Recently, when discussing Bitcoin and cryptocurrencies, Trump proposed that he supports making Bitcoin a tool to challenge irresponsible fiscal policies and expand and consolidate the global dominance of the US dollar through the adoption of programmable and monitorable stablecoins.
At the Bitcoin 2024 conference in Nashville, Tennessee last Saturday, former President Donald Trump detailed his future administration's possible cryptocurrency and Bitcoin strategies. Standing in front of a banner with the Xapo Bank logo, Trump stated his policy vision of integrating Bitcoin, the U.S. dollar and stablecoins, with the goal of "expanding the dollar's dominance in new areas around the world."
After years of talk of a threatened dollar, even as the petrodollar system is coming to an end and increasingly influential power groups seek alternative reserve currencies, Trump’s latest speech shows his intention to use Bitcoin to deal with runaway US government debt and promote the use of digital dollar stablecoins, which are quietly dollarizing many countries in the Global South as COVID-19-era fiscal policies continue to undermine the purchasing power of 99% of the world’s population.
Trump promised that he would "build a framework to ensure the safe and responsible expansion of stablecoins, allowing the dollar's dominance to expand into new areas around the world." He further asserted that the government will adopt dollar stablecoins in the future, which will "make America richer, the world better, and billions of people will enter the crypto economy and transfer their savings to Bitcoin." In addition, Bitcoin mining became one of the focuses of Trump's speech, and he declared that "the United States will become the world's undisputed Bitcoin mining power", which will further consolidate the US government's position as "one of the largest holders of Bitcoin."
Trump also pointed out that Bitcoin does not pose a threat to the US dollar, and the real threat comes from the actions of the current government. The "threatening" behavior that Trump refers to, namely the continuous printing of money by the Federal Reserve System, has been a common practice for almost every US president in the past century or so, and Trump himself is no exception. In fact, the United States has issued more money during Trump's tenure than any other president in history, because the new crown crisis "triggered the largest influx of federal funds into the US economy in history." In response to the government's lockdown policies and the purchase of experimental vaccines, the United States has printed trillions of dollars, causing the national debt to increase by $8.18 trillion during Trump's tenure, consistent with the rapid debt expansion model of his predecessor Obama.
Therefore, any policy that combines Bitcoin with the dollar - whether under Trump or other future presidents - is likely to be in response to the monetary policy that currently threatens the dollar. According to media such as CNBC, the most likely outcome under Trump is to use Bitcoin as a reserve asset to absorb the inflation caused by the government's ever-increasing money supply. Ironically, Bitcoin may end up being the enabler of the problem it has always claimed to solve.
Not only that, but Bitcoin could become an anchor point for the U.S. government to use the dollar against countries whose currencies face destabilizing economic pressures, effectively replacing those countries’ currencies with digital dollars. This phenomenon has already been seen in countries such as Argentina, providing the U.S. government with a major opportunity to conduct financial surveillance on “billions of people” by enrolling them in dollar stablecoin platforms, some of which have already joined the FBI and Secret Service in freezing accounts at their request.
Given that “private” stablecoin platforms are closely aligned with governments, which are known for their warrantless surveillance of civilians at home and abroad, concerns about surveillance are similar to those about central bank digital currencies (CBDCs). Moreover, since stablecoins are programmable like CBDCs, the main difference between the two is the issuer – private or public sector, as both have the same functions in terms of surveillance and programmability, which leads many to believe that such currencies pose a threat to freedom and privacy. Therefore, Trump’s rejection of CBDCs and acceptance of USD stablecoins on Saturday indicated that he rejected the Fed’s direct issuance of digital currency, rather than rejecting the surveillance-able, programmable currency itself.
So why doesn’t the US government just create a retail-oriented CBDC? First, public sector entities may be more restricted on their platforms. However, the main reason is economic: they need to resell debt to others to continue the US fiscal system.
Steady Demand for US Debt In order for the incoming Trump administration to successfully meet Congress’ budgetary demands while paying down the $35 trillion in debt we already owe, the Treasury needs to find people willing to buy newly issued debt. Over the past 18 months, a new large net buyer has emerged in the cryptocurrency industry: stablecoin issuers. Stablecoin issuers such as Tether or Circle have purchased over $150 billion in US debt in order to “back” their dollar-pegged tokens with dollar-denominated assets. To put this in perspective, these relatively young, smaller players have absorbed the vast majority of US debt, holding just under $1 trillion and just over $1 trillion, respectively, compared to China and Japan, the two largest historical creditors of the United States. Despite only being around for a decade and having a market cap of just over $10 billion in 2020, Tether already accounts for over 10% of the US Treasury held by the two largest US creditors.
Using stablecoins to help ease the US debt problem has become a popular topic among Republicans. Despite his “never let this happen again” stance towards Trump, former House Speaker Paul Ryan recently expressed this view in an op-ed in the Wall Street Journal titled “Cryptocurrency Could Avoid a US Debt Crisis.” Ryan claims that dollar-backed stablecoins provide demand for US public debt and are therefore “a way to keep up with China.” He speculates that “a debt crisis could start with a failed US Treasury auction,” which would lead to “a massive budget adjustment.” The former Speaker predicts that “the dollar will suffer a major confidence shock,” and therefore asks “what can we do about it?” His straightforward answer is “start with taking stablecoins seriously.” He points out that dollar-backed stablecoins are becoming “significant net buyers of US government debt,” with stablecoin issuers now the 18th largest holder of US debt. Ryan goes on to say that if the fiat-backed dollar stablecoin issuer were a country, that country “would be outside the top ten of countries holding US Treasuries,” still less than Hong Kong, but “larger than Saudi Arabia, the US’s former partner in the petrodollar system.”
In the future, the expansion of the industry and the deregulation of regulations during the Trump presidency may make stablecoins (including PayPal's relatively new stablecoin PYUSD) one of the important buyers of US government debt, and more importantly, a reliable new source of demand for US Treasuries. Paul pointed out that the often-discussed trend of de-dollarization has put pressure on the development timeline of the industry. He said: "If other countries successfully increase the influence of their own currencies while selling US Treasuries, the United States will need to explore new strategies to increase the attractiveness of the US dollar." He also emphasized that "dollar-backed stablecoins" may be one of the solutions.
In the United States, a retail CBDC is merely a cover-up to hide the truth.
On Saturday, Trump reiterated his opposition to government-issued digital currencies, a statement that was widely supported by other candidates and won enthusiastic praise from freedom-loving citizens across the country and across party lines. Central bank digital currencies (CBDCs) are seen as an Orwellian construct, and public concerns about governments using such digital powers to control citizens are widespread. Therefore, while there are widespread concerns about a government directly issuing some form of retail CBDC, such as concerns about surveillance or seizure, less people realize that private corporate issuers could do the same - and perhaps even more.
As our economy and the dollar become more digital, some of the privacy features of traditional paper money are taken for granted, and our focus is deliberately directed to the Orwellian view that digital currencies seem to be limited to those issued by central banks. Meanwhile, the rapid growth of the private stablecoin industry and the banks behind it has attracted little attention. At this point, members of both parties in the United States have recognized and actively promoted measures to ban the issuance of central bank digital currencies (CBDCs). However, the stablecoin industry has remained undisturbed for many years, with issuance of more than $150 billion, mainly in the form of programmable, securitable and auditable ERC-20 tokens, which are mainly issued on Ethereum and the infrastructure is largely dominated by JPMorgan. In addition, Circle, the company behind the well-known stablecoin USDC, has also vigorously promoted the programmable nature of its stablecoin.
As for the U.S. dollar stablecoin Tether (USDT), Howard Lutnick, CEO of Cantor Fitzgerald, which holds Tether bonds, said he is extremely bullish on Tether and mentioned Tether's recent trend of blacklisting retail addresses marked by the U.S. Department of Justice. "With Tether, you can contact them directly and they will freeze the funds." On Saturday, Trump mentioned Lutnick's name in his speech, calling him one of the most senior and top U.S. government bond traders, his ability is "incredible", and he is "one of the truly talented people on Wall Street."
Last October, Tether froze 32 wallets for alleged links to terrorist activities in Ukraine and Israel. The following month, the U.S. Department of Justice’s investigation revealed that the wallets with the alleged funds were linked to human trafficking rings, and subsequently froze $225 million. In December 2023, the stablecoin issuer froze more than 40 wallets on the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list. Explaining the purpose of these actions, Tether CEO Paolo Ardoino said: "By proactively freezing wallet addresses that are newly added to the SDN list, and freezing previously added addresses, we will be able to further strengthen the positive applications of stablecoin technology and promote a safer stablecoin ecosystem for all users." He also mentioned that Tether had frozen about $435 million worth of USDT for the U.S. Department of Justice, the FBI, and the Secret Service. He also explained why Tether has a close relationship with the now-defunct cryptocurrency exchange FTX, as Tether is working to become a "world-class partner" of the United States to "expand the hegemony of the US dollar around the world."
This year, the situation has barely changed, with Tether pledging to freeze assets associated with U.S.-sanctioned Venezuelan state oil company in April. Tether has thus made clear its plans to become a tool of U.S. foreign policy. Given that the U.S. military has in the past viewed institutions like the World Bank and the International Monetary Fund as “financial weapons” of the U.S. government, it’s safe to say that Tether has become a new member of the U.S. financial arsenal. This is especially true considering that Tether recently integrated Chainalysis, which is heavily backed by the CIA’s In-Q-Tel, into its platform in May, and hired Chainalysis’ chief economist as Tether’s economic director earlier this month.
The stablecoin ecosystem, led by dollar-pegged stablecoins like Tether, is increasingly tied to the broader dollar system and the U.S. government. After a long period of tracking the company behind retail-oriented Tether, the U.S. Department of Justice has tightened its control and now blacklists accounts whenever U.S. authorities request it. The Treasury Department benefits from large purchases of U.S. Treasuries by stablecoin issuers, which each further help the federal government repay its debts. Private sector brokers and custodians who hold these U.S. Treasuries for stablecoin issuers receive essentially risk-free returns. Meanwhile, the dollar itself, in the form of these digital tokens, is furthering its efforts to achieve high-speed globalization, helping to ensure its continued global monetary hegemony.
Until recently, legitimate concerns about the loss of privacy and property rights inherent in centralized currencies have focused primarily on currencies directly issued by the state, without delving into the question of how stablecoins might take a similar approach. While Trump has explicitly rejected the adoption of central bank digital currencies (CBDCs) as one of his campaign promises, he plans to allow a massive growth in private stablecoins to promote the dollar’s global hegemony and ease our country’s debt burden. After Trump’s revelatory speech on Bitcoin in 2024, those neglected “private bank digital currencies” issues have suddenly been pushed to the forefront and highlighted in bright orange.
Building Bitcoin Dollars
In the conception of establishing a Bitcoin dollar, Trump's speech not only outlined a new regulatory framework for stablecoins, but also portrayed a vision: the country will never sell its Bitcoin holdings, and people around the world will keep their assets in the form of Bitcoin. But why would the national leader want to establish a new reserve asset outside the treasury system? Although it is generally believed that Bitcoin may compete with the US dollar system, Trump showed a different point of view in his speech: "Those who think that Bitcoin threatens the US dollar are completely wrong. I think this is a misunderstanding. Bitcoin does not pose a threat to the US dollar."
The Bitcoin-Dollar concept is similar to the oil-dollar system that has persisted since Nixon abolished the gold standard in 1971. By effectively monopolizing the trade of oil and dollars, the United States has managed to tie its ever-expanding dollar to its growing energy needs, thereby attracting a large number of dollar buyers. Every country that wants to industrialize first needs to buy dollars in order to compete on the global stage. Bitcoin is also an energy commodity, and the dollar system has once again established a de facto monopoly on global Bitcoin sales, not to mention that the United States already holds more Bitcoin on its national balance sheet than any other country in the world. The United States can easily print $35 trillion in new Treasury bonds to repay its debts, especially after finding a demanding buyer in the stablecoin issuers, but the inflationary effects of this action will be disastrous for the purchasing power of the dollar and the net purchasing power of the US economy.
Bitcoin plays a key role here. It is the only commodity that can handle the pressure of supply inflation due to growing demand. For example, if the price of gold doubles, gold miners can increase the number of miners, speed up mining, increase supply to meet demand, and ultimately reduce the price. However, no matter how many people participate in Bitcoin mining, no matter how much the hash rate increases this month, the issuance of Bitcoin per block will still be 3.125 as of April 2024. The final supply cap is fixed at 21 million, achieved through the deflationary token issuance rate in the Bitcoin monetary policy protocol set at the launch of the network, allowing the United States to inject large amounts of dollars into this energy commodity with inelastic demand without increasing the wealth of gold or oil-rich countries. As the price of Bitcoin rises globally, the large reserves held within the United States will enhance the country's relative wealth position.
How do we maintain demand for the dollar while still increasing the money supply to pay off our compounding debt? … By creating an infrastructure on-ramp to Satoshi’s protocol denominated in dollars, we have, in effect, re-created the constant need for an ever-expanding supply of dollars in the petrodollar system. By expanding Tether’s market cap to $115 billion in the first dozen years of Bitcoin’s existence, with 94% of the total supply at the time, the U.S. market ensured that the value injected into the now deflationary protocol would always be symbiotic with the dollar system…
Tether does not simply “tie” the dollar to Bitcoin, but rather permanently links the emerging global permissionless energy market to U.S. monetary policy. We have recreated the petrodollar mechanism to preserve the net purchasing power of the U.S. economy despite an expansion of the monetary base.
In the current and future regulatory environment, banking groups are required to support the U.S. fiscal system through new capital requirements, serving the U.S. government’s current budget and the growing interest burden generated by the $35 trillion in debt we hold, thereby optimizing the interaction mechanism between Bitcoin and the U.S. dollar.
Between the public and private sectors
As U.S. commercial banks further integrate volatile digital assets such as Bitcoin, the need for liquid liabilities to ensure retail investors hold digital commodities provides regulators with a unique opportunity to stimulate demand for the U.S. dollar. New regulations such as the upcoming Basel III, proposed by Trump appointee Jerome Powell, require that banks that wish to hold Bitcoin, other digital assets, or even gold, must also hold an equal value of U.S. dollar-denominated investments. This international capital requirement will create a net demand for the U.S. dollar in the U.S. banking system despite the current high monetary inflation environment. For banks or investment entities that wish to hedge against the effects of inflation by purchasing alternative reserve assets such as Bitcoin, this regulation means an increase in the valuation of Bitcoin and an increase in the demand for U.S. dollar liabilities on their balance sheets. Do you want to run a responsible bank that meets capital requirements and holds Bitcoin on your balance sheet? Then you better be prepared to hold a significant amount of U.S. dollars as well. The implementation of Basel III will create a continuous demand for the U.S. dollar globally, even in a "hyper-bitcoinization" environment. This is particularly evident in the context of "hyper-bitcoinization" in particular, and it is likely intentional.
Trump will no doubt continue to lean on his private sector banker friends in this administration, as he did last time. In effect, the Trump administration is in charge of implementing a “direct reset” designed by BlackRock. As John Titus explains in Catherine Fitz’s Solari Report, this “reset” began in August 2019, when Larry Fink’s BlackRock presented central bankers with a proposal to “respond to the next recession” that directed the Fed to take “direct action.” In short, “direct action” was a radical departure from the Fed’s past crisis response playbook because, as BlackRock envisioned it, it meant “exploring ways to channel central bank funds directly into the hands of public and private sector consumers,” not just the public sector, thus representing “permanent fiscally financed monetary expansion.” As Titus explains, this package was effectively a modified quantitative easing policy, but with the addition of “private sector consumers” as the new beneficiary.
BlackRock’s proposal was extremely well-timed, as the “next recession” arrived less than a month later and the repo market became extremely unstable, leading the New York Fed to intervene in that market starting on September 17, 2019. From September 2019 to March 2020, the Fed rapidly expanded the size of its balance sheet, taking measures similar to those during the 2008 financial crisis and beginning to implement “direct interventions” in accordance with BlackRock’s August 2019 proposal. The stock market crashed in mid-February 2020, and the Fed increased its asset purchases to more than $150 billion, which made matters worse. However, the stock market did not respond as the Fed expected. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. That same day, as John Titus has documented in detail in his article “Going Direct,” the Fed’s asset purchase program quickly entered an accelerated phase.
After the outbreak was announced, Larry Fink of BlackRock was in close communication with the Trump administration’s Treasury Secretary Steve Mnuchin and Federal Reserve Chairman Jerome Powell (also appointed by Trump). According to records obtained by The New York Times, BlackRock and Fink referred to the Trump administration’s COVID-19 fiscal response as a “project” in which Fink and his company “worked together” with the public sector. Titus’s report pointed out that this “project” obviously refers to the “direct reset” mentioned above, which was actually implemented before the outbreak was announced, but was cleverly disguised as a policy response to the COVID-19 outbreak.
Trump himself has boasted that soon after announcing the outbreak, he had obtained advice from "a secret weapon: Larry Fink." BlackRock and Fink have managed Trump's portfolio for many years before Trump became president, and Trump was also a major investor in BlackRock's Obsidian Fund. At a White House event in 2017, Trump said: "Larry has done a great job for me. He manages a lot of my money. I must say, he has brought me great returns." Fink, who calls himself a "proud globalist," was also appointed by Trump to the Strategic and Policy Forum, whose goal is to "provide the president with advice from the best and brightest in the business world directly in a candid, non-bureaucratic and non-partisan manner." This makes people wonder whether the close personal and financial relationship between Trump and Fink influenced the government's decision to implement BlackRock's "direct" plan.
In 2020, BlackRock played a key role in the allocation of the Fed’s rescue program, being selected as the manager of the Primary and Secondary Corporate Credit Facility. BlackRock stepped up and used this newly granted statutory authority to purchase ETFs that BlackRock itself owns: “From May 14 to May 20, approximately $1.58 billion of ETFs were purchased through the Secondary Market Corporate Credit Facility (SMCCF), of which $746 million (about 47%) came from BlackRock’s ETFs.” When BlackRock announced its role in “Recovery,” one asset management executive told the Financial Times: “This is outrageous. BlackRock will manage a fund and decide whether to use taxpayer money to buy the ETFs they manage. There are probably 100-200 other managers who could do this, but BlackRock was chosen.”
Despite its mission to “save Main Street” from the economic impact of the coronavirus (despite the government-imposed lockdowns), BlackRock remains a profit-first private company motivated by shareholders—particularly the American public. As Titus points out, this is exactly the view that Congress raised on May 18, 2020, when it questioned Trump-appointed Treasury Secretary Steve Mnuchin and Trump-appointed Federal Reserve Chairman Jerome Powell: “The Federal Reserve has hired BlackRock to serve as the institution’s investment manager. How can the Federal Reserve ensure that BlackRock is acting in the best interests of the Federal Reserve and the public?” All Mnuchin and Powell could confirm was that BlackRock was hardly acting in the public interest but in the interests of the Federal Reserve Bank of New York (“FRBNY”), despite the private bank name. Under the [Investment Management Agreement], BlackRock, as trustee of the CCF, provides investment management services.
Under the Trump administration, BlackRock has used capital creation to deliver outsized returns to shareholders during the crisis, disguised as a necessary response to the virus emergency. However, BlackRock had been planning this “crisis response” long before the COVID-19 outbreak. Crucially, the Fed actually began implementing this plan before the COVID-19 pandemic was declared. This series of operations ultimately resulted in an unprecedented transfer of wealth from ordinary Americans to a handful of billionaires. Few Americans knew that this wealth transfer was carefully designed and clearly disguised as the COVID-19 crisis, which should be seen as an unprecedented robbery of American taxpayers.
As mentioned above, during the COVID-19 pandemic, BlackRock took advantage of the government blockade to manipulate its ETF holdings to gain huge profits. BlackRock's iShares Spot Bitcoin ETF - IBIT - has invested more than 337,000 Bitcoins since January 2024, becoming the fastest growing ETF in history and the world's largest Bitcoin fund, all within the supervision of US regulators. In the registration statement of BlackRock's iShares Bitcoin Trust Form S-1, they revealed that they use Coinbase for Bitcoin custody (as does the US government). The statement also points out that one of their affiliates may have a conflict of interest as it serves as the investment manager of the Circle Reserve Fund, a money market fund that the USDC stablecoin issuer uses to “hold cash, U.S. Treasury bills, notes, and other principal and interest obligations guaranteed or guaranteed by the U.S. Treasury, and repurchase agreements secured by such obligations or cash, as reserves to back the USDC stablecoin.” The statement then states that “an affiliate of Founder [BlackRock] holds a minority stake in the USDC issuer.” A line in the S-1 filing all but explicitly expresses concerns that the price of Bitcoin could be affected by stablecoins (including Tether and USDC), the activities of stablecoin issuers, and their regulatory treatment.
Will the Trump administration once again ask BlackRock, one-time Trump fund manager, to draft legislation during future “crises”? History tends to repeat itself, and if the next economic disaster comes, Bitcoin could play a key role in crony capitalism’s response strategy.
Orange character who accepted the concept of Bitcoin
With President Biden out of the race, the chances of Trump winning in November appear to have increased. Trump may well support Bitcoin, as he said on Saturday, but that support would be limited to the extent that he would adopt Bitcoin policies that would benefit his personal banker friends, such as Larry Fink. Since Fink's about-face on the issue, he has frequently said that Bitcoin is a "store of value technology" and nothing more.
Trump’s recently proposed strategic vision aims to establish a regulatory environment to prevent people from “just using Bitcoin.” This is because Bitcoin, the U.S. dollar, and its stablecoins will together form a financial system that meets the needs of the U.S. military-industrial complex and Wall Street. In addition, considering that Trump’s previous fiscal policies enabled BlackRock to design and execute a premeditated, large-scale plan to plunder the wealth of ordinary Americans, it is reasonable to speculate that the regulatory framework promised by Trump may significantly increase the risk of such behavior.
The 2020 government lockdowns crushed economic demand, while the Fed, the Treasury, and their private partners (such as BlackRock) used emergency decisions to create trillions of dollars to buy assets at extremely low prices. Now, as economic activity resumes, these players plan to convert the hyperinflation of the dollar into assets purchased during the COVID-19 pandemic, and once the "next recession" arrives, it is very likely that another large-scale wealth transfer will occur.
Judging from Saturday’s speech, it appears that the next president plans to launch a new financial system ahead of his inauguration, fulfilling his now-clear promise to make America and its currency “great again” through Bitcoin and private-sector stablecoins.
Bitcoin undoubtedly marks a financial revolution, but it may not be the kind of revolution that everyone is expecting.
