For most of recent history, money has come in two forms. There’s the cash in your wallet — the physical stuff, paper and coins — and there’s the number that shows up when you log into your bank account. That’s it. Two kinds of money, and we’ve been living with that arrangement for a very long time. But something genuinely new is arriving, and it’s worth paying attention to: a third kind of money called a “payment stablecoin.” If that sounds like just another fintech application, stick with me, because this one is very different.
Payment stablecoins are not just a new and efficient way to make payments. They are in fact a new kind of money, and every new stablecoin adds to the existing money supply.
To understand why stablecoins matter, it helps to take a quick trip through monetary history, because what’s happening now isn’t as unprecedented as it might seem — it’s actually the latest chapter in a very old story. Money has always evolved by layering new credit instruments on top of whatever the underlying standard of value was. We started with barter, which worked fine until you needed to trade a cow for something worth half a cow. Then came commodity money, which is the most marketable commodity used in barter. Gold emerged as the winner because it’s durable, divisible, portable, and rare enough to hold its value.
Gold worked beautifully for thousands of years. Then came banking, and with it the banknote: a paper receipt promising you could redeem it for gold at a trusted bank. The note was easier to carry than the gold itself, and as long as people trusted the bank, the note was as good as gold. Then came bank deposits and checkbooks — instead of carrying paper, you just moved numbers around a ledger.
Along the way, government paper replaced gold as the standard money, but people accepted this based on their trust of the established banking system plus a good dose of government coercion.
Then came the internet, and suddenly you could move those same bank deposits around via credit cards, Zelle, Venmo, and Apple Pay. Faster and more convenient, but fundamentally the same thing: shifting bank deposits from one name to another.
Here’s the key insight that most people miss: A payment stablecoin is not just another app for moving your bank deposits around. It is something categorically different. When you buy a stablecoin token, your bank deposit doesn’t disappear — it moves to the stablecoin issuer, who uses it to buy Treasury bills, moving the deposit to the Treasury seller. Meanwhile, you get a digital token worth exactly one dollar, which you can spend like cash.
As monetary scholar Russell Napier put it, existing money is not destroyed when a stablecoin is created — a brand-new medium of exchange is added on top. That’s not a mere payment app. That’s money creation. Stablecoins may be the most significant development in how money works since commercial banking emerged in the 16th century. For the full story, you can watch Part One of my video series on stablecoins: “Stablecoins are creating new money – almost nobody realizes this.”
So now there are two dollar-denominated spending instruments in the world, where before there was one. Previously, banks were the only entities with the legal privilege to create money. Now there is another – the stablecoin issuer, companies like Tether and Circle. The legal framework that makes all this official is the GENIUS Act — Guiding and Establishing National Innovation for U.S. Stablecoins — signed into law by President Trump on July 18, 2025, with strong bipartisan support. The law designates “payment stablecoins” as a legal means of payment, requires stablecoin issuers to back every token one-for-one with Treasury bills or equivalent safe assets, guarantees immediate redemption at par, and prohibits issuers from paying interest on tokens. That last detail matters, as we’ll see in a moment.
So who’s pushing this newfangled money, and why? The answer is Washington, and the reason is straightforward: the U.S. government is broke and needs new buyers for its debt, i.e., new lenders. Treasury Secretary Scott Bessent has been quite candid about this. He’s described stablecoins as potentially “an important feature of financing the U.S. government,” argued that they represent “a once-in-a-generation opportunity to expand dollar dominance,” and projected that the stablecoin market could grow from roughly $300 billion today to $3 trillion by the end of the decade. Every US “payment stablecoin” issued requires the purchase of T-bills or their equivalent, which means every new stablecoin user is effectively lending money to the U.S. government.
Beyond Washington, who else benefits from stablecoins? Primarily, it’s people outside the United States. If you’re a middle-class American with a checking account and a Venmo app, payment stablecoins don’t offer you much you don’t already have. But if you live in Turkey or Venezuela, where your local currency loses value weekly, a dollar-denominated stablecoin on your smartphone is a godsend. If you’re sending money across borders through a banking system that charges steep fees and takes days to settle, a stablecoin transfer that settles in seconds for fractions of a cent is transformative. Picture a jewelry vendor in Istanbul who currently faces a choice among bulky paper dollars, a credit card that charges him 2-3% and can be reversed, or a stablecoin that’s instant, final, and costs almost nothing. The choice isn’t difficult.
Geopolitically, stablecoins are essentially a weapon in the currency war that’s already underway. The BRICS countries — Brazil, Russia, India, China, South Africa, and several newer members — have been actively building alternatives to the dollar-based trade settlement system. China is developing a yuan- and gold-based payment infrastructure. Every barrel of oil priced in yuan is a vote against the dollar. But every stablecoin wallet opened in Nigeria, Indonesia, or Argentina is a vote for the dollar. As Bessent said plainly: stablecoins can reinforce dollar supremacy. He’s probably right.
But there are real costs, and they’re not evenly distributed. Stablecoins aren’t FDIC-insured. They add to the money supply and therefore contribute to price inflation. And since by law they pay zero interest, anyone who holds them for very long is guaranteed to lose ground to inflation.
Stablecoins will also likely accelerate the migration of deposits from small community banks to large money-center banks, since T-bill sellers tend to bank with the big institutions. That’s a development worth watching.
So, where does this leave us in practice? Stablecoins will become a common feature of the global economy within the next few years. Mass adoption in the U.S. will be slower — Americans don’t need them as much as people in higher-inflation economies. Internationally, growth will be faster and more dramatic. Bessent’s multi-trillion-dollar projections are plausible. The dollar may strengthen as demand for stablecoins drives T-bill purchases. Short-term interest rates will face downward pressure. Investment asset prices could benefit as T-bill sellers put their newly liquid dollars to work in equities and real estate.
The bottom line is this: payment stablecoins will give Washington more runway on its debt problem, strengthen the dollar’s global position, and deliver real benefits to the unbanked and the dollar-hungry around the world. But they also entrench the U.S. government’s inflation policy in the long-term economic landscape.
Stablecoins have a historical parallel. In 1789, revolutionary France invented a new money called the assignat, backed by land confiscated from the Catholic Church. It worked for a while, then collapsed when money creation outpaced the collateral. A famous 1896 monograph, Fiat Money Inflation In France, observed that the losses ultimately fell almost entirely on working people and small savers — those who lacked the means or the knowledge to protect themselves.
The stablecoin story isn’t the assignat story, but the underlying dynamic is recognizable: a fiscally strained government seeking a new monetary instrument to attract new lenders, buying itself time while ordinary people absorb the inflationary consequences.
For regular people, the lesson is the same one it has always been: don’t be the one left trying to save in a depreciating currency. If you haven’t already done it, start a savings plan by buying physical gold.
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