Steven Miran, a member of the Federal Reserve Board of Governors since September 2025, has been spouting optimism about US dollar stablecoin. He asserts huge demand for the coin will boost demand for US Treasuries, which back the coin, meaning interest rates will go down.
Such a view of dollar insinuates dollar "privilege" and lacks a forward perspective.
US dollar stable does not earn interest. Many industry players want to create yield-bearing stablecoins, but US bank chiefs are fiercely opposed to it, since it may suck away their deposits.
So, if there is no stable yield on the US dollar stable, why would so many people want it?
Is it because the US economy is so stable and strong? No, inflation is not under control, the deficit continues to grow, and there is a degree of policy uncertainty. One day tariffs are there, and the next they are gone. Such inconsistency does not inspire confidence in an economy or currency.
Will people flock to US dollar stable to buy assets they cannot buy in their own country, like US stocks? Perhaps, but given the run the market has had and the valuations, it doesn't seem likely.
So, if investors are not buying due to the stability of the US economy, and are possibly concerned about an over-extended stock market, why would they flock to the US dollar stablecoin like Miran says?
Two economists Marins Azzimonti and Vincenzo Quudrini joined Miran's chorus when they said "The exorbitant privilege of the US dollar will be enforced by the growth of Stablecoins." "Exorbitant privilege" of the US dollar? I think the Chinese may take issue with that, as they are making a push for more use of the stable RMB. Also, the only real privilege the US dollar has is as the number one reserve currency at 60% of global reserves. But this is down from a high of 90% years ago.
US dollar trends do not project "exorbitant privilege".
Let's look at the numbers. When someone sees that US dollar stablecoin represents over 90% of the stablecoin market, it is not hard to see why there is blind optimism. But this view focuses on the present. The key is the future; investment is forward looking, and one thing is for certain — more economies are pushing for stablecoins. Stable Euro, Yen, and RMB will take share from US dollar stable. In the end, it would not be healthy for one currency to be over 90% of the stable market.
Investors looking to plunge into stable should construct diversified portfolios. Yes, US dollar should be part of it, but also Mexican CETES and Brazilian Real. Short-term Latin Stable bonds are like stable cash and earn yields, good yields.
If too much money flows into US dollar stablecoin, financial pain will eventually follow. Flows and portfolios should be diversified.
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