Stablecoins like USDT are gradually becoming an important tool in the economies of Global South countries, allowing residents to preserve wealth amid high inflation. U.S. authorities view them as a means of controlling the dollar system.
Stablecoins in the Global South Economy
In countries like Argentina, stablecoins have replaced local currency for protecting savings. Amid the peso's devaluation and high inflation, residents turn to USDT for transactions. These tokens, originating from the U.S., effectively serve as a secure asset, helping to channel distributed finances back into the U.S. treasury. This shift is not limited to local markets and goes against the process of 'dollarization.'
Mechanism and Impact on Banks
Stablecoin issuers receive U.S. dollars, invest them in short-term Treasury securities, and issue tokens at a 1:1 ratio. This mechanism essentially creates a 'narrow bank' that increases demand for short-term bonds, reducing Federal Reserve control over national financial systems. However, the outflow of funds from commercial banks to stablecoins also leads to a contraction in real economy lending.
Tech Platforms as New Dollar Channels
American platforms, such as WhatsApp, could become vehicles for the widespread distribution of stablecoins. If successfully implemented, users could send stablecoins as easily as messages, making the dollar more accessible to populations in countries with unstable currencies. This could weaken states' influence on monetary policy as residents utilize the dollar as 'people's money.'
Stablecoins represent a new stage in the evolution of the dollar economy and could significantly alter financial flows. Their impact may be both positive and negative, creating opportunities for safer transactions, yet also posing risks to the system as a whole.
