“Stablecoins will alleviate the US debt crisis”

In a scenario in which the United States is approaching a debt crisis that could put its credibility at risk, stablecoins emerge as a response to mitigate this potentially devastating situation.

This is stated by Paul Ryan, former president of the United States House of Representatives, who highlighted the role that these cryptoassets can play with 1:1 parity to the US dollar to avoid a failed debt auctionwhich would unleash a debt crisis.

For Ryan, there is a growing risk that the US government could experience a debt auction before long. An event that “would shake the markets and seriously undermine the credibility of the United States” in the international arena.

According to USdebtclock.com, current US debt exceeds $34.8 billion as of June 17, 2024. This is a huge number and represents a significant increase in recent years.

Ryan assures that the solution to this problem is obvious and involves cutting social assistance programs, which are driving up the US debt. However, he criticizes that the politicians of that country “cannot find the courage to do what needs to be done.”

In this way, “the country is moving down this dangerous path,” reflects the former congressman, who predicts an economic contraction for the United States in the short term as a result of the debt crisis.

A debt crisis would put the United States in an uncomfortable economic situation. If that scenario were to occur, the country would experience recession, financial instability, rising interest rates, in addition to significant damage to the American reputation.

Thus, Ryan mentioned stablecoins as an alternative that the US government can use in your favor and avoid the consequences of a debt crisis.

In his opinion, US dollar stablecoins “are becoming an important net buyer of US government debt.” This, remembering that a large part of the reserves of large currencies such as USD Tether (USDT) and USD Coin (USDC), They are backed by bonds from the US Treasury Department.

This is positive for the US economy, says Paul Ryan, because if the companies issuing these stablecoins were a country, they would be among the nations with the most US debt. and they would be smaller than Hong Kong, but larger than Saudi Arabia.

In that sense, he explains that, if this sector continues to grow, stablecoins “could become one of the largest buyers of US government debt and a reliable source of new demand.”

“The status quo could be changing”

Paul Ryan asserted that stablecoins could also be a timely solution in the face of the de-dollarization that is underway in the world.

He recalled that, although there is an “insatiable demand” for dollars, due to the ability of the US government to consistently sell debt in the international market, “there are signs that the status quo It could be changing, and fast.”

He recalled that, for several months, nations that historically were large buyers of US debt, including China and Saudi Arabia, “are gradually withdrawing from the market.” This, while “they are increasingly looking for options to settle payments outside the dollar system.”

A true de-dollarization that has been reported by CriptoNoticias. China, Russia, and the rest of the BRICS bloc countries; as well as other nations of the world, have shown clear intentions to move away from the dollar standarda scenario in which bitcoin (BTC) could gain key ground.

Specifically China, one of the leaders of the global de-dollarization movement, “understands what is happening,” in Ryan’s opinion. He highlights that in that country they have advanced at a fast pace. about the creation of its own virtual currency, the digital yuanmaking it “a pillar of the country’s international development strategy and foreign policy.”

“The Chinese government is using investment in physical and digital infrastructure in emerging markets, along with financial engineering, to integrate the yuan into a network it can control to project influence,” acknowledged the former speaker of the US House of Representatives.

Added to all this is that if the US were to fall into a debt crisis, the US dollar would go through a “major confidence shock”, affecting demand for the greenback internationally, thus losing its primacy, the politician suggests.

Now, if other countries, such as China, succeed in strengthening the influence of their currencies as they get rid of American debt, “The United States will have to find new ways to make the dollar more attractive,” he said.

That’s where stablecoins shine, according to Paul Ryan’s argument. He says that these assets They are a “timely dollar promotion mechanism.” This, remembering that the US benefits from the status of its currency as the main international reserve asset in companies such as Tether Limited or Circle, the issuers of USDT and USDC.

Also remember that most stablecoins are in the hands of investors from countries “with weak economies and underlying institutions that are looking for ‘better’ money.” Among them, those of Venezuela and Argentina, where the dollar has come to surpass local currencies in terms of useas confirmed by independent research and reports.

Thus, Ryan explains that, if the trend and promotion of stablecoins continues, demand for US debt will begin to grow significantly, providing “clear benefits” in the short term for Americans. “Reducing the risk of a failed debt auction and a concomitant crisis,” she said.

He did not say what those benefits would be, but if there is an increase in demand for debt, the US government would be allowed to finance its operations and expenses, there would be greater economic stability, accompanied by growth in the economy. and greater influence on the global economy.

For this reason, Ryan expressed support for the fact that a “solid and predictable” regulatory framework for stablecoins is being debated in the US Congress with bipartisan support. This is the project presented by senators Kirsten Gillibrand and Cynthia Lummis, aimed at these cryptocurrencies.

In his opinion, the approval of the Gillibrand-Gillibrand project “would help dramatically expand the use of digital dollars at a critical time.” “In an election year, given all the ugly politics ahead, we sure could use a victory,” he said.