Stablecoins are a defense technology.
This idea has been on repeat in my head since 2018. At the time, I was meeting with regulators in DC about Libra (meta, then Facebook’s stablecoin project). One of my personal motivations behind Libra was national defense.
The basic idea is that the future of money will be more digital than physical. And stablecoins (in this case, cryptocurrencies pegged to stable currencies like the US dollar) are the best tool to digitize dollars. If we don’t digitize the dollar, we risk losing our status as the center of the financial world. In doing so, we would lose a key pillar of American stability and leadership that most people now take for granted. And if the US government doesn’t realize this soon, someone else will. (If you haven’t already, 👋🏻🇨🇳). Hence the defensive angle.
If you’re a stablecoin founder and don’t think of yourself as a defense technology company, think again. And if you are a regulator who is asleep at the thought of stablecoins and the role they will play in the hegemony of the dollar, wake up.
Now is the time to act. The market capitalization of stablecoins has reached nearly $150 billion, and adoption continues to grow.
If we want to build a stable infrastructure for finance and even democracy (bear with me), we need to act fast.
And with that…
Why stablecoins are a defense technology
Let’s start with a quick history lesson.
After World War II, the dollar became the world’s main reserve currency. This was decided at the Bretton Woods Conference in 1944, which was also a melting pot for the World Bank and the IMF.
While Europe’s large financial centers were smoldering, the United States had a chance to anchor the dollar at the center of the postwar world economy.
Bretton Woods formalized things by creating a system of exchange rates that allowed other countries to measure the value of their currencies in relation to the dollar, which at the time was pegged to the value of gold.
Of course, the dollar is no longer pegged to the value of gold. But it still represents the strength, stability, and geopolitical influence of the United States. Therefore, we continue to sail on the power of that idea.
Being the world’s reserve currency is not a right. It’s a privilege. This comes with some economic benefits, such as not having to go through exchange processes for trade and the fact that you can borrow money at lower interest rates (and, looking at it another way, other It becomes easier to impose sanctions on countries).
But the real power is security. If the dollar were to collapse, it would have a major impact on the entire global economy. Much of the world’s monetary system is supported by the fact that the United States is stable. This means you are less likely to experience targeted attacks, financial wars, hostile takeovers, or worse.
This is a fact that we recognize in the National Security Strategy that we published. International financial institutions are “a force that increases our values and interests.”
It is also true that China is eager for change.
Recently, the Chinese Communist Party released a report on “US Hegemony and its Dangers,” which includes an entire section focused on the dominance of the dollar. A quote from that section: “America’s economic and financial hegemony has become a geopolitical weapon.”
From our American perspective, the US dollar is more of a shield than a weapon. But China’s use of the language speaks for itself. There are many countries that want to use this status as the world’s reserve currency as a weapon.
What has always baffled me is that there are still US regulators who do not consider safe and secure stablecoin projects as (harmless) Trojan horses for continued domination of the US dollar. . If you want to multiply your currency through many stable assets across many secure exchanges, what better option than stablecoins? is a way to provide instant access to the US dollar to millions of people around the world.
If you don’t find some way to protect your brand, someone else will try to use (or abuse) it.
good news
Despite us, there is a lot of good news.
Currently, 99% of stablecoin projects are pegged to the US dollar.
Ironically, the fact that we are not moving quickly or at all to digitize the dollar from the top down may be the best-case scenario. This allowed us to grow our ecosystem organically.
In the past, US hegemony has been a push dynamic. But digital hegemony is more of a pull than a push. There is evidence that people want stablecoins, and entrepreneurs are building solutions. When I actually saw it, it was very beautiful.
A diverse stablecoin ecosystem is what we want. Not just for consumers, but for national security as well. Many projects are pegged to the US dollar, meaning it is much harder to overtake the dollar.
But there is one thing we need regulators to do. It makes the rules of the game clear, but this can be very ineffective. For example…U.S. dollar trademark registration.
USD Trademark Registration
Let’s go back to DC in 2018. I remember attending a meeting with the Treasury Department and asking if “USD” was trademarked. “Why?” they asked as if I was crazy.
When you think about it, there is no official definition of a true digital US dollar, at least from a government perspective. That means basically anyone can create a digital “US dollar.” In other words, anyone can counterfeit US dollars within 15 minutes. Today, we were able to start NFX-USD.
On a larger scale, this means that, hypothetically, China has no obligation to even call a renminbi-backed stablecoin that. They could literally use the US dollar brand and tie it internally to their national currency. No one is watching.
Instead of the US government building (and considering doing) its own digital currency, it just needs to clarify the rules of the game.
US dollar trademark registration begins with a government-backed definition of the actual US digital dollar. It ends with a set of requirements that further enable good people by providing regulatory clarity for entrepreneurs. And at the same time protect consumers from bad actors.
Some suggestions for these requirements:
Fully backed reserves Auditable financials KYC-d Founder
This effectively allows governments to outsource the creation, growth, and maintenance of the US dollar to capitalism in the digital space.
It’s simple and beautiful when the rules are clear.
A call to the founders
If something hadn’t happened, I’d be even more sleep-deprived right now. I meet more and more stablecoin founders every day. You are motivated, talented, and smart. You are smart and insightful, and you understand this issue fundamentally.
We have a network of stablecoin founders across the United States who will help us solve this problem if we provide them with the necessary resources and support. Crypto enthusiasts like to focus on the market cap of individual coins, but friends, this is a team sport.
Technically and organizationally, stablecoins enable the digital multiplication of dollars. We have a decentralized team of founders working for us, not to mention the decentralized nature of cryptocurrencies. If we can give these networks what they need to thrive, this is a very elegant solution powered by the American Dream.
This is something that every stablecoin founder should understand, even if they don’t know it already. Your job is a matter of national defense, and even more so, a matter of democracy.
