The former speaker of the House, Paul Ryan, published an op-ed in the Wall Street Journal last week claiming that stablecoins could be a magic bullet to address the country's looming fiscal train wreck. I normally don't pay these sort of pieces much attention since they typically involve—as is the case here—a former politician shilling for whatever industry is paying them these days. This one, though, deserves more consideration than most.
Ryan, you may recall, made his name as a young firebrand in the Tea Party, a GOP faction devoted to fiscal prudence back when the Republican party still cared about such things. In his op-ed, he takes up his old crusade by pointing out correctly that the U.S.'s debt is spiraling out of control, and the day is coming when the Fed holds yet another Treasury auction to prop up the balance sheet—only to find there are no takers.
As Ryan notes, longtime buyers of U.S. debt like China and Saudi Arabia have already started to pull back, threatening the long-term status of the dollar as the world's reserve currency—a status that makes it cheap for America to borrow and lets it flex enormous economic influence overseas. What to do about this? The obvious answer is to reform runaway Social Security and Medicare spending. But neither Trump nor Biden dares to touch that. And so we have Ryan's plan B: stablecoins.
Ryan observes that, if fiat-backed dollar stablecoin issuers (think Tether, USDC, and PayPal) were a country, its U.S. debt holdings would exceed those of Saudi Arabia. Meanwhile, he makes the point: "If other countries are successful at bolstering their currencies’ influence while dumping Treasury debt, the U.S. will need to find new ways to make the dollar more attractive. Dollar-backed stablecoins are one answer."
It's not a crazy idea. Stablecoins are taking off in countries like Nigeria and Argentina, where lousy rulers have made citizens reluctant to hold the local currency. They are also cheap and easy to move around and, as Ryan points out, "permissionless blockchains come packaged with the deeply American values of freedom and openness." The more widely stablecoins spread, the more people there will be with a vested interest in the success of the U.S. economy.
Ryan doesn't point it out but there's also a downside to stablecoins: They are hard or even impossible for the U.S. Treasury to control, so their spread will undercut the government's ability to use tools like the SWIFT banking system to impose sanctions. But adversaries have already found plenty of other ways to dodge the long arm of U.S. financial enforcement so, on balance, there would likely be more good than bad if the government came to embrace stablecoins.
The best option would be for America's political leaders to get serious about the country's frightening national debt. But if they won't do that, then turning to stablecoins would help to keep the U.S. afloat for a little longer.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
