TRUMP WANTS BIG TECH TO OWN THE DOLLAR / PROJECT SYNDICATE

Trump Wants Big Tech to Own the Dollar

Two parallel monetary systems – one based on public monies issued in China, India, and maybe the eurozone, and the other comprising private money, increasingly dominated by dollar-pegged stablecoins – appear to be emerging. Central bankers are not the only ones who should feel anxious.

Yanis Varoufakis

ATHENS – The Spring Meetings of the International Monetary Fund and the World Bank are usually placid, forgettable affairs. 

Not this year. 

Several central bankers returned home with a visceral sense of dread. 

The reason? 

The specter of the GENIUS Act – the stablecoin bill barreling toward passage by the US Congress hot on the heels of President Donald Trump’s March 6 executive order establishing a strategic cryptocurrency reserve.

Central bankers have hitherto seen cryptocurrencies as a nuisance that, thankfully, lacked the capacity to cause serious ruptures in the monetary systems under their care. 

But now they think that Trump’s team are counting on cryptocurrencies pegged to the dollar as part of their strategy to rejig the global monetary system (and make the boss and his family a fortune in the process).

What unsettled central bankers this spring was the policy’s implications: a deliberate, chaotic unraveling of the twentieth century’s monetary order, under which central banks reigned as the sole architects of money. 

While the GENIUS Act allows private stablecoins, another bill would bar the US Federal Reserve from issuing a central bank digital currency (CBDC), thereby anointing corporate-issued tokens as the new guardians of dollar hegemony.

This isn’t innovation; it’s a hostile takeover of the money supply. 

Lacking anything resembling serious regulation, stablecoins are neither stable nor merely an alternative dollar payment option. 

They are a Trojan horse for the privatization of money.

The European Central Bank sees the danger. 

If securities migrate to the blockchain, with bonds, stocks, and derivatives becoming tokenized, then settlement must follow. 

The ECB’s solution is a tokenized euro, ensuring public money remains the bedrock of finance. 

So far, the ECB has faced resistance to this plan from German and French private banks. 

Now, the ECB has another, bigger headache: the United States is racing in the opposite direction. 

By banning CBDCs and green-lighting stablecoins, Trump’s team are not just rejecting public digital money; they are outsourcing dollar supremacy to the darkest forces within Big Tech.

The irony is grotesque. 

The same libertarians who rail against government are now begging the state to anoint their stablecoins as de facto official currency. 

Worse, they demand access to the Federal Reserve’s balance sheet, allowing private issuers to back their tokens with central bank reserves. 

Imagine a world where Tether, Circle, or some non-scam “X Token” backed by Elon Musk enjoys the implicit backing of the US Treasury while operating outside banking regulations. 

This isn’t just regulatory arbitrage; it’s monetary feudalism.

Lest we forget, nineteenth-century America was a monetary dystopia. 

With thousands of wildcat banks issuing private notes, frequent financial panics left the public, the working class in particular, holding worthless paper. 

Even J.P. Morgan was so appalled and felt so threatened that he decided to strong-arm the federal government and other bankers to establish the Federal Reserve as a public institution with a remit to stabilize money.

Now, the US is hurtling backward – and dragging the rest of the world along. 

In a stunning reversal of reality, Trump’s January 23 executive order on Strengthening American Leadership in Digital Financial Technology defines dollar-backed stablecoins as instruments that will “promote and protect the sovereignty of the US dollar.” 

But the GENIUS Act (whose final draft is not yet public) is a formula for unleashing a digital wildcat era, where stablecoins – pegged to the dollar but controlled by private actors – flood the global economy with digital pseudo dollars. 

Private stablecoins stand no chance of maintaining their tokens’ dollar peg after they receive the official imprimatur of the federal authorities and their volume balloons. 

Even if countries ditch the greenback, they will remain trapped in its digital shadow.

Europe is scrambling. 

The ECB, recognizing the existential threat, is fast-tracking a “wholesale CBDC”: a digital euro for institutional use that acts as a stopgap – a quick and dirty hybrid system that syncs traditional payments with blockchain infrastructure and buys time until true atomic settlement can be pushed past the resistance of private bankers who profit from the status quo.

But it may be too late. 

While Europe dithers with committees, the US is acting. 

The Markets in Crypto-Assets (MiCA) regulation has already driven Tether out of Europe – not because MiCA is too strict, but because the EU’s political leadership still does not grasp the stakes. 

If stablecoins become the default money of crypto markets, decentralized finance, and emerging economies, the ECB’s half-baked digital euro will arrive to a battlefield where the war is already lost.

Meanwhile developing countries face a brutal choice. 

Already struggling under the dollar’s dominance, they must now either ban stablecoins (thus forfeiting access to crypto capital flows) or create their own to compete with the dollar’s network effects. 

A third, unappetizing alternative, is to surrender to a new – even more perilous – form of de facto dollarization.

The only central bank that has planned ahead is the People’s Bank of China. 

Having the luxury of its own, already functioning digital renminbi, the PBOC can afford to refuse lending legitimacy to stablecoins by banning them.

But this sensible defiance leaves one gigantic dilemma unaddressed: China’s public and private institutions hold accumulated savings of approximately $4.5 trillion. 

Should they dump their dollars, thus giving a boost to the Trump team’s plan to devalue the greenback, or hold them and remain exposed to the turbulence that Trump is so adept at stirring up?

In the longer term, the danger is that monetary bifurcation exacerbates geopolitical and geo-economic uncertainty. 

Two parallel monetary systems – one based on public monies issued in China, India, and maybe the eurozone, and the other comprising private money, increasingly dominated by dollar-pegged stablecoins – would inevitably clash. 

Central bankers are not the only ones who should feel anxious.

Yanis Varoufakis, a former finance minister of Greece, is leader of the MERA25 party and Professor of Economics at the University of Athens.