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Why do traditional media professionals criticize stablecoin innovation?

Why do traditional media professionals criticize stablecoin innovation?

ForesightNews 速递2025/11/24 10:13
By: ForesightNews 速递
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Are stablecoins truly "the most dangerous cryptocurrencies," or are they "a global public good"?
Are stablecoins truly "the most dangerous form of cryptocurrency," or are they "a global public good"?


Written by: Byron Gilliam

Translated by: AididiaoJP, Foresight News


"The innovation that once kept central bankers awake at night may ultimately become the solid foundation beneath their feet." — David Beckworth


The Danger Argument: A Threat to Financial Stability


David Frum, a contributor to The Atlantic, warns that stablecoins are "the most dangerous form of cryptocurrency to date." He believes that the "GENIUS Act" legalizes them, which is tantamount to "lighting the fuse for America's next financial disaster."


Frum expects the scale of stablecoins to soar to $4 trillion (citing a forecast from Citi Bank), with almost all funds flowing into three-month Treasury bills, the riskiest asset class permitted by the Act.


He predicts that the Treasury market will inevitably repeat the crash of 2022-2023. When holders rush to redeem, stablecoin issuers will be forced to sell $4 trillion in Treasuries at massive losses, triggering a run.


More seriously, Frum points out that stablecoins "have all the risk characteristics of subprime securities," and may ultimately force the government to repeat the 2008 bailout, using taxpayer money to cover private losses.


Voices of Doubt


But it is worth noting that the Treasury decline in 2022-2023 lasted 18 months. For assets that mature and pay out every three months, why would this trigger panic among zero-leverage issuers? This logic is debatable.


We discuss Frum's views not only because of their dramatic alarmism, but also because they reflect a common public concern: that stablecoins are doomed to fail, and therefore dangerous.


The Success Argument: Disrupting the Existing System


Helen Rey of the International Monetary Fund warns that stablecoins, by being too successful, will "threaten government fiscal revenues and shake the foundations of the international financial system."


She believes that if global savings shift massively into stablecoins, banks will lose their lending capacity, governments will struggle to raise funds, and central banks' monetary policy tools will become ineffective.


The chain reactions include:


  • Financial stability risks
  • Hollowing out of the banking system
  • Currency competition and volatility
  • Aggravated money laundering issues
  • Erosion of the tax base
  • Privatization of seigniorage
  • Rampant lobbying by interest groups


Helen Rey is particularly concerned that the privatization of seigniorage will lead to "wealth being highly concentrated among a few companies and individuals," undermining the public nature of the international monetary system.


"We must be prepared for significant consequences," she concludes.


A Neutral Perspective: The Value of Financial Innovation


Steven Milan of the Federal Reserve, like Rey, cherishes the current dollar system: "The reserve currency and assets provided by the United States are a global public good." But he reaches the opposite conclusion:


"Stablecoins can enable financially repressed groups to more easily enjoy these global public goods, freeing them from harsh financial restrictions."


The crypto community often sees the Fed's monetary issuance as a public harm, but Milan's argument is both substantial and strategic: defining fiat currency as a public good is the best framework to counter anti-crypto rhetoric.


Unlike the previous views, Milan believes that a mass exodus of funds from the banking system is unlikely, because the GENIUS Act clearly stipulates that stablecoins do not pay interest and have no deposit insurance.


"The real opportunity for stablecoins lies in meeting the global demand for dollar assets, especially in regions where dollar channels are restricted."


In Rey's view, this demand threatens national sovereignty, while Milan believes it allows people in emerging markets to "avoid the pain of hyperinflation and exchange rate volatility."


This argument is quite persuasive, but only if you agree that fiat currency has a public nature.


The Stability Function Argument: A Regulator of Financial Cycles


David Beckworth points out that alarmists overlook a key point: "The widespread adoption of dollar stablecoins actually helps smooth global financial volatility."


He cites Helen Rey's research on how dollar debt in emerging markets undermines stability, and suggests that stablecoins can address this by improving private sector balance sheets:


When the dollar appreciates and dollar debt rises, the simultaneous appreciation of stablecoins will provide a buffer for emerging markets. In other words, "stablecoins can become a decentralized global economic stabilizer."


Combined with the expectation that the Fed may become the ultimate backstop for stablecoins—precisely the scenario Frum fears—the expansion of stablecoins "may be becoming a tool for balancing global financial cycles."


Beckworth concludes: "The innovation that once made central bankers tremble may ultimately become their most solid cornerstone."


The Crime Tool Argument: A Money Laundering Channel in the Shadows


The indictment of Firas Issa, founder of a cryptocurrency ATM business in Illinois, on felony money laundering charges reminds us: despite the transparency and traceability of blockchains, criminals still see them as a first stop for laundering money.


The case, in which the suspect profited $10 million by exchanging cash for cryptocurrency, shows that crypto crime is not just about stealing on-chain assets, but also about bringing traditional dirty money on-chain.


As stablecoins grow in scale and become deeply integrated with traditional finance, experts worry that money laundering risks will intensify. Helen Rey points out that stablecoins may "channel illegal funds and seriously erode national tax bases." David Frum is even more direct: "Thinking that facilitating criminal activity will boost demand for Treasuries is putting the cart before the horse."


So far, we have not found any strong counterarguments to this.


A Pragmatic Perspective: An Ordinary Payment Tool


When British House of Lords member Colwyn Range questioned the government's stance on stablecoins, the parliamentary discussion may have set a record for dullness.


Lord Livermore, responding on behalf of the King, predicted that stablecoins will play a role in "reducing the cost of international payments and improving efficiency."


Compared to those predicting financial doomsday or revolutionary salvation, this view is so bland as to be unremarkable. But it is precisely this blandness that may be closest to the truth of the future.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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