The Trump administration is putting pressure on its trading partners to buy American energy, defense and agricultural products, as reported by the Wall Street Journal.
But as foreign leaders say they will buy American goods and services, they worry that from Japanese pensioners to European investors, national actors, especially American stocks, corporate debt, and, worryingly, the US is dependent on signs of government spending.
Rospero gained political fame (or depends on who you ask in the 1990s by claiming that the factory work flow from the Midwest to Mexico caused “a huge sucking sound towards the south” from NAFTA. We hear new sucking sounds, but this time it’s capital, not work.
Since the beginning of the year, the US dollar has weakened against almost all major currencies, falling more than 10% against the euro and Japanese yen and more than 8% against the British pound. And European and British markets are rising while US stock markets are under pressure from Trump’s tariffs.
Some fear that damage from tariffs, American businesses, the US financial markets, and even the dollar itself will last a long time. “Global trust and dependence on the dollar have been built up for over half a century,” says Barry Eishengreen, an economist and professor at Berkeley University.
The prediction that current policies will guide the path to ruining America is probably exaggerated. But this dollar unrest raises pressing real concern that the US can run out of buyers due to government debt, as traditional investors avoid the Treasury along with other US assets.
In the worst-case scenario, China deliberately dumps US debt to retaliate for tariffs, sends higher fees, which could affect everything from car loans to mortgage payments. Treasury Secretary Scott Becent is trying to calm these worrying markets, and is convinced that “we will do something if a foreign rival is weaponizing the US government’s bond market, or if they were trying to destabilize it for political gain.”
Therefore, while the US must fund key government spending at a reasonable interest rate, legacy buyers will not line up eagerly to buy debt in the future. What now?
The good news is that new US Treasury buyers are emerging, made possible by the technology behind cryptocurrencies like Bitcoin.
Blockchain-based stubcoin is currently the seventh largest buyer of US government debt, beyond Germany, Australia and other major powers. And they are growing rapidly – this year it surpasses $200 billion and today it exceeds nearly $250 billion.
Stable Coins are a sustainable and growing buyer of the new Treasury issuance, as they are fully supported at 1:1 dollars and are usually US government debt. More and more, government leaders are seeing their potential. In a June 2024 opinion article in the Wall Street Journal, former House Speaker Paul Ryan said, “Dollar-backed stubcoins are becoming key net buyers of US government debt.”
Certainly, stubcoins are still a small part of the huge financial market. However, this trend suggests that Stablecoins will continue to grow, perhaps capturing a 5% to 10% share of the global money supply ($5-10 trillion) over the next decade.
Jeremy Allerle, CEO of Circle, America’s largest stubcoin issuer, said the stubcoin market could reach $3 trillion by 2030.
The US benefits greatly from the US dollar, the global reserve currency. Despite accounting for around 25% of the world’s GDP, greenback is involved in most of global trade.
At the White House Crypto Summit in February, Scott Bescent said, “We intend to keep the US (the dollar) the world’s dominant reserve currency, and we will use Stablecoins to do that.” China and the rest of the world may be closing the doors of the US dollar and the old regimes where the US relied on foreign governments to buy debt. Stablecoins could be opening a window into that future.
Alex Tapscott is the author of Web3: The Next Economic and Cultural Frontier Chart of the Internet and is managing director of Digital Asset Group, a division of NinePoint Partners LP.
