To The Moon

I recently took a week long holiday in Japan. I visited Tokyo, Kyoto, and Hakone. Tokyo’s electric energy, from Shibuya’s bustling streets to serene Meiji Shrine, was invigorating. Kyoto’s tranquil temples, like Kinkaku-ji, and seasonal kaiseki dining offered cultural depth. The highlight was soaking in a Hakone onsen, surrounded by mountain views—a moment of pure relaxation that recharged me. 

Japan’s blend of tradition and innovation, evident in its efficient infrastructure and tech-savvy culture, prompted thoughts about its digital finance landscape. 

Reflecting on my trip, I’m eager to share where I visited and the standout moment that truly refreshed me. As someone vested in $MicroStrategy(MSTR)$ , $Coinbase Global, Inc.(COIN)$ , and $2X ETHER ETF(ETHU)$ , and having analyzed Singapore’s stablecoin ecosystem, I also took note of Japan’s advancements in digital finance, especially the digital yen and growing crypto adoption, which led me to reflect on their potential impact on global markets, particularly in light of the U.S. 30 year Treasury yield surpassing 5%.

Okie.. BAck to my focus.

I’m deeply concerned about the declining demand for U.S. Treasury bonds, a critical issue threatening America’s financial stability. However, the rise of stablecoins offers a strategic solution: issuing more stablecoins requires purchasing more U.S. Treasuries, ensuring a steady buyer base. This explains why, since taking office, President Trump has aggressively pushed stablecoin legislation. This move not only secures Treasury buyers but also cements the U.S. dollar’s dominance in blockchain-based global reserves, reinforcing its role as the currency of a superpower.

The current financial landscape reveals a brewing currency war, masked by Trump’s tariff policies. 

The U.S. dollar is depreciating sharply, while Asian currencies appreciate, and stablecoins pegged to the dollar are gaining prominence under Trump’s support. 

This raises critical questions: How do stablecoins connect to U.S. Treasuries and the dollar? What is Trump’s strategic intent, and how does it sustain U.S. financial hegemony? 

Since abandoning the gold standard in 1971, the U.S. has relied on its national strength to uphold the dollar as the world’s reserve currency. However, with $36 trillion in debt and growing global challenges, the dollar’s credibility is under strain. Trump’s tariff and currency wars aim to address trade deficits, particularly with China, while reinforcing dollar dominance. This has triggered stock market declines and forced appreciation of currencies like the Singapore dollar, Malaysia Ringgit, Taiwan Dollar, Korean Won, and Jap Yen, driven by fears of U.S. debt default. The dollar’s value, once tied to gold under the 1944 Bretton Woods agreement ($35 per ounce), shifted to a debt-based system after Nixon’s decoupling due to overspending. 

This “Triffin Dilemma” highlights the dollar’s paradox as a global currency: Asian nations earn dollars through exports, which the U.S. borrows to consume, recycling into Treasury purchases.

With unsustainable debt levels, Trump’s strategy devalues the dollar to reduce debt burdens, but this doesn’t address the core issue: lack of Treasury buyers. 

Enter stablecoins like USDT and USDC. Issuers must buy dollars to issue stablecoins 1:1 on-chain, without printing new money, as minting rights remain with the Federal Reserve. 

Since stablecoins don’t accrue interest, issuers invest in short-term U.S. Treasuries (yielding ~4% annually). For instance, Tether holds $100 billion of its $120 billion assets in Treasuries, generating $4 billion in interest yearly. Trump’s stablecoin legislation, including his proposed USD One, ensures Treasury demand and extends dollar dominance on-chain, securing its role in global trade settlements.

This strategy wields two blades: tariffs generate revenue to tackle debt, and dollar devaluation reduces debt value. However, as Treasuries mature, securing buyers remains critical. Treasury Secretary Benson has emphasized at a crypto summit that stablecoins can bolster the dollar’s global reserve status and drive Treasury demand. Regulations, like Europe’s MiCA requiring 60% of reserves in liquid assets like short-term Treasuries, reinforce this mechanism. While physical-world Treasury demand wanes, stablecoins sustain it in the virtual world, countering the dollar’s declining influence.

Some crypto analysts mistakenly claim stablecoins double the money supply by circulating digitally while backed by Treasuries. 

This is incorrect: issuers buy dollars first, mapping them 1:1 on-chain, supporting dollar circulation and Treasury demand without inflation. 

This elegant structure, backed by a formidable team, explains Trump’s all-in push for the crypto economy. Key players include Treasury Secretary Benson, a currency war expert; David Sachs, the “Crypto Czar” from the PayPal Mafia; and Commerce Secretary Lunik, linked to Tether’s Treasury purchases via Cantor Fitzgerald. 

This Silicon Valley-backed team is orchestrating a shift from currency wars to a crypto-driven financial framework.

Trump’s strategy devalues the dollar, making Treasuries and stablecoins cheaper to issue, ensuring buyers for both and supporting Bitcoin as a national reserve. Critics, including Democrats and the European Central Bank, oppose initiatives like USD One and Bitcoin reserves, citing risks to global financial stability. Democrats argue Trump’s family issuing USD One exploits policy arbitrage, though stablecoins, as private digital currencies, are open to all. Trump’s Bitcoin reserve plan seeks to replace gold and Treasuries with “digital gold” to bolster U.S. credit. By promoting U.S.-based mining and corporate holdings (e.g., MicroStrategy), Trump aims to control Bitcoin’s narrative, replicating the 1944 dollar-gold peg with Bitcoin, enhancing U.S. financial power.

For Asia, Europe, Korean, Japan and Taiwan, U.S. dominance in stablecoins (99% market share) and crypto markets poses challenges. Non-issuing countries risk losing digital pricing power, diminishing their currencies’ influence. China’s 2017 crypto exchange ban and 2021 mining crackdown ceded Bitcoin control to the U.S., fueling Coinbase’s rise and U.S. mining dominance. Hong Kong’s push for digital HKD and crypto ETFs struggles against U.S. hegemony due to political tensions. Singapore should issue stablecoins to retain financial relevance.

Singapore’s forward-thinking stablecoin regulation, driven by the Monetary Authority of Singapore (MAS), has positioned it as a global leader in digital finance, balancing innovation with stability. However, the pace of adoption, while impressive, is arguably too slow given the rapidly evolving global financial landscape, where the U.S. dominates with a 99% stablecoin market share and is aggressively pushing initiatives like USD One to secure U.S. Treasury buyers and dollar hegemony. Singapore’s stablecoin market has seen significant growth, with payments nearing $1 billion in Q2 2024, driven by merchant services like dtcpay and Grab accepting Bitcoin, Ether, USDT, and the Singapore dollar-backed XSGD issued by StraitsX. XSGD’s transaction profile—75% under $1 million and 25% under $10,000—reflects strong retail adoption, while USDT caters to larger institutional transactions. Major banks like DBS are exploring stablecoin listings, with crypto trading volumes tripling in early 2024 due to institutional demand. A 2024 Seedly and Coinbase survey found 57% of finance-savvy Singaporeans own crypto, with 54% using stablecoins for payments and 35% for remittances, aligning with Singapore’s digital asset goals

The U.S. Department of the Treasury’s January 2023 data lists Singapore’s total U.S. Treasury holdings at $187.6 billion, ranking it 14th among foreign holders

These risky Treasuries—worsens with global money supply (M2) ballooning from $36 trillion in 2008 to $90 trillion today, eroding Singapore purchasing power. 

Bitcoin and stablecoins hedge this risk, but the U.S.’s crypto lead means others must follow. Trump’s next step is moving traditional finance ($900 trillion) on-chain, using stablecoins to price assets like stocks and real estate, boosting efficiency and U.S. dominance. Bitcoin’s value, driven by scarcity and “digital gold” status, is fueled by ETF inflows ($100 billion), institutional adoption, and state-level reserves (e.g., New Hampshire). Despite critics like Buffett dismissing it, Bitcoin’s rise reflects a virtual economy shift, appealing to future generations.

In conclusion, Trump’s stablecoin and Bitcoin strategies swiftly address dollar and debt challenges, securing U.S. financial hegemony. However, this could marginalize non-participating nations, risking crises as the European Central Bank fears. Asia countries like Singapore must act decisively in the stablecoin race to avoid losing financial influence in this evolving digital sovereignty battle.

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