Op-Ed: Cliff Sims: Why Stablecoins are the answer to outmaneuvering China and anchoring dollar dominance
President Donald Trump’s trade negotiations could unify much of the free world into an informal bloc that isolates China and reverses their decades of predatory economic practices. His challenge will be disrupting the parts of the economic system that disadvantage American workers and undermine national security, while preserving the parts that long ensured America’s economic dominance.
While tariffs, investment restrictions and technology controls offer opportunities to produce the necessary disruptions, spurring the proliferation of stablecoins could ensure stability by preserving the U.S. dollar’s unquestioned status as the world’s reserve currency.
To understand this dynamic, it’s important to first separate the signal from the noise.
The media has breathlessly covered the volatility in U.S. equities markets in recent weeks, but as the saying goes, the stock market is not the economy.
In the real economy, 228,000 jobs were added in March, far exceeding economists' projections. Significant growth in construction, transportation and warehousing employment represents an early signal that President Trump is delivering on his promise to bring jobs back home. And inflation has dropped to a six-month low.
The lesser covered, but far more important, volatility of the last month has actually been in the bond markets. U.S. Treasuries have traditionally been viewed as a safe haven for investors in tumultuous times. But in recent days, an unusual number of investors have fled U.S. dollar assets — equities and bonds alike. This is a potential panic signal. If the U.S. asset dump accelerates and institutions with large positions get hit all at once by the investor exodus, markets won’t just feel the pain, the U.S. dollar's reserve status could be threatened for the first time.
Fortunately, President Trump and Treasury Secretary Scott Bessent have deftly maneuvered to prevent this outcome. But the warning signal remains.
For years, we’ve heard chatter about threats to the dollar’s reign. BRICS nations — Brazil, Russia, India, China, South Africa, and a handful of others who’ve joined the group in recent years — have even discussed the idea of creating a common currency to challenge the dollar’s dominance. The concept gained momentum as the West ratcheted up economic sanctions on Russia, prompting countries around the world to accelerate efforts to avoid the mechanisms the U.S. uses to exert financial control, the SWIFT system in particular.
Control of the SWIFT network, which facilitates international financial transactions, has allowed the U.S. to kneecap enemies like Iran, foreign terrorist organizations and drug cartels, by cutting them off from the world and strangling their access to cash and ability to transact. But the overreliance on sanctions as the “easy button” of American foreign policy led adversarial nations to get serious about building alternatives, with China leading the way in their own quest for a new, yuan-led financial order.
The People’s Bank of China recently plugged its digital yuan into a rival payment network spanning 38 percent of global trade — a blockchain beast that clears transactions in seven seconds flat, leaving SWIFT’s lumbering, days-long process in the dust and cutting transaction costs by 98 percent. Beijing will likely never risk exporting yuan liquidity to the world because it would cause the Chinese Communist Party to lose control of their closed financial system, but these efforts to circumvent SWIFT represent a clear challenge to U.S. sanctioning capabilities and U.S. dollar-based supremacy, nonetheless.
U.S. policymakers must realize that long-term dollar dominance will not come from top-down controls like the increasingly-antiquated SWIFT. It will be achieved by putting U.S. dollars in the hands of working people in developing economies with shaky currencies and unreliable governments.
This is why digital currencies, backed by U.S. treasuries, are the perfect weapon to counter China’s digital yuan. Born in 2014, these “stablecoins” were made for the unbanked and underserved in nations where inflation and rogue regimes wreak havoc.
Among cab drivers in Argentina and village farmers in Africa, there’s no brand stronger than the all mighty U.S. dollar because they know Uncle Sam guarantees its stability in a way their own government never could. So with every little transaction they make, they not only ensure their own peace of mind, they also contribute to the organic growth of America’s financial muscle.
Today, the top stablecoin, USDT (Tether), powers $31 billion in daily transactions with 400 million users worldwide. And by working with law enforcement agencies in the United States and abroad, they’re able to leverage blockchain technology to prevent illicit schemes and terrorist financing that once alluded authorities.
Widespread stablecoin proliferation also counters the argument for the U.S. government to issue its own Central Bank Digital Currency (CBDC). President Trump smartly banned CBDCs via executive order earlier this year, warning that giving the Fed such power could “threaten the stability of the financial system, individual privacy, and the sovereignty of the United States.”
The only thing that could slow stablecoins’ momentum — and deprive President Trump of an important tool to ensure dollar domination — is government overregulation.
The U.S. Congress is currently hashing out stablecoin rules, and there’s no shortage of sharp ideas. Legislation with common sense regulations could provide solid oversight without stifling innovation. But choking stablecoins now would deliver a massive victory to China and breathe new life into BRICS nations’ pipe dream of a post-dollar financial system.
Let’s keep rules light and let the digital dollars soar.
Cliff Sims served as Deputy Director of National Intelligence for Strategy and Communications during the first Trump administration.