A lengthy analysis in Bloomberg News Aug. 23, by a financial columnist who has worked for the Financial Times and the Wall Street Journal, maintains that “[Treasury Secretary] Scott Bessent is deluded” that stablecoins will save the Treasury bubble; rather, their effect, if stablecoin use expands as advertised, will be to shrink credit in the U.S. economy and threaten the Treasury market with more instability. Columnist Paul Davies is teaming up with JPMorgan Chase officer Theresa Ho in his column, although only he is the signer.
Davies’ main point is that “stablecoins were invented as a gateway to trading in and out of other cryptocurrencies, including Bitcoin…. Right now, Tether, USDC and others are almost exclusively used by people trading crypto.” If their use as dollar deposits expands dramatically as Bessent and the other plutocrats expect, the new uses—including worldwide—will primarily be by speculating institutions indifferent to the stablecoin accounts lacking deposit insurance and paying no interest. And these users, particularly money-market funds, hedge funds, and banks, U.S.-based and abroad, are already big buyers of Treasuries; they will use stablecoin accounts for fast transfers, etc. to assist their trading operations. So, these “uses” will shrink use of existing dollar accounts which are more likely to be loaned, thereby shrinking credit—and the economy.
