Could stablecoins allow the entire world to switch to the US Dollar? - Episode 361 - by cryptohunt.it

Could stablecoins allow the entire world to switch to the US Dollar?

Welcome to the Cryptohunt Jam, where you learn – in just a minute or two a day – what is happening in crypto and other game-changing ideas. As always: In plain English.

Say you are the president of a country that has struggled to keep its own currency stable. Your people are suffering from hyperinflation, businesses are dying, and naturally, you are not winning any popularity contests right now.

But you also notice something: Many citizens have started using the US Dollar as an alternative currency on the street. They like it because its value is stable and they’ve started to accept it universally. The only problem: There are only so many dollar bills you can import – and certainly not enough of them to support your entire country.

But this gives you a clever idea: What if you just made a stablecoin, such as Tether or USDC, the official currency of your country, you’d have all the benefits and none of the drawbacks, right?

Well - let’s look into that!

Your first problem: You’d have to find a place that has that many stablecoins available for sale. There are only about $70bn Dollars worth of Tether, the largest stablecoin, in circulation for example. Sounds like a lot, but is not really if we are talking about an entire economy. The reason for that is quite simple: In order to buy them, you have to trade an equivalent amount of something else for them.

But in theory that could be solved. You’ll work closely with the Tether company, and over time convert your own volatile currency into Tether.

But now you have a second problem on your hands, and this is a big one. For a quick second, think about where the stability of the US Dollar comes from: It comes from the US economy. But the US economy has a fixed size, and the more outside economies cling onto the US Dollar, the more these countries introduce their own economic instabilities - like the ones in your imaginary country - into the actual US Dollar.

And that is a problem we can’t overcome and is also why stablecoins will never be able to replace an entire country’s currency. It’s a nice idea but fails pretty quickly in practice.

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This podcast is produced by Cryptohunt.it, the easiest place to learn all about Web3. My name is Christian Byza, Co-Founder of Cryptohunt and your host of this daily show.