Joseph Arminio: The peril of stablecoin
Why has the federal government banned dangerous central bank digital currency, yet a sizable faction of the government is promoting a version of such currency?
Presidential candidate Donald Trump rightfully opposed central bank digital currency (CBDC) on the 2024 campaign trail and, good to his word, issued Executive Order 14178 in late January that bans such money. Even so, a major push has begun in Congress to promote retail digital currency (“stablecoins”). And, oddly, there are signs that the executive branch may want this push to succeed and to become law later this year.
The Senate Banking Committee, by a vote of 15 to 6, endorsed the pro-stablecoin GENIUS Act. Pennsylvania’s Dave McCormick (R) is one of the fifteen. The House Financial Services Committee, by a vote of 32 to 17, endorsed the STABLE Act, essentially the same bill. Pennsylvania’s Republican Dan Meuser (R) is one of the 32. This stablecoin legislation is now on the Senate and House floors.
Like the dread CBDC, stablecoin is programmable, trackable, and can be seized. Among several reasons to oppose stablecoin, it is feared that the widespread use of stablecoin could be a backdoor to the imposition of a CBDC.
Stablecoin issuer Tether furnishes an uneasy precedent. Tether leadership boasts of its cooperation with the Department of Justice and law enforcement has seized Tether accounts numbering in the hundreds of millions of dollars. Proponents of stablecoin say that such accounts were justly seized. Just seizure is in the eye of the beholder, however. Future seizures or the threat thereof could lead to tyranny.
Notwithstanding what I believe to be the noble intentions of many crypto-currency enthusiasts, retail digital currency may turn out to be nothing more than a fig leaf.
It seems that the very same private, financial elite or many of them who are behind such currency are behind the US central bank — the Federal Reserve or “the Fed.” Furthermore, it is likely that this is the very same elite (or many of them) or their predecessors who are or were primarily responsible for the Global Financial Crisis of 2007 and 2008 and other financial fiascos. Dare we trust these elites to have total control over Americans’ every dollar and cent, which large-scale use of stablecoin might very well ensure?
If stablecoin could be this deadly, why are a number of top leaders in favor of it? For one thing, they argue that the widespread use of stablecoin would favorably resolve the debt crisis. Indeed, it might — for a time. But it would also further enrich and empower Wall Street and their friends abroad and would not address the root problem of our economy, which is the nature of our money.
Since 1971, the only thing backing the US dollar have been US treasuries. Treasuries are loans whose ultimate beneficiaries are the fat cats of High Finance and the politicians who can confer favors without raising taxes.
The federal debt is financed by treasuries. In essence, the government pays off its annual deficit with a cash infusion from the sale of treasuries. The government is on the hook to pay back principal and interest. Some treasury buyers (e.g., Red China, Japan and domestic investors) lend to the federal government dollars that they earned. Others, especially the very big banks, put up cash that, by law, they are allowed to create out of nothing! Moreover, these banks loan out to the private sector and governments multiples of the cash it created out of nothing!
The federal debt is now so large that foreign and domestic demand for treasuries is drying up. Those who might otherwise hold treasuries — and who thus might otherwise stave off the US dollar’s collapse and government bankruptcy — are having a hard time believing that our government can continue to pay interest on its debt.
Pro-stablecoin legislation — the STABLE Act and GENIUS Act — require, among other things, that stablecoin issuers hold “reserves” equivalent to the value of stablecoins in circulation. What a coincidence: the number one “reserve” would be treasuries! Stablecoin would supposedly revive the demand for treasuries. The federal government would avoid bankruptcy; High Finance would continue to profit from treasuries and grow all the stronger.
Are we doomed? Must we either embrace stablecoin with all the unwanted baggage and risks or accept the collapse of the dollar and depression? The answer is we are not doomed! American banking history is replete with solutions. Consider, for instance, the experience of Thomas Jefferson.
Like President Trump, the then President Jefferson was opposed to central-bank control of the economy. The latter studied all currency and banking policies until he found the best ones. Then he vigorously promoted these, which, I suggest, have tremendous relevance today. May Mr. Trump and the entire federal government, for that matter, not be dazzled by fancy (digital) technology but look to historically proven and fair American currency and banking policies. And if, digitized money should one day replace cash, may extraordinary safeguards be put in place.
A Delaware Valley native, Joseph Arminio is the author of The Fed’s Endgame: Handing America Over To The Globalists And How To Stop It, which is available on Amazon. His author’s page is cfar21.org/sanmodpublishers.
