Who Produces the Best Dollar
How the Private Sector Is Quietly Reshaping U.S. Debt Strategy
In September 2025, Anton Kobyakov, a senior advisor to President Putin, took the stage at the Eastern Economic Forum in Vladivostok and delivered a provocative allegation: the United States, he claimed, intends to use stablecoins and blockchain technology to “devalue” its public debt.
The entire stablecoin market is worth less than $300 billion, a drop in the ocean compared to $37 trillion in federal debt.
But something in his framing made me pause and think, not about debt cancellation, but about a shift in the relationship between U.S. debt and global dollar liquidity. From there I found myself diving into the GENIUS Act, the distinction between types of stablecoins, and the emergence of a competitive free-market system for dollar production. Taken together, these developments may be quietly reshaping U.S. monetary strategy.
The GENIUS Act: A New Game Structure
The GENIUS Act, signed by Trump in July 2025, sets the first comprehensive regulatory framework for stablecoins in the United States. The law creates a category of “licensed stablecoin issuers” subject to strict requirements: 100% backing in eligible assets, transparent monthly reporting, stringent licensing, a prohibition on interest payments to holders, and priority in bankruptcy.
At first glance, this framework appears designed to ensure stability and prevent the under-collateralization that plagued several foreign stablecoin issuers. But there is something else at play, subtler and deeper. The legislation builds structural, automatic demand for U.S. Treasuries directly into the mechanics of digital dollar creation. How? The law requires reserves to consist primarily of government securities or cash. In effect, every incremental dollar of stablecoins becomes incremental demand for Treasuries. This is not incidental, it is architectural.
Two Types of Dollars: Substitution vs Expansion
I began to wonder what actually happens when a digital dollar, a stablecoin, is backed by Treasuries rather than cash. Not every stablecoin affects the money supply in the same way. To understand this, consider two cases: what happens to the money supply when a digital dollar is backed by cash, and what happens when it is backed by Treasuries.
- Cash-backed stablecoins are pure substitution.
Imagine a user transferring 100 dollars from their bank account to Circle, the issuer of USDC.
• Circle receives the 100 dollars
• Holds them in cash
• And issues 100 USDC in return
What happened to the total money supply? Nothing.
• The bank deposit decreased by 100 dollars
• The stablecoins increased by 100 dollars
The total amount of dollar claims did not change.
- Treasury-backed stablecoins operate under a different mechanism.
• A company buys a 100 dollar US Treasury
• The 100 dollars go to whoever sold the Treasury and remain in circulation
• The company now holds a note that says “the government owes me 100 dollars in three months”
• The company issues 100 dollars of stablecoins backed by that Treasury
Let us count:
• The seller of the Treasury holds 100 dollars in cash ✓
• The stablecoin users hold 100 digital dollars ✓
• Total: 200 dollars in circulation, backed by the same 100 dollar Treasury
This is no longer substitution. This is expansion.
The money supply increased without the government issuing new debt and without any action by the Federal Reserve. It is essentially quantitative expansion performed by the private sector. Also referred to as shadow QE or shadow money creation.
We are effectively turning debt (a note you cannot spend at the grocery store) into a liquid means of payment (money you can spend). The Treasury was already a highly liquid asset, but the stablecoin is an even more liquid asset. That improvement in liquidity is what produces the monetary expansion.
If this is correct, then what does it imply? What happens when such a mechanism operates at scale, for example trillions of dollars in stablecoins? I considered three possible consequences.
A) First consequence: Diluting the debt burden
This expansion mechanism changes the relationship between U.S. public debt and the money supply. When more money circulates relative to existing debt, the debt becomes, in a real economic sense, lighter. It is not erased, it is diluted.
Imagine a scenario in which Treasury-backed stablecoins reach three trillion dollars, which lies within projections for the U.S. market by the end of the decade.
• Before the expansion: 38 trillion dollars of debt and roughly 22 trillion dollars of M2 equals a debt to money ratio of 1.73
• After the expansion: debt remains 38 trillion, but the effective money supply rises to 25 trillion, yielding a ratio of 1.52
The ratio improves by 12 percent without repaying a single dollar of principal.
But if we increase the money supply by trillions, where is the inflation? We will return to this question in the third consequence, because the answer depends directly on global demand for stablecoins.
B) Second consequence: a new strategy for debt management
The mechanism behind Treasury-backed stablecoins does more than improve debt ratios. It provides the United States with a powerful new tool for active debt management through manipulation of the yield curve.
Stablecoin issuers require immediate liquidity, so they primarily buy short term Treasuries with maturities of one to six months. As the stablecoin market grows, demand for short term Treasuries grows with it. Greater demand raises prices of short term Treasuries and lowers their yields.
Short term yields decline, while yields on long term Treasuries remain unchanged, since demand for them does not shift in the same way. A spread emerges. The government can now issue large quantities of short term debt at low interest rates, because demand is enormous, and use that funding to retire older, long term, more expensive debt. This is a form of arbitrage performed by the sovereign on itself, sometimes likened to Operation Twist.
The interesting part is that it occurs without direct intervention by the Federal Reserve. The boundary between monetary policy (the Fed) and fiscal policy (the Treasury) becomes less distinct.
C) Third consequence: an unstoppable geopolitical dollar
Beyond domestic debt management, Treasury-backed stablecoins transform global access to dollars and reinforce their dominance.
Traditionally, holding dollars required either an American bank account or a local bank connected to the American banking system. For billions of people in emerging markets, this was not possible. Stablecoins erase that barrier entirely. A shopkeeper in Lagos, a freelancer in Buenos Aires, or a merchant in Istanbul can now hold dollars with a smartphone and an internet connection. That is all.
This is already happening at large scale. In Venezuela, inflation exceeded 200 percent in 2025 and USDT effectively became a local currency. People pay for groceries, rent, and even receive salaries in USDT. In Argentina, a portion of wages can be paid in stablecoins, and residents routinely convert pesos into stablecoins to protect savings. In Nigeria, more than ten percent of the population, roughly twenty six million people, use stablecoins mainly because dollars are difficult to obtain through the banking system.
Here lies the answer to the question raised earlier: where is the inflation? The answer is “inflation export”. The money is created in the United States but absorbed abroad, in Nigeria, Argentina, Vietnam, and any place where people flee the local currency. This massive external demand absorbs the excess liquidity. The United States issues the money, the world absorbs the inflation. The mechanism works only if global demand for dollars is enormous.
Governments will be largely powerless against this. Blockchain operates differently: no business hours, no approvals, low fees, and once enough people use it, it becomes impossible to block. States that once imposed capital controls or banned dollar transactions are discovering that these tools are largely ineffective against stablecoins.
This insight is not new. In 1999, a decade before Bitcoin, Peter Thiel, co-founder of PayPal and Palantir, predicted precisely this mechanism. In a remarkable talk on the future of digital money, he described how mobile phones connected to the internet would allow people everywhere to route funds into safe jurisdictions and fully dollarize their economies. Thiel foresaw governments facing an impossible dilemma: either shut down telecommunications and make phones and the internet illegal, or surrender monetary sovereignty.
This is also where the interesting geopolitical dimension of Treasury-backed stablecoins emerges: a redistribution of U.S. public debt. The United States effectively spreads its debt across hundreds of millions of people around the world. When a farmer in Kenya holds a Treasury-backed stablecoin, he creates demand for U.S. Treasuries. But it does not end there. That same farmer now has a personal interest in the stability of the dollar. The system strengthens not despite instability elsewhere, but because of it. As more local currencies collapse, more people move to digital dollars without their governments being able to stop them.
In other words, beyond domestic debt management, Treasury-backed stablecoins create a new and massive market for U.S. Treasuries that did not exist before, and bring about a fundamental change in global dollar accessibility and dominance.
The Engine of the Machine: Competition as the Driving Force
So how does the United States execute its strategy? The answer is simple. It does not. It lets market forces do it on its behalf.
Instead of issuing digital dollars directly, the United States creates an open competitive market for stablecoin issuance. Numerous private companies compete to produce the best dollar. All of them pursue the same brand: the dollar. And the prize is enormous. Consider Tether today: a market value above 150 billion dollars and billions of dollars in annual profit from Treasury yields that back USDT. Now imagine this at the scale of trillions. Whoever wins this race, whoever provides the best dollar, captures the yields on trillions of dollars in Treasuries. This is an unprecedented revenue stream, and it is precisely the competition every firm wants to win.
The competitive dynamic itself creates the structural demand for Treasuries. Any issuer seeking to grow market share must buy more Treasuries, hold more reserves, and expand issuance. This is not a discretionary investment. It is an operational requirement. The system forms a self reinforcing loop: competition drives stablecoin issuance, issuance requires Treasury purchases, Treasury purchases lower yields, lower yields reduce borrowing costs, lower borrowing costs strengthen the fiscal position, a stronger fiscal position supports the dollar, a stronger dollar attracts more users to stablecoins, and competition intensifies.
According to economic theory, competition in a free market is the most powerful and efficient engine. The United States harnesses this engine for its national strategy.
Risks: Crisis Scenarios
The greatest vulnerability of the system lies in its dependence on confidence and redemption. If confidence breaks due to issuer default, insufficient reserves, operational failure, or an external market shock, a domino effect can begin. Users attempt to redeem stablecoins for cash, stablecoin issuers sell Treasury holdings to meet redemptions, Treasury sales push prices down and yields up, fear of inadequate backing triggers further redemptions in a bank run dynamic, the Treasury market experiences turbulence, yields rise further, government borrowing costs increase, and additional issuers are pulled into distress. The pattern is familiar. It has recurred throughout financial history. The risks are real and significant.
Conclusion
I have tried to understand what is happening here. What drives the American interest in stablecoins and why at this particular moment. The deeper I dug into the GENIUS Act, the differentiation between types of stablecoins, and the competitive mechanism that now exists, the more I felt I was finding the logic beneath the mess.
The United States is not “reducing its debt in the crypto cloud” through crude manipulation, as Anton Kobyakov suggested. It is far more sophisticated than that. Instead, the United States creates a competitive free market in which private entities, driven by profit incentives and market forces, systematically expand the money supply, generate structural demand for Treasuries, extend the global dominance of the dollar, and distribute the burden of public debt across hundreds of millions of users. The competitive market itself, the race to produce the best dollar, serves as the engine for this entire process.
This is at least the theory, or my understanding of it. I would be interested to know what you think.
*Link to the Peter Thiel talk (short and recommended):
https://www.youtube.com/watch?v=Osp_Ug_7r7Q
*Link to the Anton Kobyakov speech:
https://x.com/BitcoinNewsCom/status/1965002879175139504?s=20