Original author: Morgan Beller
Original translation: Block unicorn
This idea has been on my mind since 2018, when I was in Washington discussing Libra (Meta’s, then Facebook’s, stablecoin project) with regulators. One of my personal motivations for supporting Libra was national defense.
The basic idea is that the future of money will be more digital and less physical. Stablecoins, such as cryptocurrencies that are pegged to stable currencies like the U.S. dollar, are our best tool for digitizing the dollar. If we dont digitize the dollar, we risk losing its central role in the financial world. If that happens, we will lose a key pillar of American stability and leadership that most people probably take for granted right now. If the U.S. government doesnt realize this soon, others will. So its a defense angle.
If you’re a stablecoin founder and you don’t yet think of yourself as a defense technology company, reconsider. If you’re a regulator who’s been paying attention to stablecoins and the role they will play in the dollar’s hegemony, wake up.
The time to act is now. Stablecoins have a market cap of nearly $150 billion and adoption continues to grow.
If we want to build stable infrastructure—not just for finance, but even for democracy (bear with me)—then we need to act quickly.
With this...
Why Stablecoins Are a National Defense Technology
Let us first take a brief look at history.
Since the end of World War II, the US dollar has been the worlds main reserve currency. This was decided at the Bretton Woods Conference in 1944, which also led to the establishment of the World Bank and the International Monetary Fund.
At the time, Europes major financial centers were still being rebuilt, and the United States took the opportunity to step forward and consolidate the dollars central position in the post-war world economy.
The Bretton Woods system formalized everything by creating a system of exchange rates where other countries could measure the value of their currencies in terms of the U.S. dollar, which at the time was pegged to the value of gold.
Of course, the dollar is no longer tied to the value of gold. But it still represents American power, stability, and geopolitical influence. So we will continue to rely on the strength of that idea.
Being the world’s reserve currency is not a right, but a privilege. It brings some financial advantages, like not having to go through the exchange process when trading, or the fact that we can borrow money at lower interest rates (which, from another perspective, makes it easier for us to impose sanctions on other countries).
But the real power is security. If the dollar collapsed, it would have a huge impact on the entire world economy. Much of the worlds monetary system is maintained because of the stability of the United States. This means we are less likely to experience targeted attacks, financial wars, hostile takeovers... or worse.
This is a fact that we have acknowledged even in our own National Security Strategy. International financial institutions are force multipliers of our values and interests.
It is also a fact that China is eager to change this situation.
Recently, China published a report on “American hegemony and its harms”, in which a section is devoted to the hegemony of the dollar. A quote from this section is: “The economic and financial hegemony of the United States has become a geopolitical weapon.”
From our American perspective, the dollar is more of a shield than a weapon. But Chinas use of that term is telling. There are many countries in the world that would like to wield the worlds reserve currency status as a weapon.
I am always puzzled as to why US regulators still do not consider safe and reliable stablecoin projects as a (benign) Trojan Horse for our continued domination of the US dollar. If you want to spread your currency across many secure exchanges through multiple stable assets, what better choice is there than stablecoins? It is also a free marketing for the US dollar - a way to make those dollars instantly available to millions of people around the world who want them through a decentralized network.
If we don’t do something to protect the brand, others will try to use (or abuse) it.
good news
Despite our own problems, there is also a lot of good news.
Currently 99% of stablecoin projects are pegged to the US dollar.
Ironically, it’s probably for the best that we didn’t move quickly or even at all to digitize the dollar from the top down. This gave us the opportunity to grow this ecosystem organically.
In the past, American hegemony was a push. But digital hegemony is more of a pull than a push. There is evidence that people want stablecoins — and entrepreneurs have built solutions. This is actually beautiful.
A diverse stablecoin ecosystem is exactly what we want to see. This is not only for consumers, but also for national security. Many projects are pegged to the US dollar, which means that the US dollar is more difficult to surpass.
But we do need regulators to do one thing: clarify the rules of the game, which is actually very cheap. For example... register a trademark for the US dollar.
Dollar Branding
Lets go back to 2018 in Washington, DC. I remember being in a meeting with the Treasury Department and asking them if the term USD was a trademark. Why are you asking that? They asked me like I was crazy.
If you think about it, there is no official definition of a true digital dollar, at least from a government perspective. This means that basically anyone can create a digital dollar - in other words, anyone can forge a dollar in 15 minutes. For example, we can launch NFX-USD today.
In the bigger picture, this means that China is not even obligated to make their RMB-based stablecoin a digital RMB. They can actually use the branding of the US dollar and tie it to their currency. Because no one is paying attention to that.
The U.S. government doesn’t need to create its own digital currency (something they have considered doing), they just need to clarify the rules of the game.
The trademark registration for the dollar begins with a definition of a government-backed U.S. digital dollar. Finally, a series of requirements are proposed to further facilitate good people by providing regulatory clarity for entrepreneurs. At the same time, it also protects consumers from malicious actors.
Some suggestions for these requirements:
100% collateralized reserve
Auditable financials
Identity verification of founders
This effectively allows the government to outsource the construction, development, and maintenance of the dollar in the digital space to capitalism.
If we set clear rules, this will all be easy and beautiful.
Calling Founders
I would be even more sleep deprived right now if it weren’t for one thing. Every day, I meet more and more stablecoin founders. You are motivated, talented, and smart. You have high spirits, sharp minds, and can see the essence of problems.
In the U.S., we have a group of stablecoin founders who can step in and solve this problem for us, as long as we provide them with the necessary resources and support. Those who are obsessed with crypto like to focus on the market capitalization of individual coins, but folks, this is a team sport.
Stablecoins will enable a digital expansion of the dollar, both technically and organizationally. We have a decentralized team of founders, not to mention the decentralized nature of cryptocurrencies, which works in our favor. If we give these networks everything they need to thrive, it will be an elegant solution driven by the American Dream.
I hope all stablecoin founders realize this, if you don’t know it yet. Your work is about national defense and even democracy.
