Stablecoin Opens U.S. Dollar Hegemony Renaissance

# The Limitations of Dollar and 'Strong Dollar' Phenomenon Leading the Popularity of Stablecoin

In October, when 'stagflation' accompanying inflation and economic recession has became a reality around the world, stablecoin emerged as a 'hot' asset in many parts of the world.

While the global asset market has fallen sharply amid high inflation, the value of the dollar, the 'world's safetest asset', has become safer and more solid. Many people in the 'global village' want the dollar.

Amid the high value of the dollar, the adoption of stablecoin that the value is pegged to the dollar has begun to soar around the world.

Blockchain analysis company 'Chainalysis' released a case of a surge in stablecoin in Russia after the war between Russia and Ukraine in a report. Stablecoin's share of transactions to Russian services had increased from 42% in January and it increased to 67% in March , and has continued to increase since then.

According to Coinmarketcap at 4 p.m. on Oct. 14, Tether, the largest stablecoin issuer recorded a market capitalization of 68.4 billion dollars, showing nearly 3% growth in October.

Despite the characteristics of 'cryptocurrency' which are still unfamiliar to many people and the handicap of assets issued by a private issuer, people aroung the world have started to buy stablecoin to defend their property.

The reason is the limitations of the dollar.

Many countries have enforced dollar purchase limit system. Various countries around the world, including Russia, China, and Argentina, are restricting people's dollar purchases due to their complicated reasons. When people in many countries purchase more than a certain amount of dollars and want to remit the dollar, they have to go through very complicated processes, including identification and specifying the clear reasons for purchasing dollars. In fact, in March this year, shortly after the war began, the Russian government launched a purchase limit system as a way to crack down on the outflow of national wealth due to wartime conditions. Russian citizens are officially unable to withdraw more than $10,000 in cash and remit them.

There are several risk factors for dollar purchases through unofficial routes. Not only is there no guarantee that transparent dollar exchange transactions based on the exact exchange rate, but there is no system to deposit or remit them safely.

The difficult process of purchasing dollars and the physical limitations required to deposit and move dollars eventually led to the search for alternatives. So many people chose stablecoin.

# Stablecoin's Big Breakthrough = Strengthening U.S. Dollar Hegemony

The result of stablecoin's global leap forward is, in the end, strengthening the U.S. and dollar hegemony.

Tether announced a significant fact in an official statement on Oct. 14. They reported that the U.S. government bond was purchased with the funds after selling the entire commercial paper of 30 billion dollars. "The full sale of commercial paper shows the tether(USDT) is supported by the safest asset in the world," Tedder said in an official statement.

Earlier, a number of large media outlets, including the Wall Street Journal (WSJ) and Bloomberg, reported news that the majority of Tether's capital was related to China's Evergrande Group. Many large media outlets have stressed the fact that Tether has Chinese commercial paper, constantly pointing out that there is a big problem with Tether's liquidity. In response, Tether promised to reduce all commercial paper and finally announced that they had exchanged all commercial papers for U.S. government bonds.

Tether's market capitalization is $68.4 billion. This is about 41% of the total market capitalization of the stablecoin.

USDC, which ranked second in the market capitalization of stablecoin, also consists of more than 80% of its portfolio of U.S. government bonds.

The total market capitalization of Tether and USDC is around $116.3 billion. It accounts for 76% of the total market capitalization of stablecoin. About $116.3 billion of stablecoin that is consisted of U.S. government bonds are distributed all over the world. Those who are buying stablecoin to defend property in many places around the world are actually buying U.S. government bonds.

The conflict, which began with the war between Russia and Ukraine, has brought the current world to an era of 'New Cold War' between the 'West' and the 'BRICS'. In addition, as Saudi Arabia and India turned their backs on the U.S. amid complex interests, the West faced the challenge of "BRICS+," which uses energy as their weapon. The challenge of BRICS+ was both a challenge to Western forces centered on the United States and a challenge to the dollar. This is because Russia has declared a 'crypto international trade'that uses cryptocurrency for international trade settlement. It means that new key currency of BRICS+ is expected to appear. Many doubted the status of the U.S. and the world's key currency, the dollar, in response to the rapidly changing world situation. "What will happen to countless dollars issued?"

Among them, the way the U.S. maintains its hegemony with the U.S. and the dollar may have been simpler than expected. It is through the natural distribution of stablecoin, which embraces U.S. government bonds.

Stablecoin has been transformed into various shapes and is being distributed around the world. In June, when Europe's economy was in great trouble due to soaring oil prices, the stablecoin USDC announced the news of its landing in Europe. It announced the news of the issuance of the stablecoin "EUROC" pegged to the euro.

The following is a phrase from the book〈An Inconvenient Truth about Capital〉.

It is constantly asking the question, "Who will ultimately benefit from a situation?" Also, you should always think, "Is there any shadow power hiding behind the body?" For example, when A and B fight like crazy, we think that the winner of this fight will be A or B. But we have to take a step further. Is there any C who instigated the fight between these two, and does C take his share of whoever wins, so what does C take, and what does the final winner have to do with C in the future?

권승원 기자 ksw@