On the stage of financial policy, Trump’s shift in attitude towards stablecoins can be described as dramatic. During his first presidential term, Trump bluntly stated that the so-called “currency” without an anchor was the world’s largest Ponzi scheme, and was full of doubts and criticisms towards cryptocurrencies, including stablecoins. He once criticized the unstable value of cryptocurrencies as “thin air” and pointed out that unregulated cryptocurrency assets may fuel illegal activities, including drug trafficking, so issuers must be subject to banking regulations “both domestically and internationally” just like banks. However, before and after his second term in the White House, Trump suddenly showed extraordinary enthusiasm for stablecoins, taking a 180 degree turn in attitude. He not only urged lawmakers to pass stablecoin legislation on various occasions to help the United States become the world’s “cryptocurrency capital,” but also signed relevant bills to safeguard the development of stablecoins. Behind this huge transformation lies a four fold calculation of interests.
Consolidate the hegemonic position of the US dollar
From the perspective of the global monetary landscape, the dominant position of the US dollar is facing challenges. China, Russia and other countries continue to promote “de dollarization” and expand the international trading scale of their currencies. In the current global foreign exchange market, although the US dollar holds the top spot with a 44% share in currency trading, its position is no longer unbreakable.
The stablecoin market is accelerating its development with the absolute dominance of the US dollar. According to research by blockchain analysis firm Chain Analytics, about two-thirds of cryptocurrency transactions on the blockchain are stablecoins, with over 90% of them being pegged to the US dollar, such as Tether. The Trump administration is attempting to further consolidate the dominant position of the US dollar in the global monetary system by vigorously promoting stablecoins pegged to the US dollar.
The Trump administration claims to expand the US dollar market globally through stablecoins. The biggest advantage of stablecoins is that they can be used instantly and at almost zero cost for cross-border commercial transactions and personal remittances, which can change the international remittance market landscape. If the new regulations enhance user security, the market size of stablecoins pegged to the US dollar is expected to expand from the current $234 billion to $2 trillion within three years. The birth of a stable currency supported by US treasury bond will consolidate the dominant position of the benchmark currency, the US dollar, and control global trade and settlement through a stable currency, which will become an important measure to maintain the process of the US dollar’s benchmark currency status.
Relieve the selling pressure on US Treasury bonds
The US treasury bond bond market is currently facing severe selling pressure. A series of economic policies implemented by the Trump government have led to the continuous expansion of the US fiscal deficit, the continuous increase in the size of treasury bond and the shaking of investors’ confidence in US debt.
The Genius Act stipulates that if the issuer of stable currency maintains the anchoring mechanism of “one currency=one dollar”, it needs to hold a reserve of more than one dollar for each currency, and the reserve needs to be mainly allocated to short-term U.S. treasury bond bonds. This means that virtual currency issuers need to purchase a large amount of US Treasury bonds to meet compliance requirements. If the size of the stable currency market reaches $2 trillion, it will generate nearly $2 trillion of new demand for US treasury bond bonds.
By stabilizing the development of the currency, more funds can be attracted to flow into the U.S. treasury bond bond market, thus reducing the yield of U.S. short-term treasury bond bonds, easing the debt pressure of the U.S. government, and striving for more space for the implementation of U.S. fiscal policies. Trump said that stabilizing the currency would increase the demand for US treasury bond and reduce US interest rates, which is of great significance to the stability of the US treasury bond market.
Catering to emerging voter groups
At the political level, Trump’s shift in attitude is closely related to election interests. During the 2024 presidential campaign, Trump discovered that cryptocurrency holders are an undeniable force of voters.
A political action committee called Trump 47, composed solely of cryptocurrency circles, raised $7.5 million in cryptocurrency donations for Trump within four months. In the final sprint stage of the 2024 election, Trump changed his fundraising structure from small donations during his 2016 campaign, and “big money” became mainstream. Despite the fact that Republican fundraising has never been as good as Democratic fundraising, Trump’s large fundraising in the third quarter exceeded Harris by more than 50 percentage points. According to statistics, the super political action committee formed by supporters of cryptocurrency invested nearly $250 million during this election period.
In order to win the support of this group of voters, Trump promised to support the development of cryptocurrency and announced the acceptance of digital currency donations. His transformation has attracted the attention and support of a large number of cryptocurrency holders, which has to some extent helped him succeed in being elected president. After being successfully elected, Trump reciprocated by actively promoting stablecoin related legislation to give back to this voter group and consolidate his political support base.
Promote the development of financial technology in the United States
The United States has always held a leading position in the field of financial technology, but in recent years, with the rapid development of global financial technology, other countries and regions have been continuously making efforts in areas such as cryptocurrency and digital currency, posing challenges to the United States’ leading position.
The Trump administration hopes to create a more favorable development environment for American fintech companies by promoting stablecoin legislation. After the enactment of the Genius Act, it will pave the way for US banks to independently issue digital assets, enabling US financial institutions to seize the opportunity in the stablecoin field and enhance the US’s strength in global fintech competition.
By creating the world’s’ Cryptocurrency Capital ‘, attracting global cryptocurrency companies, talents, and funds to gather in the United States, further consolidating the country’s innovation advantage in the field of financial technology, driving the development of related industries, creating more job opportunities and economic growth points, and promoting the development of the US economy.
