Stablecoins are often pitched as a stopgap, or a friendly tool for people in the developing world who can’t handle the volatility of Bitcoin. It’s framed as something that complements Bitcoin, rather than in competition with it. Nothing could be further from the truth.
Bitcoiners have typically used the image of a Trojan horse to justify many things over the years, justifying the many inefficiencies and compromises made over time as what was necessary for Bitcoin to infiltrate the old system to eventually take over and win. This is exactly what stablecoins are, except in reverse.
Stablecoins are Bitcoin’s Trojan horse.
The volatility of Bitcoin makes it difficult to use if you don’t have the net worth to overcome it, but there are mechanisms to deal with this. Centralized schemes like Blink’s Stablesats were created to use Bitcoin collateral to stabilize the value of the dollar without having to actually hold the dollar. Secret ledger contracts (DLCs) provide another mechanism to accomplish the same thing in a decentralized manner.
Instead, we support the US dollar. Stablecoins are a solution to volatility, but they are not native Bitcoin. They are a Trojan horse for the US Treasury in the bitcoin space. They do more to control and support the dollar than they do to “help” Bitcoin users deal with the volatility issue, which can be done while holding only Bitcoin.
Stablecoins give the Treasury a new lifeline for selling Treasuries. Foreign countries have reduced demand and sold off existing Treasuries for several years now, and stablecoin issuers have stepped up to pick up the slack. The greater the demand for stablecoins, the greater the decline in foreign governments’ demand for Treasuries that the US government can transact. At a time when the BRICS are increasingly planning to shift away from their dependence on the US dollar, stablecoins represent a way to improve this problem.
They also, unlike native Bitcoin solutions like DLCs, pose a security risk to their holders. As far as I know, apart from Liquid Network, all stablecoins on the network are issued with a seizure and freeze function built into the smart contract the issuer uses to create them. Almost all stablecoins support arbitrary freezing and seizure of user balances on the various networks on which they are traded.
Monitoring is another aspect of the proliferation of stablecoins. The more dollar-denominated stablecoins are adopted around the world, without any government having to be politically convinced to formally dollarize, the more the US government will be able to directly monitor foreign financial activity. Chainalysis and other companies become a de facto government surveillance system for foreign financial activity, without having to subpoena or collect records first. Everything exists on the blockchain.
At the same time, he is promoting the idea that blockchain is a useful technology separate from Bitcoin, pushing the idea to the average person that Bitcoin is just an asset like gold to invest in. It creates a psychological narrative of “invest in bitcoin, use your monitoring funds when you need to spend.
Stablecoins in general would be one of the most epic unforced errors to ever happen in this entire ecosystem. People need to wake up before this becomes so deeply ingrained in their lives, and in the financial world in general, that it becomes difficult to break free of it.
People should deploy and rely on Bitcoin, money built to enable freedom and sovereignty, not these cheap imitations called stablecoins that are nothing more than an extension of the surveillance and tyranny of the old financial system.
This article is a takes. The opinions expressed are entirely those of the author and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
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