A pretty lucrative devil’s pact – BitcoinBlog.de – the blog for Bitcoin and other virtual currencies

The oldest consumer protection agency in the USA warns against Tether (USDT). The stablecoin is used for terrorist financing, drug trafficking and money laundering – but also creates a welcome demand for government bonds. Time can only deepen this pact.

Consumer’s Research is considered the oldest consumer protection organization in the USA. Although the formerly left-leaning NGO, founded in the 1920s, no longer has much in common with its origins since it was taken over by Republicans in the 2020s and harnessed into the usual crusade against wokeness, it is almost returning to the old days with a current campaign.

Last week, Consumer’s Research broadcast the ad “Tethered to corruption” on a giant screen in New York’s Times Square, the “Center of the Universe.” Below it showed pictures of Islamic terrorists, slaves, pills, banknotes in envelopes, and Russian soldiers. The message is clear: Tether dollars are used to finance terrorist attacks, human and drug trafficking, bribery, and Russian weapons. Last year alone, it is said, at least 20 billion dollars in criminal transactions were processed via Tether.

On the website tetheredtocorruption.com, Consumer’s Research displays headlines and articles that show what Tether dollars are being misused for. You can click down almost endlessly to read more and more horrors and crimes. The organization also says that Tether is threatening to become the next FTX, dragging US savers into the abyss with it.

Consumer’s Research is not against stablecoins across the board. The organization even admits that stablecoins could be the future. This makes it all the more necessary to control them with stricter laws.

The 18th largest holder of public debt

However, this is likely to be difficult. A study published around the same time by Tagus Capital, a Web3 fund, calculates that stablecoin issuers have now become the 18th largest holders of US government bonds, ahead of powerful industrial nations such as Germany or South Korea. With $91 billion, Tether is by far the leader, followed by Circle (USDC), which holds $29 billion worth of government bonds.

Stablecoins are therefore almost becoming systemically relevant for the USA. The country is in debt to the tune of almost $34 trillion, with interest payments alone amounting to almost $900 billion in 2024. The rising cost of debt is one of the reasons why the Treasury issued even more government bonds than usual last year, which is probably a dangerous path in the long term.

The government is grateful for the unexpected increase in demand from stablecoins. After all, the need for capital is not decreasing, if only to pay interest, while China is currently in the process of reducing its holdings of government bonds and the BRICS countries are at risk of becoming less dependent on the dollar. A high, possibly long-term increase in demand from stablecoins could be extremely helpful for the government.

If Tether is the next FTX, it threatens to drag down not only some savers – but possibly also the government financing of the USA.

“That’s just the beginning!”

According to Circle boss Jeremy Allaire, this need for US debt, which creates stablecoins, will not decrease anytime soon. Quite the opposite. Allaire says on Twitter that by 2034, around 10 percent of global trade will be represented by stablecoins:

“I have never been more optimistic than I am now,” he explains. The crypto industry has achieved so much, more than you can count, and even more breakthroughs are lurking around every corner, blockchains are scaling, infrastructure is hardening, user-friendliness is increasing, and so on. And stablecoins are right in the middle of it all, are becoming more and more accepted, penetrate almost every jurisdiction… — and that’s just the beginning.

What would happen, Allaire asks, if ever larger parts of the financial system run on public blockchains, blockchains underlie apps for billions of users, on-chain organizations such as DAOs compete with traditional companies, political bodies – governments, cities, regions – live democracy on-chain and so on, if all those wild, utopian dreams circulating in the crypto space even begin to come true – and if ten percent of the money in circulation globally, ten percent of trade, is listed in stablecoins?

Jeremy Allaire is a little bit of a dreamer, and he makes no secret of it. But he thinks that all of this could happen in the next ten years. And he’s not wrong. The technology is getting more mature every year, the legal situation is getting more solid, and interest is stable.

And if it happens as Allaire thinks, then the US government has a lever to profit from it infinitely. Even if the petrodollar comes to an end, as is sometimes said, if the BRICS create their own currency, or if the yuan becomes the second global reserve currency – even then the US could benefit from a never-ending demand for government bonds thanks to stablecoins. But it has to pay a price for this, one could say it has to make a pact with the devil: it has to accept that stablecoins also scale the global misuse of money – that they also become a means of payment for injustice and evil.