by Mark Goodwin and Whitney Webb, Unlimited Hangout:
This past Saturday, former president Donald Trump addressed the Bitcoin 2024 conference in Nashville, Tennessee, expounding upon the crypto and bitcoin policies likely to be implemented as part of a likely future Trump administration. Speaking in front of a banner emblazoned with the logo of Xapo bank, an institution which hopes to serve as a global bridge between bitcoin, the U.S. dollar and stablecoins, Trump’s speech revealed a policy vision that would integrate those three in order to “extend the dominance of the U.S. dollar to new frontiers all around the world.”
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Talk of a threatened dollar has been circulating for years, with the petrodollar system now having ended and increasingly influential power blocs seeking alternatives to the dollar as a reserve currency. However, Trump – per his recent speech – seems poised to employ bitcoin as a sink for out-of-control U.S. government debt and to unleash the expansion of digital dollar stablecoins, which are already quietly dollarizing numerous countries in the Global South as the consequences of Covid-era fiscal policies continue to decimate the purchasing power of the 99% globally.
Trump promised, among other things, to “create a framework to enable the safe, responsible expansion of stablecoins […] allowing us to extend the dominance of the U.S. dollar to new frontiers all around the world.” He then asserted that, as a result of his future administration’s embrace of dollar stablecoins, “America will be richer, the world will be better, and there will be billions and billions of people brought into the crypto economy and storing their savings in bitcoin.” Bitcoin mining was also a later focus of the speech, with Trump claiming that “America will become the world’s undisputed bitcoin mining powerhouse.” This would further entrench something else touched on by Trump, that “the United States government is among the largest holders of bitcoin.”
He then discussed his views on the relationship between bitcoin and the dollar: ¨Bitcoin is not threatening the dollar. The behavior of the current U.S. government is really threatening the dollar.¨ However, the “threatening” behavior to which Trump refers, the perpetual money printing of the Federal Reserve system, has been the policy of every U.S. president for roughly the past century, with Trump himself being no exception. Indeed, under Trump, more money was printed than under any president in history, as the Covid-19 crisis “unleashed the largest flood of federal money into the United States economy in recorded history.” With trillions printed to enable the government’s policy of lockdowns and government purchases of experimental vaccines, the U.S. national debt grew by $8.18 trillion under Trump, keeping up with the pattern of rapid debt expansion set by his predecessor Barack Obama – who grew the debt by $8.34 trillion during his eight years in office.
Thus, any policy that unites bitcoin and the dollar – whether under Trump or another future president – would most likely be aimed at enabling the same monetary policy that currently threatens the dollar. The most likely outcome under Trump, as outlets like CNBC have speculated, would be making bitcoin a reserve asset and, as a consequence, a sink for the inflation caused by the government’s perpetual expansion of the money supply. Ironically, bitcoin would then become the enabler of the very problem it had long been heralded as solving.
Not only that, but bitcoin would then become the anchor that would allow the U.S. government to weaponize the dollar against economies where local currencies fail to withstand the pressures of an increasingly unstable economy, effectively supplanting the local currency with digital dollars. This phenomenon, already under way in countries like Argentina, brings with it significant opportunities for the U.S. government to financially surveil the “billions and billions of people” to be brought onto dollar stablecoin platforms, some of which have already onboarded the FBI and Secret Service and frozen wallets at their request.
Considering that “private” stablecoin platforms are already so intertwined with a government known to warrantlessly surveil civilians both domestically and abroad, the surveillance concerns are analogous to the surveillance concerns around central bank digital currencies (CBDCs). In addition, with stablecoins being just as programmable as CBDCs, the differences between stablecoins and a CBDC would revolve largely around whether the private or public sector is issuing them, as both would retain the same functionality in terms of surveillance and programmability that have led many to view such currencies as threats to freedom and privacy. Thus, Trump’s rejection of CBDCs but embrace of dollar stablecoins on Saturday shows a rejection of direct digital currency issuance by the Federal Reserve, not a rejection of surveillable, programmable money.
So the question remains, why wouldn’t the U.S. government just make a retail-facing CBDC? For starters, there are likely more limitations for a public sector entity on who and what they can restrict on their platforms. However, the main reason is mostly an economic one: they need to sell their debt to someone else to perpetuate the U.S. Treasury system.
Stable Demand For U.S. Debt
In order for an incoming Trump administration to successfully meet the demands of their congressional budget while also servicing of our compounding $35 trillion in debt already owed, the Treasury needs to find a willing buyer for that newly issued debt. In the past 18 months, a new high volume net buyer of this debt has appeared in the cryptocurrency industry: stablecoin issuers. Stablecoin issuers such as Tether or Circle have purchased over $150 billion of U.S. debt –– in the form of securities issued by the Treasury –– in order to “back” the issuance of their dollar-pegged tokens with a dollar-denominated asset. For some perspective on the absolutely astounding amount of volume these relatively young and relatively small businesses have gobbled up of U.S. debt, China and Japan, historically the U.S.’ largest creditors, hold just under and just over $1 trillion, respectively, in these same debt instruments. Despite only existing for a decade, and despite only surpassing a $10 billion market capin 2020, this leaves Tether alone at over 10% the Treasuries held by either of the U.S.’ largest nation-state creditors.
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