highly liquid assets. The latter are not specified so they could also be speculative financial derivatives with a short term. This would be serious, gambling on gambling does not create certainty and stability. According to the US Treasury, the stablecoin market could reach 3.7 trillion dollars by 2030. Furthermore, faced with the weakness of the dollar and its growing inability to continue to be the linchpin of global monetary reserves and the international financial and commercial system, there would be, as reported by Forbes magazine, a plan to create stablecoins worth 16 trillion dollars by 2030. In fact, it is claimed that it would be “a radical new competitor to the dollar!”. This is the plan to tokenize finance. Asset tokenization is the process of creating a digital token that represents a real asset, such as property, a bond or a stock, allowing it to be managed, traded and sold through the blockchain. Stock tokens, for example, would be traded outside of regulated stock exchanges, making the latter superfluous. To leave no doubt about the true intentions of the Administration, Treasury Secretary Scott Bessent said: “A healthy stablecoin ecosystem will increase private demand for government bonds, lowering the cost of financing for the government.” He hopes that the new law will facilitate the inflow of capital into the US, encourage the use of the digital dollar and even reduce the cost of public debt. Remember that the US public debt is reaching 37 trillion, with annual interest rates well above one thousand billion. An unmanageable “business” even for Trump. For him, however, stablecoins are “excellent business”, being involved with his family in the World Liberty Financial project, the issuer of Trump’s USD1 stablecoin, currently the eighth in the world by capitalization. Issues related to conflicts of interest have been addressed by the new law in such a way as to guarantee, in any case, the possibility for members of the Administration and presidential families to operate in the sector. Previously, in the US, conflicts of interest were a serious matter. The rush to cryptocurrencies is exciting the entire financial sector. From large banks, such as Bank of America and Morgan Stanley, to the distribution giant Walmarkt to PayPal, the payment service, they are all on the crypto bandwagon. Even big tech companies insist on wanting to create their own cryptocurrencies. Fortunately, not everyone thinks like Trump on cryptocurrencies. In Europe and also in Italy, great doubts and concerns are being expressed regarding stablecoins. Paolo Savona, president of Consob, at the recent annual conference of the body, defined them as Pinocchio's court of miracles, where the illusion of easy profits reigns. He recalled that: "The analogy that is being determined with the roots of the 2008 financial crisis cannot be overlooked, due to the spread of complex derivatives that contained credits that were difficult to repay (subprime) and caused serious economic consequences, also putting the security of the State at risk". Also during the Festival of Economics in Trento at the end of May, Savona declared that he considered "the legitimization of cryptocurrencies a fatal risk, the risk is that the concept of money will be lost and that these private currencies will replace public money". It would be a return to the Middle Ages, when every prince or bishop minted his own coin! On the occasion of the publication of the 2024 report of the Bank of Italy, governor Fabio Panetta also warned that stablecoins "expose holders to risks related to the solidity of the issuers and the variability of the value of the underlying asset".

In Europe, it is necessary to keep our guard up on stablecoins, even if US President Trump has entered the fray for them. Following him in this dangerous adventure would mean becoming subjects and paying the highest price in the next global financial crisis.

* Mario Lettieri, former member of parliament and undersecretary of the Economy; Paolo Raimondi, economist and university professor.