A rather lucrative deal with the devil

EIn Ziegenbock im Wildgehege Granat. Bild von Daniel Grothe via flickr.com.. Lizenz: CC BY 2.0

The Oldest Consumer Protection Organization in the USA Warns About Tether (USDT). The Stablecoin Is Used for Terror Financing, Drug Trafficking, and Money Laundering – But It Also Creates a Welcome Demand for Government Bonds. Time Can Only Deepen This Pact.

Consumer’s Research is considered the oldest consumer protection organization in the USA. Although the formerly left-leaning NGO founded in the 1920s has little in common with its origins, since it was taken over by Republicans in the 2020s and incorporated into the usual crusade against „wokeness.“ However, with a current campaign, it is almost returning to its old ways.

Last week, Consumer’s Research broadcast the ad „Tethered to Corruption“ on a giant screen in New York’s Times Square, the „Center of the Universe.“ Below the text, images of Islamist terrorists, slaves, pills, envelopes filled with money, and Russian soldiers were displayed. The message is clear: Tether dollars finance terrorist attacks, human and drug trafficking, bribery, and Russian weapons. It goes on to say that last year alone, at least 20 billion dollars in criminal transactions were allegedly processed through Tether.

On the website tetheredtocorruption.com, Consumer’s Research presents headlines and articles showing how Tether dollars are abused. You can scroll endlessly down to read more horrors and crimes. Additionally, the organization warns that Tether could become the next FTX and drag US savers down with it.

However, Consumer’s Research is not generally against stablecoins. The organization even admits that stablecoins can be the future. All the more reason to control them with stricter laws.

The 18th Largest Holder of Government Debt

This, however, may prove difficult. A study by Tagus Capital, a Web3 fund, published around the same time, calculates that stablecoin issuers have now become the 18th largest holders of US government bonds, ahead of powerful industrialized nations like Germany or South Korea. With 91 billion dollars, Tether is by far the leader, followed by Circle (USDC), which holds government bonds worth 29 billion dollars.

For the USA, stablecoins are thus gaining almost systemic relevance. The country is in debt to the tune of nearly 34 trillion, with interest payments alone totaling nearly 900 billion dollars in 2024. The rising costs of debt are a reason why the Treasury issued even more government bonds than usual last year, which is likely a dangerous path in the long term.

The government gratefully accepts the unexpected increased demand from stablecoins. After all, the demand for capital is not decreasing, if only to pay interest, while China is currently in the process of reducing its holdings of government bonds, and the BRICS countries are threatening to decrease their dependency on the dollar. A high, possibly increasing demand from stablecoins could be extremely helpful for the government.

If Tether is the next FTX, it threatens not only some savers but possibly also the US government financing.

„This Is Just the Beginning!“

According to Circle CEO Jeremy Allaire, the demand for US debt created by stablecoins will not decline anytime soon. Quite the opposite. Allaire says on Twitter that by 2034, around 10 percent of global trade will be conducted in stablecoins:

„I have never been as optimistic as I am right now,“ he explains. The crypto industry has achieved infinitely more than one can list, and even more breakthroughs are lurking around every corner, blockchains are scaling, infrastructure is hardening, user-friendliness is increasing, and so on. And stablecoins are right in the middle, increasingly accepted, penetrating almost every jurisdiction … — and this is just the beginning.

What if, Allaire asks, ever larger parts of the financial system run on public blockchains, Blockchain Apps cater to billions of users, Onchain organizations like DAOs compete with traditional companies, political bodies – governments, cities, regions – live democracy Onchain, and so forth, if all those wild, utopian dreams circulating in the crypto space come true, even to some extent — and if ten percent of the world’s circulating money, ten percent of trade, is denominated in stablecoins?

Jeremy Allaire dreams a little, and he makes no secret of it. But he believes that all this could very well happen in the next ten years. And he is not wrong. The technology becomes more mature every year, the legal situation more settled, the interest stable.

And if it comes to pass as Allaire suggests, the US government has a lever to benefit immensely. Even if the petrodollar comes to an end, as is sometimes said, if the BRICS create their own currency, or the Yuan becomes the second global reserve currency – even then the USA could draw from a never-ending demand for government bonds thanks to stablecoins. But it has to pay a price, one could say, make a pact with the devil: it must accept that stablecoins also scale the global misuse of money – that they also become the currency of the unjust and evil.