The United States’ national debt surpassed the unconscionable amount of $36 trillion in November. December’s Treasury report estimated $1.22 trillion in interest payments for the fiscal year, a dire number that exceeds the combined national defense and education budgets. This development is beyond unsettling and underscores the urgency of staunching the hemorrhage. Many are beginning to realize that stablecoins may serve as one of the few solutions to a predictable debt crisis. That solution is exactly what the state of Wyoming has been probing for years.
Opinion
Wyoming stands on the vanguard of forward-thinking legislation around cryptocurrencies, blockchain and digital assets. Since 2016, our Legislature has passed over 40 laws designed to create a regulatory environment conducive to innovation around this emerging technology.
One such initiative is the Wyoming Stable Token. With the passage of the Wyoming Stable Token Act, the Wyoming Legislature affirmed its desire for the state to launch the first fully-reserved, fiat-backed stable token issued by a public entity in the United States. Like incumbent stablecoin offerings, the anticipated “WYST” token will be released on public blockchains and can be used to settle dollar-denominated transactions anywhere on earth, in seconds, with minimal fees, and mitigating counterparty risk.
The Wyoming token will be backed by cash and short-duration U.S. Treasury securities and repurchase agreements held in reserve. Interest income generated on the underlying securities will help diversify the state’s revenue streams. Since capital will be distributed quarterly to the state’s school foundation program, we view the project as a public good.
This opportunity extends beyond our state borders. The rise of dollar-backed stablecoins offers a unique opportunity to address the broader economic challenges facing our nation. Stablecoins, when properly regulated and integrated into the global financial system, can provide a consistent and reliable source of demand for U.S. Treasuries. Where better to do that than in the USA?
Ominously, China, the second largest holder of U.S. debt, has continued its steady sell-off – over $265 billion since January 2022. In contrast, dollar-backed stablecoins now rank as a top-20 holder of U.S. debt in aggregate. Stablecoins are a clear mitigant of the risks associated with foreign ownership of our national debt and can ensure continued confidence in the dollar.
The strategic importance of a dollar-backed stablecoin becomes even more apparent in the context of wider geopolitical shifts. The potential inclusion of Saudi Arabia in the BRICS+ coalition and their nonrenewal of the petrodollar agreement signal a realignment in global financial dynamics. The BRICS+ nations, with stated plans for their own digital currency, could pose a direct challenge to the dollar’s supremacy. By embracing stablecoins, the U.S. can counter this threat and reinforce the dollar’s position as the world’s primary reserve currency.
America’s stodgy, byzantine regulatory apparatus has slowed a responsible adoption of these proven, blockchain-native instruments and has effectively hamstrung their domestic development with a lack of clear and cohesive regulation in the United States. Neither the “Clarity for Payment Stablecoins Act” introduced by Rep. Patrick McHenry, R-N.C., nor the bipartisan “Lummis-Gillibrand Payment Stablecoin Act,” have received a floor vote. Compare this inaction to the forward momentum of the European Union, the Monetary Authority of Singapore and Japan’s Financial Services Agency. Each has enacted stablecoin legislation. You can see why the U.S. risks surrendering innovation.
By focusing so heavily on centralized regulation, America has crippled the innovation that has been the hallmark of her success. Witness an ongoing effort to debank companies working with digital assets, and pressure applied to novel fintech companies.
I was encouraged to hear President Trump acknowledge this concern on the campaign trail. He clearly emphasized the need for a legislative framework that can support stablecoins, while discouraging any notion of a central bank digital currency. CBDCs, unlike stablecoins, are controlled by the federal government, raising concerns about their backing, privacy and financial freedom.
As we navigate the complexities of a burgeoning national debt and evolving global financial dynamics, the implementation of stablecoins emerges as a pivotal strategy.
Financial privacy is crucial to capitalism and sacrosanct to Wyoming. The Wyoming Stable Token must strike a balance between preventing illicit use by malicious actors and protecting the confidentiality of retail transactions. Still, solving problems like these is in Wyoming’s DNA. It is an evolving topic, but the advent of new privacy solutions powered by zero-knowledge proofs, homomorphic encryption and other technologies will prove valuable in this quest.
It is high time we begin exploring stablecoins backed by U.S. Treasuries here at home. At a minimum, they can provide an important hedge against the explosive growth of the U.S. monetary supply, which has increased more than 40% over the last five years under the tutelage of a Federal Reserve that has seemingly decided that socializing risk is an appropriate addition to its conventional portfolio. It is a policy that has eroded the purchasing power of the dollar, jackknifed inflation and calamitously driven up interest rates, compounding the challenges of such a massive national debt. Should states increase their holdings of U.S. debt through stablecoin issuance, the federal government will owe states that interest — not our adversaries. What a way to create true accountability and retake the “power of the purse.”
As we navigate the complexities of a burgeoning national debt and evolving global financial dynamics, the implementation of stablecoins emerges as a pivotal strategy. The U.S. cannot dither away our advantage. Wyoming’s legislative foresight demonstrates the viability and benefits of innovation, offering a template other states are eager to follow. Stablecoins backed by U.S. Treasuries can foster financial stability, protect the dollar’s global supremacy and ensure a sustainable economic future. The time is now.
Gov. Mark Gordon was elected chief executive of the state of Wyoming on Nov. 6, 2018. Through his robust public and private sector experiences, Gordon is uniquely qualified for his hands-on role as chair of the Wyoming Stable Token Commission.
The commission endeavors to launch the first fiat-backed, fully-reserved stable token issued by a public entity. Gordon has signed over 30 pieces of legislation focused on the treatment and utilization of cryptocurrency, blockchain, and digital assets in Wyoming.
Prior to his election as governor, Gordon served the people of Wyoming as state treasurer (2012-2019), ranking in the top 100 “Most Significant and Impactful Public Investor Executives” (The Sovereign Wealth Fund Institute). Under his guidance as treasurer, Wyoming’s sovereign funds earned a No. 1 ranking for the United States and No. 3 in the world for transparency (Peterson Institute). Gordon served as a Class B director at the Federal Reserve Bank of Kansas City.
Rancher, mountaineer, and entrepreneur, he has experience in natural resource management, building businesses and raising a family. He believes that measured decentralization of the domestic financial system is needed to fortify dollar hegemony and keep economic innovation in the United States.
Stablecoins are digital coins. They are linked to real assets, like the US dollar. This makes their value stable. People use them for trading and saving. They help in online payments too. Stablecoins can be useful for everyone.
Great article! Fully agree that stablecoins are one the few available solutions to our debt crisis. That said, the tricky part is how do you get this flywheel started…how do you get consumers to pay with stablecoins?? How can stablecoins compete with credit/debit cards?
The answer is, they can’t. And shouldn’t.
Stablecoins aren’t a consumer-led payments innovation. Consumers love their Cards. They don’t need stablecoins, at least, not in most mature economies.
Stablecoins are a “backend transition” for faster, cheaper, yield-bearing settlement.
The next transition will be, consumer pays with their Amex, but the merchant is settled in stablecoins. Enhance the capabilities of entrench card networks and payment intermediaries, rather than compete against them.
This would require a stablecoin API layer in the stack, primarily for payment intermediaries. Hence why Stripe acquired Bridge. And the yield from t-bills could be used to incentivize adoption with payment intermediaries and end merchants.
Not exactly certain what dollar hegemony is, but Governor, rancher, treasurer Gordon seems to have a pretty good handle on it. My grampap was a cattle rancher too and he was just about as fond of our Federal Reserve as he was of his yearly colonoscopies. Kept all his cash buried in Butternut cans around the yard. After he passed we found ’em hidden everywhere. In the corrals, in grams rose bushes, under the front porch… dug up most of his silver dollars out in the stalls where they were safe and sound under a big steaming pile of manure. He used to refer to ’em as “horse apples” but I rather prefer the way Governor’s “stable tokens” rolls off the tongue– just sounds a little more refined. Ol’ grampap would be right proud…
Senator Lummis is heavily involved in stablecoin legislation at the federal level according to this release last year. I’m assuming Wyoming is on the front row partnering in these efforts.
https://www.lummis.senate.gov/press-releases/lummis-gillibrand-introduce-bipartisan-landmark-legislation-to-create-regulatory-framework-for-stablecoins/
It’s quite clear and well communicated that the end goal concerning our monetary system is to have it evolve into a fully digital currency realm with the use of cash eliminated. China’s nearly completed their transition with very little cash still used. Even credit cards are pretty much gone. Transactions are done by phone.
As for drivers, in addition to the listed advantages of blockchain currencies above, there’s the obvious elimination of the ‘underground’ economy exclusively based in cash. Draining this unlawful slippage allows significant increases in taxable revenues to be finally seen and advantaged. CBDCs aren’t trusted yet for all the obvious loss of privacy reasons having every transaction fully tracible utilizing fully programmable currency. Yes, it’s completely possible to program and track every blockchain dollar and transaction to whatever parameters are desired. I’ll let your imagination fill in the blanks.
The stablecoins have the same blockchain technology as the CBDCs, so they seem to provide a nice stepping stone into this brave new monetary world where the National and State banks, as well as other sanctioned stablecoin issuers like Wyoming State provide the digital blockchain money rather than central banks to build confidence and move us closer towards the day when cash is eventually eliminated and every transaction tagged and bagged.
Well, I suppose Kim Jung Un is looking for an easy mark.
Paving the way for the next depression.
Governor Gordon, you say, “CBdcs, unlike stablecoins, are controlled by the federal government, raising concerns about their backing, privacy and financial freedom.” Please explain why a Wyoming dollar-backed stable coin would not also raise concerns about its backing, privacy and financial freedom.
Please note that the “Stablecoins” are backed by US treasuries and not by the State of Wyoming. In other words, the full faith and credit of the U.S. government, the same as the U.S. dollar.
That means that the state isn’t on the hook if these coins tank. How “stable” will they be if the U.S. government can’t pay its bills?
In what way is a “dollar-backed stablecoin” safer than actual dollars? The coins create an unnecessary middle tier that manage that coin which won’t be “free” to the public. Why would Wyomingites want to pay a fee to the coin management people when the coins are “dollar-backed? Actual dollars are backed by the Federal Government. States are not permitted by Federal Law to issue their own currencies. Gov Gordon knows that. This proposal will line someone’s pocket to create coins that are based on the actual value of the US dollar providing zero additional value to Wyoming taxpayers.
A National debt greater than the US GDP IS a major concern, but the proposed coin will suffer the exact same inflationary damage that the dollars themselves will based on this ridiculous debt level.