March 4, 2025 (EIRNS)—In the world of monetarism, it should be a real oddity that the IMF, in a loan agreement, is banning El Salvador’s Bukele government’s use of government funds to purchase Bitcoins, or to continue to call them legal tender; at the same time that the Trump Administration is plunging ahead to accumulate a “cryptocurrency strategic reserve” which is a potentially unstoppable step toward a second, private U.S. currency. The Bukele government is being told that it is disrupting the reserve status of the U.S. dollar, which has for some time been its only “national” currency; while the Trump “team of billionaires” at Treasury, Commerce, DOGE, Crypto Czar, and Oval Office fondly believe they are increasing the dominance of the U.S. dollar as the global reserve currency—by effectively privatizing it.
In the world of real banking, a real expert has warned in American Banker: “The creation of major new demands for Treasury bills and Treasury-backed repos and reverse repos, by stablecoin issuers, could cause dangerous shortages of available Treasury bills, particularly during periods of financial stress. Those shortages could trigger serious disruptions and liquidity crises such as the repo market crisis in September 2019 and the ‘dash for cash’ that occurred in global financial markets in March 2020, following the outbreak of the COVID-19 pandemic.”
Prof. Arthur Wilmarth of George Washington University Law School, who has championed the Glass-Steagall Act’s restoration throughout this century, is the author of the authoritative 2020 book, Taming the Megabanks: Why We Need a New Glass-Steagall Act. What he’s warning of is this: Tether, Inc., “minter” of the dominant stablecoin Tether, will sell Tether coins around the world and use the proceeds (real dollars, euros, etc.) to buy Treasury bills under the new GOP legislation, which promises “light-touch regulation” and expressly allows the issuers’ use of Treasury bill assets for “repo” contracts of up to 7 days. It will use the Treasury bills for speculative derivatives activities, especially as collateral for “repos” (repurchase agreement derivatives). When the Tether holders then try, in any garden-variety crisis, to redeem their stablecoins and get the Treasury bills, the latter will be tied up on (losing) speculations. Dollar interest rates will spike, etc. The situation with other stablecoins will be similar. There is already great volatility and stress throughout the short-term sections of the Treasury market, because of such speculation on top of debt that has doubled in five years.
This is to say nothing of a strategic stockpile, progressively linking the U.S. dollar to the values of “unstablecoins” like Bitcoin, a free-floating security—privatizing the U.S. currency into a “cryptodollar.”
