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Can Anyone explain this To the Thread?
Are Stablecoins About to Displace Bonds, Gold?Its not a stretch
The great thing about being the largest economy in the world while simultaneously fielding the largest military force is that you basically get to jam whatever you want down the rest of the world’s throat without consultation.
Thus, the United States, through the GENIUS Act, is jamming sovereign-regulated stablecoins down the throat of the global financial system, whose members are now clambering to catch up.
If you’re wondering why the US has embraced stablecoins so thoroughly all of a sudden, you need only look at the wobbly confidence in US Treasuries that is the underlying main catalyst driving the price of gold for the last two years.
Every stablecoin issuer is a new buyer of US Treasuries. Or, at least, T-bills for the shorter duration. Regulated stablecoins provide a digital proxy to US Treasuries without the limited marketability of treasuries in the secondary market.
 But here’s the thing: The GENIUS Act institutionalizes a self-reinforcing expansion of nominal money supply that, absent exogenous constraints, tends toward infinity. It transforms sovereign debt into the reserve substrate for private money creation, allowing digital “backed” instruments to proliferate indefinitely—so long as confidence persists in the redeemability of promises built upon other promises.
In other words, it solves the “kicking of the can” in terms of US debt repayability by creating a new source of demand for Treasuries that has nothing to do with sovereign investor interest. This is the ultimate kicking of the can down the road along which the endless corpses of failed fiat currencies are littered.
The Mimetic Ontology of the Global Financial System
With announcements in the last two weeks that Japan, Canada, the Eurozone, and the UK have all unveiled plans to roll out regulations governing the issuance of stablecoins pegged to each nation’s sovereign currency, a new generational wealth opportunity has emerged.
There is now a race among the G7 nations to get stablecoin regimes ratified and deployed to match the US implementation schedule by the end of 2026.
Japan is in the lead, with three of its largest chartered banks launching a pilot program this month. Canadian Prime Minister Mark Carney indicated in “Budget 2025,” published in early November 2025, that they would begin formulating policy and legislation to regulate private stablecoin issuances. And the US, whose dollar is what the values of both USDT and USDC are pegged to, has now defined stablecoins in the GENIUS Act as legal money.
You’ll notice we’re talking “stablecoins” here, not Central Bank Digital Currencies (CBDCs).
What’s the difference?
A stablecoin is a cryptocurrency whose value is “pegged” or determined by its direct representation by an equivalent value in Tier 1 capital of the country in which the stablecoin is issued. The two principal stablecoins are USDT, operated by Tether, and USDC, operated by Circle. They are private companies now regulated by the GENIUS Act.
A CBDC is a stablecoin issued and operated by the central bank of the issuing nation, and is a proxy for the national currency unit of each country.
So one is a private currency regulated by the government in jurisdictions where it is legal, and the other is government-issued and therefore backed by the full credit of the nation issuing it.
What Happened?When the US president signed the GENIUS Act (short for “Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025”) into law on July 18 this year, he basically put a pin in the long-running regulatory debate as to whether stablecoins, cryptocoins, tokens, and NFTs were securities subject to SEC oversight, commodities under the CFTC’s realm, or currencies subject to Federal Reserve regulation.
Stablecoins are not legal tender, according to the GENIUS Act; nor are they securities. They have been designated “payment instruments” and are regulated as “private financial liabilities” overseen by the Fed, OCC, FinCEN, CFPB, and state regulators.
The GENIUS Act grants stablecoins a new statutory identity—a form of regulated private money—but stops short of elevating them to sovereign status. They are lawful and federally recognized, yet remain private contractual claims redeemable for U.S. dollars rather than dollars themselves.
And with the only G7 policy uniformity being the requirement for every stablecoin issuer to match 1 stablecoin with holdings of 1 dollar of sovereign fiat, there is every reason to presume that the newly and gleefully discovered way to re-monetize each nation’s national debt again and again is to simply continue licensing stablecoin issuers who can raise the dough to establish a treasury of bonds.
How much would you bet that it’s just a matter of time until they permit the holding of a basket of bonds to further dilute, obfuscate, and frustrate the calculation of fair value?
The Competitive Driver
The other G7 members have correctly concluded that if they don’t have a similar digital offering, they may lose market share of digital payments to the US, which would negatively impact economies not participating in regulated digital payment systems.
But there are additional competitive considerations that derive from sovereign debt investors.
Under the GENIUS Act, issuers of stablecoins are prohibited from lending stablecoins for interest, in that it would create a claim on the reserves backing the stablecoin, which constitutes risk but also could engender competition with the bond market.
Holders of stablecoins, on the other hand, are allowed to generate yield from stablecoin holdings through lending, but only through separate, regulated financial contracts, not through the stablecoin itself.
What this implies for secondary markets trafficking in stablecoin debt instruments, however, is that investors will be seeking the highest possible yield with the lowest possible risk.
So we come back to the perceived safety of the underlying currency to which the stablecoin is pegged—which imposes a consideration of debt-to-GDP ratios and the interest rate on bond issuances.
Just as zero-interest rate lending by the Bank of Japan catalyzed the yen carry trade, where investors borrow yen to invest in higher-return US tech stocks, so could the lowest-cost stablecoins generate greater borrowing interest and potentially undermine the attractiveness of higher-cost stablecoins.
Monetary Valuation Efficiency Infrastructure
What has sprung up around the GENIUS Act, and is now percolating down the G7 stablecoin food chain, is an entire new ecosystem that generates yield from stablecoins through a range of strategies.
From market making to lending, the value that will be synthesized into existence by trading in stablecoin instruments (never mind the imminent flood of ETFs, funds, and options) represents an entirely new source of M2 money generation driven by the stablecoin ecosystem.
So we come back to the issue of competition with sovereign control over monetary supply. The long-sung value proposition of decentralized currencies has been, among other things, the built-in financial discipline of finite supply of digital currency.
My decade-long dismissal of such claims—based on the reality that every new cryptocurrency has the potential effect of debasing the value of all cryptocurrencies—has now been neutralized by this new stablecoin reality.
The supply of sovereign debt instruments will continue to modulate the supply of stablecoins (for now), but the infinite value creation cycle of stablecoins buying sovereign debt instruments to backstop their stablecoins so more can be issued constitutes a hyperinflationary driver.
“Stablecoins are privately issued, and, notably, pose risks to monetary policy,” said Christine Lagarde, President of the European Central Bank during a recent address.
That’s an understatement.
If yield strategies generate consistent APY from lending and other forms of secondary market activity, the Stablecoin sector has the potential to displace sovereign debt investors (often referred to as “Bond Vigilantes”) as the leading influence on Central Bank policies.
That is the fundamental transformation that crypto investors have been waiting for, moving toward, and expecting. These are the seeds of the greatest geopolitical power shift in finance since the closing of the gold window by Nixon in 1972.
The Threat to GoldNow we arrive at another historical shift that threatens to undermine the current surge in gold prices resulting from eroding confidence in sovereign debt.
If the flight from US Treasuries is reversed by the attraction of yield generated from digital treasury proxies with all of the security and none of the risk, then sovereign investors may reduce gold exposure to incrementally embrace the new stablecoin regime.
It has been my expectation, proven more or less correct, that precious metals and the mining sector could only ever liberate themselves from the lack of interest generated by crypto if that industry collapsed.
Now, with the US government leading the way, that potentiality has been snuffed out decisively, for the time being.
The CBDC AlternativeA Central Bank Digital Currency, which mainstream media has long been conditioning society to believe is the inevitable evolution of fiat currencies (though it isn’t framed quite like that), is basically a digital dollar (or yen, yuan, ruble, euro, etc.) issued by the corresponding Central Bank of each nation.
As digital legal tender issued by the nation’s top bank, it would have to be accepted as a form of payment by any business, individual, or government operating within that jurisdiction.
It would be subject to protection and intervention if anything were to happen in the macro geopolitical context, and would thus become a proxy for the units of debt issued by governments, which are traditionally bonds.
A sovereign currency-pegged stablecoin, on the other hand, is a privately issued, government-regulated stablecoin (in other words, regulated by statute to be pegged to the sovereign unit of currency and backed by an amount of sovereign currency-denominated Tier One equivalent assets—i.e., government bonds, cash, or other approved proxy).
The dilemma for central bankers is that if they attempt to roll out Central Bank Digital Currencies now, in an environment where public trust in government has been eroded by events like the COVID-19 pandemic and government corruption at the provincial/state level—especially in real estate development—it could cause a backlash and rejection of CBDCs by the public.
There is widespread perception that CBDCs will create higher potential for state surveillance, excessive ability to impose expiration on CBDCs to induce spending and thwart savings, among other conspiratorial possibilities.
By moving forward with regulated stablecoins, governments recognize that the public will become gradually more conditioned to transact in stablecoins, and so CBDCs will likely continue to evolve behind the scenes, with governments eager to study how stablecoins might bridge public resistance to acceptance and adoption.
Either way, resistance is futile.
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