The geopolitical consequences of stablecoins such as Libra and Tether

The geopolitical consequences of stablecoins such as Libra and Tether

Since 2018 there has been an unprecedented explosion of stablecoins on the market. Anton Lucian writes that now that Libra and the People’s Bank of China are both planning to issue their own stablecoin, it is time to think about the geopolitical consequences.

Stablecoins are gaining ground on bitcoin

In May, Binance Research issued a report stating that bitcoin trading pairs on Binance were declining. An example of a trading pair is BTC / LINK. You can get to Chainlink (LINK) by trading bitcoin (BTC).

More and more stablecoins are taking over that role from bitcoin. Tether (USDT), USD Coin (USDC), and others have reduced the trade dominance of bitcoin. Since the publication of that report, stablecoins have only gained more ground. And if the plans of different companies and governments of their own stablecoin are implemented, then this will continue for a while.

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Lucian (writer of says that the current wave of new stablecoins is more than just the granting of fiat money, instead a global power game is taking place. And we all participate.

Stablecoins as geopolitics

The Chinese central bank has been building its own cryptocurrency since 2014. According to the latest reports, this stablecoin is also almost ready. The development is undoubtedly accelerated after Facebook expressed the ambition to launch Libra next year. But there are more examples.

For example, Walmart recently unveiled a patent for its own stablecoin. In the same way, insurance giant Allianz issues a stablecoin for its own token ecosystem. Two months ago, fourteen major banks, led by the UBS group, said they wanted to spend a stablecoin, more than sixty million had already been invested in the project.

Governments also participate

Governments and central banks are also interested in cryptocurrencies (even though they often express themselves negatively about bitcoin). The Petro of Venezuela is perhaps the best known example. Russia is considering opening a special trading center for digital assets on the Sino-Russian border. Iran also plans to create a stablecoin linked to gold as a way to bypass American sanctions. In July, Turkey announced that it is working on its own form of “digital blockchain money”.

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In short, cryptocurrencies are increasingly being anchored in global geopolitics. With so many stablecoins in development, it seems to be a digital arms race. For many projects, the biggest opponent is the US dollar. The idea is that stablecoins and cryptos (whether or not from a government) should offer an alternative to the power of the dollar.

China and the US

Lucian gives a good example: Suppose Alibaba releases a stablecoin that is linked to the Chinese renminbi. This token can, for example, be used as a payment method or for certain cloud services. In fact, anyone who uses the Alibaba currency would also use the Chinese renminbi without knowing it.

The same applies to the reverse situation: if many Chinese citizens use a stablecoin linked to the US dollar, this could seriously weaken the position of the renminbi. Lucian concludes that there is therefore a political incentive for states to intervene in this stablecoin mania. This is a currency war, but on a more familiar battlefield. And this may be the reason why China expresses itself so negatively about Libra as a worldwide stablecoin.

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It seems unlikely that a single country or company will build the winning stablecoin. But the interests are greater than it appears at first glance.

The question is, which currency or commodity forms the basis for the stablecoin of tomorrow?

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