Analysis of the Far-Reaching Impact of the Stablecoin Bill
I. New Arbitrage Models
Once the U.S. Stablecoin Bill is passed, it will give rise to an entirely new chain of risk-free arbitrage. Stablecoin issuers will attract U.S. dollar deposits by issuing stablecoins. Since holding stablecoins does not generate any interest, holders effectively forgo the interest income they would have earned on bank deposits. After obtaining these funds, issuers will use them entirely to purchase short-term U.S. Treasury bills. At the current interest rate of 4%, this amounts to arbitrage through deposit absorption at zero cost. For holders, the choice is either to invest in high-risk assets like Bitcoin to offset the loss of interest income or to bear the opportunity cost of holding stablecoins. In the long term, the zero-interest characteristic will significantly inhibit the adoption of stablecoins for daily payments, with the only beneficiaries being the stablecoin issuers. The higher U.S. interest rates rise, the greater this arbitrage opportunity becomes.
II. Impact on Traditional Banks
Stablecoins essentially constitute a form of deposit-taking by non-financial institutions, which will inevitably divert deposits away from traditional banks and create liquidity pressures within the banking system. As the core pillar of the U.S. financial system, banks face systemic risk should a liquidity shortage arise. Interestingly, it is precisely traditional financial institutions that are currently leading the charge in stablecoin issuance. They are well aware of the deposit diversion effect of stablecoins and have chosen to enter the market early to secure a foothold. By leveraging their own credit advantages to attract more deposits, they are essentially using this new tool to consolidate their market position.
III. The Inherent Contradiction of Treasury Rollovers
The current high-interest-rate environment is causing significant harm to the real economy, yet it supports the continuous rollover of massive amounts of U.S. dollars to purchase short-term Treasury bonds. Under the requirements of the Stablecoin Act, issuers must roll over short-term Treasury bonds every 93 days. This effectively provides the U.S. Treasury with a continuous source of demand for short-term debt, allowing it to roll over debt indefinitely—paying only interest to avoid the pressure of principal repayment. The problem, however, is that the high-interest-rate environment cannot last forever. If the Federal Reserve significantly cuts interest rates in the future, the arbitrage opportunity for stablecoins will disappear entirely. Once issuers find it unprofitable to continue purchasing short-term Treasuries, the chain of principal rollovers will break, and the Treasury will face the pressure of concentrated principal redemptions on short-term Treasuries. The Federal Reserve is now caught in a dilemma: it cannot cut rates, nor can it refrain from doing so.
IV. Future Global Liquidity Draining Mechanism
If the U.S. enters a rate-cutting cycle to inject liquidity in the future, and then enters another rate-hiking cycle several years later, in addition to the traditional financial system reclaiming global dollar liquidity, stablecoin issuers will also join the ranks of those draining liquidity. At that time, the U.S. will be able to reclaim global dollars with greater efficiency and intensity. China will be relatively less affected due to strict foreign exchange controls, but stablecoins can circumvent financial regulations in most developing countries and even some developed nations. This further underscores the necessity of de-dollarization. If other nations wish to maintain autonomous economic development, they must reduce their reliance on the dollar system to avoid being repeatedly exploited by the cycles of U.S. monetary policy.
V. Key Details of the Stablecoin Bill
Regarding whether stablecoins can pay interest, the bill has not yet been passed. Previously, platforms like Coinbase paying interest on stablecoins constituted a commercial activity undertaken at their own risk. Once the bill is passed, obtaining government endorsement will require strict compliance with regulatory requirements. The core requirement is a mandatory peg to the U.S. dollar and U.S. Treasury bonds, which essentially amounts to bringing the stablecoin industry under government oversight. It is important to clarify that the U.S. government will not provide any guarantees for stablecoins, nor will the Federal Deposit Insurance Corporation (FDIC) insure stablecoin deposits. Any risks incurred will be borne solely by investors. Issuers may only promote that their products have received government recognition; they may not claim government guarantees, or they will face penalties.