Stablecoins are often presented as a stopgap or friendly tool for people in the developing world who can’t handle Bitcoin’s volatility. They are framed as complementary to Bitcoin, not in competition with it. Nothing could be further from the truth.
Bitcoiners have commonly used the Trojan horse meme to justify many things over the years, rationalizing many shortcomings and compromises made over time as what was necessary to introduce Bitcoin into the legacy system to ultimately take control and win. That’s exactly what stablecoins are, except in the reverse direction.
Stablecoins are Bitcoin’s Trojan horse.
Bitcoin’s volatility makes it challenging to use if you don’t have the net worth to withstand it, but there are mechanisms to handle this. Centralized schemes like Blink’s Stablesats have been created to use bitcoin collateral to lock in a dollar value without needing to own dollars. Discrete ledger contracts (DLCs) offer another mechanism to achieve the same in a decentralized way.
Instead, we are propping up the US dollar. Stablecoins are a solution to volatility, but they are not native to Bitcoin. They are the US Treasury’s Trojan horse in the Bitcoin space. They do more to control and prop up the dollar than to “help” bitcoiners manage the volatility problem, which can be done by having only bitcoins.
Stablecoins give the Treasury a new lifeline to sell Treasury bonds. Foreign countries have reduced demand and sold off existing Treasuries for a few years now, and stablecoin issuers have stepped up to offset the problem. The greater the demand for stablecoins grows, the greater the decline in demand for foreign government treasuries that the US government can handle. At a time when the BRICS increasingly plan to move away from their dependence on the US dollar, stablecoins represent a vehicle to improve this problem.
Also, unlike native Bitcoin solutions such as DLCs, they present a security risk to holders. As far as I know, aside from Liquid Network, all network stablecoins that are issued come with seize and freeze functionality built into the smart contract that the issuer uses to create them. Almost all stablecoins support the arbitrary freezing and seizure of user balances on the different networks through which they circulate.
Surveillance is another aspect of the proliferation of stablecoins. The more dollar stablecoins are adopted around the world, without the need to politically convince any government to officially dollarize, I might add, the more the US government’s ability to directly police foreign financial activity expands. Chainalysis and other companies become a de facto government surveillance system for foreign financial activity, without needing to subpoena or collect records first. It’s all there on the blockchain.
At the same time, it propagates the idea that “blockchain” is a useful technology disconnected from Bitcoin, conveying to the average person the idea that Bitcoin is simply an asset like gold to invest in. It creates a psychological narrative of “invest in Bitcoin, use your watch money when you need to spend.”
Overall, stablecoins will be one of the most epic unforced errors to ever occur in this entire ecosystem. People need to wake up before it becomes so deeply ingrained in their lives, and in the financial world in general, that it becomes difficult to disentangle themselves from.
People should spread and take advantage of Bitcoin, a money created to enable freedom and sovereignty, not these cheap imitations called stablecoins that are nothing more than an extension of the surveillance and tyranny of the legacy financial system.
This article is a Carry. The opinions expressed are entirely those of the author and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
