Stablecoins Are Beneficial to U.S. Economy, Tether’s Custodian Says

One of the ongoing discussions in the cryptocurrency sphere is if US dollar stablecoins, which maintain a value linked to the U.S. dollar, reinforce the greenback’s leading position in global finance. As per the CEO of Cantor Fitzgerald, they indeed contribute positively to the economic might of the United States.

“During a Chainalysis Conference on Wednesday, Howard Lutnick expressed his belief that the dominance of the US dollar is crucial for America, as stated in a report by Bloomberg. He favors stablecoins like Tether and Circle due to their significance to our economy,” – is one way to paraphrase the given statement.

Stablecoins play a crucial role in the American economy by fueling interest in U.S. Treasury bonds, according to him, without presenting a danger to the global financial system.

In simple terms, the strength of the US dollar in international financial markets enables the United States to have larger budget deficits, secure loans at cheaper interest rates than many other countries, and apply economically damaging penalties against adversaries through financial sanctions.

Tether Holdings, the company behind the world’s largest stablecoin, USDT (with a market cap of $107 billion as of now), is looked after by Cantor Fitzgerald. In comparison, Circle’s stablecoin, USDC, has a market value of $32.25 billion. (Source: CoinGecko)

Stablecoins are frequently employed by crypto traders for two primary purposes: in the spot market as funding currencies, and in derivatives trading as collateral. During the 2022 Federal Reserve’s tightening cycle, cryptocurrencies acted as a safe haven.

After the downturn of Terra’s algorithmic stablecoin, UST, in May 2022, investor trust in stablecoins was shaken. Despite this, Tether withstood the challenge, upholding redemptions despite ongoing doubts regarding its reserve backing. In January, Lutnick assured the public that Tether indeed had sufficient funds to back USDT.

Lutnick expressed his opposition to central bank digital currencies (CBDCs) during a speech on Wednesday. He raised concerns that China might perceive a possible digital dollar as a covert American surveillance tool.

He expressed concern that central banks might consider introducing a digital currency of their own. This seems logical, doesn’t it? But there’s a potential issue: how will China react? They could view it as an American surveillance tool.

Over the next decade, Lutnick predicted that tangible assets such as bonds could be transformed into digital tokens for trading on the blockchain, given that the technology advances to become both swift and cost-effective.