Dollar stablecoin: the scepter of money
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Dollar stablecoin: the scepter of money
If the dollar stablecoin bill is passed, it would be equivalent to the U.S. government gaining "indirect minting rights."
Navigating Web3 tides with focused insightsAuthor: 0xCousin
Monetary Policy Has Always Been an Extension of Politics
Throughout history, money has never been a neutral tool. From ancient emperors privately minting copper coins to modern states manipulating credit through quantitative easing, currency has always been an extension of politics.
Rome’s “Silver to Copper” Transition
In the later years of the Roman Empire, emperors gradually reduced the silver content in coins to fund massive military and bureaucratic expenses—dropping from 90% to 70%, 50%, 30%, and eventually creating so-called “silver coins” that were almost pure copper. This was essentially a way for the Roman Empire to tax its entire population through currency devaluation, forming an early prototype of inflation.
Emperor Wu of Han’s “Three Types of White Money”
Emperor Wu of Han launched prolonged military campaigns against the Xiongnu, draining the imperial treasury. Facing fiscal imbalance, the court attempted to bypass the traditional copper coin system by introducing the “Three Types of White Money” (gold, silver, and turtle-shell coins), seeking innovative monetary tools to finance war expenditures. However, due to lack of market acceptance, this move triggered monetary chaos instead.
Nazi Germany’s “Mefo Bills” System
After the Nazis came to power in 1933, they sought to escape the financial constraints imposed by the Treaty of Versailles. They created the “Mefo Bills,” a financial instrument allowing the government to hide budget deficits and circumvent international oversight. Through this system, Nazi Germany generated massive national debt via Mefo Bills, shifting the financial risks of this "false prosperity" onto citizens and businesses.
History serves as a mirror revealing cycles of rise and fall. Across civilizations and eras, regime changes have not only been determined by military outcomes but also deeply influenced by fiscal dynamics. The recurring pattern—“fiscal deficit → currency depreciation → collapse of authority”—plays out time and again.
America’s Separation of Powers
The decline of empires often begins with fiscal失控. In past empires, governments held all powers—printing money, spending it, and regulating it simultaneously. At its founding, the United States sought to change this. It adopted a political system of “separation of powers,” where legislative (Congress), executive (President), and judicial (Federal Courts) branches operate independently and check each other.
This principle extends to fiscal and monetary policy through a form of “functional separation.” To prevent abuse of monetary authority, Congress passed the Federal Reserve Act in 1913, establishing the Federal Reserve and delegating coinage rights to it. Fiscal policy remains under congressional control—deciding how much to spend and how to allocate funds—with government agencies executing expenditures. Monetary policy is managed by the Fed, which controls money supply and interest rates independently of the President.
Since then, the U.S. government (Treasury Department) holds authority over issuing national debt, while the Federal Reserve controls money creation. Fiscal policy, led by the Treasury, involves taxation, bond issuance, and spending. Monetary policy, led by the Fed, uses tools like interest rate adjustments, bond trading, and quantitative easing to manage the economy. Though independent, these two functions sometimes coordinate—this mechanism aims to prevent excessive dollar printing and maintain the dollar’s value.
This system largely fulfilled the Founders’ vision: fiscal authority rests with the government, monetary authority with the central bank, balancing each other to prevent “government hijacking of money for unchecked power.”
U.S. Fiscal Policy Gradually Spiraling Out of Control
After winning both World Wars, the United States emerged as the sole victorious superpower. Under globalization, the Bretton Woods system and the petrodollar settlement mechanism helped establish the dollar as the world’s primary reserve currency.
From 1945 to 1971, the gold standard constrained U.S. fiscal policy—the need to back dollars with gold reserves limited government spending, keeping budgets relatively restrained.
After 1971, the end of the Bretton Woods system severed the dollar’s link to gold. With no real constraint on deficits, the era of “fiscal-monetary collusion” began—government spends by issuing bonds, and the Fed prints money to buy them.
The U.S. now runs its fiscal deficits on a cycle of “issuing debt → printing money → global absorption.” Today, national debt exceeds $36 trillion, annual deficits average over $1.5 trillion, and interest payments alone surpass $1 trillion—among the largest single items in the federal budget.
American fiscal policy is increasingly losing control, trapped in four major dilemmas:
First, debt dependency: The budget can only sustain itself by rolling over old debt with new borrowing; without lower interest rates, the situation may worsen;
Second, political compromise paralysis: Neither party can cut spending effectively—Democrats demand social welfare, Republicans push for tax cuts;
Third, Fed bailout inertia: Although the Fed claims independence, historically it has printed money to rescue fiscal crises whenever they arise;
Fourth, global de-dollarization pressures: More countries are stockpiling gold and diversifying foreign reserves, increasing refinancing pressure on U.S. debt.
Facing these four challenges, the U.S. government’s demand for liquidity from the Fed grows stronger. Trump repeatedly demanded rate cuts via social media, yet the Fed still clings to “monetary policy independence.”
Trump’s New Move: On-Chain Backdoor Minting
The Trump administration is pushing forward legislation for a dollar-backed stablecoin. Whether it's the "Stable Act" or the “Genius Act,” both allow the issuance of dollar stablecoins backed by U.S. Treasury bonds.
If passed, such legislation would grant the U.S. government a “backdoor minting right.” The logic works as follows:
1. The U.S. Treasury has the authority to issue government bonds;
2. These bonds serve as collateral to issue dollar stablecoins;
3. Dollar stablecoins are then exchanged for dollars, forcing shifts in Federal Reserve monetary policy.
Through the pathway of “Treasury bonds → dollar stablecoins → dollars,” the U.S. government could indirectly seize digital dollar minting authority, undermining the Fed’s monetary independence.
In a sense, this could become a “hunt” by the U.S. government against the Federal Reserve.
In multiple speeches, Trump stated he would abandon CBDC (central bank digital currency) and support dollar stablecoins. Many fail to grasp the difference: CBDC is issued by the central bank (the Fed), meaning minting power remains with the Fed; whereas dollar stablecoins can be issued by commercial companies or banks, using U.S. Treasury bonds as underlying collateral—bonds issued by the U.S. Treasury. Therefore, CBDC strengthens the Fed’s authority, while dollar stablecoins strengthen the Treasury’s authority.
Judging from the Trump administration’s maneuvers, there is clearly suspicion of attempting to seize minting power.
Side note: In reality, the U.S. Treasury already has some minting authority—divided into two parts. Paper dollars are issued by the Federal Reserve, while physical coins are minted by the “U.S. Mint,” a bureau under the Treasury. Some previously proposed that the Treasury could mint a few platinum coins with a face value of $1 trillion each, deposit them into its Fed account, and use them directly to pay debts or fund spending. This was an early idea for seizing minting power. The White House rejected such proposals, fearing damage to confidence in the dollar.
For further insights, consider ChatGPT’s responses:
1. Will the U.S. government really seize minting power?
ChatGPT response: It’s not a question of “if,” but “how far along it already is.” The Constitution permits it—Congress inherently holds minting authority. Politically, there’s will—Trump openly opposes CBDC and supports dollar stablecoins. Fiscally, there’s need—persistent deficits and unsustainable interest burdens. Practically, there’s a plan—using Treasuries as collateral for on-chain stablecoins. Legally, there’s basis—the stablecoin bill is advancing. So the key question is whether the government can institutionalize and legalize this “soft coup” via on-chain monetary mechanisms and gain global market recognition.
2. Could this destabilize the dollar?
ChatGPT response: Not in the short term—the stablecoins are pegged to Treasuries and bank deposits, and the Fed still controls the interest rate anchor. But in the medium to long term, it may undermine the dollar’s credibility, especially if the Treasury bypasses the Fed and continuously expands on-chain dollar supply. The dollar’s value anchor would no longer depend solely on Fed control. If Bitcoin, gold, or other assets are later included as reserve backing for stablecoins, it could mark the emergence of a “new Bretton Woods system.”
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