Washington’s stablecoin strategy could shore up the dollar by making U.S. Treasury bills the backing for a new digital currency. But who gets the interest, and who will make the loans?
For several years, “the death of the dollar” has been a persistent headline, with compelling data to back it up. The dollar’s share of global foreign exchange reserves has slipped from over 70% in 1999 to about 57% today. Last spring, gold overtook U.S. Treasuries as the largest asset in foreign central bank reserves for the first time since the mid-1990s. The BRICS nations are settling more of their trade in their own currencies, and the U.S. has used the dollar as a sanctions weapon so often that friendly nations as well as rivals are looking for a way out. A topic once confined to gold bugs and doomsday newsletters has gone mainstream.
At the Federal Reserve’s Jackson Hole symposium in August, however, a paper by Eswar Prasad and colleagues highlighted a different set of data. Yes, the dollar’s share of central bank reserves has fallen, and foreign central banks’ Treasury holdings have stayed flat at around $4 trillion. But foreign private holdings have risen from $1 trillion in 2010 to more than $5 trillion today. The world isn’t dumping the dollar so much as changing who holds it. And the authors expect stablecoins to accelerate that shift, by driving global demand for dollars into the U.S. Treasury bills needed to back them. The dollar may not be dying so much as being re-engineered.
According to financial strategist Matt Dines, who attended the recent G20 meeting of finance ministers and central bank governors in Asheville, a “dollar reset” is underway. His thesis is that Washington isn’t trying to prop up the old dollar so much as to build a new one on a different foundation – a foundation that is the very debt everyone is so worried about. In August the national debt passed $40 trillion, with annual interest of over $1 trillion.
The notion that government debt can be an asset isn’t new. A Treasury bond is a debt of the government, but it is an asset to whoever owns it. The idea goes back to Alexander Hamilton, the first U.S. Treasury Secretary. Faced with a crushing Revolutionary War debt, he turned it into an asset by accepting it as three-fourths of the payment for stock in the First Bank of the United States. The debt thus became the capital of a national bank that generated credit for the nation.
The new dollar reset would do something similar on a global scale: Treasury bills, a portion of the national debt, would become the assets backing the world’s digital trade currency.
The View from Asheville
The G20 meeting in late August was hosted by Treasury Secretary Scott Bessent and attended by new Federal Reserve Chair Kevin Warsh. The official agenda was growth, deregulation, energy security and sovereign debt. But Dines came away with a bigger takeaway, which he laid out in a video titled “Quantitative Credit Guidance: G20 Says Growth Is the Only Way Out.”
His reading is that the officials now running U.S. monetary policy have concluded that the debt cannot simply be inflated away with another round of quantitative easing, as it was after the 2008 financial crisis, when the Fed created trillions of dollars that mainly inflated stock and bond prices on Wall Street. As a ZeroHedge summary of Dines’ thesis put it, “The QE period is over.” The way out is to “provide credit to those who have capacity (Main Street),” with credit steered into factories, infrastructure and productive investment rather than financial speculation.
Dines draws on economist Richard Werner, whose Princes of the Yen showed how Japan’s central bank used “window guidance” to steer bank credit into productive industry. What matters, Werner argues, is not just how much money is created but where it goes: credit for buying existing assets inflates prices, while credit for producing new goods and services creates growth without inflation.
Bessent said, “The only way for us to get out of this is to grow our way out of it.” Whether that kind of growth is achievable is debated. But supporting economic growth is only half of the new dollar plan. The other half concerns the plumbing of the dollar itself – what backs it in trade.
Your Dollars Are Your Bank’s IOUs
Most of the money we use today is not government-issued cash. It is bank deposits, and a deposit is a liability of the bank, its promise to pay dollars on demand. When a bank makes a loan, it doesn’t lend out someone else’s savings. It credits the borrower’s account with a new deposit. The loan is the bank’s asset; the deposit is its liability. That is how the money supply expands.
When the depositor asked for his money, historically the bank paid with gold or silver. Today it is Federal Reserve reserves – digital balances held by banks at the Fed, or the paper notes into which reserves can be converted. Deposits are only a promise to deliver that “real” money, and no bank holds enough of it to pay everyone at once. The system works because depositors don’t all ask for their money at once, and because deposit insurance and the Fed stand behind it.
When confidence fails, however, a bank can fail even if its assets look safe. Silicon Valley Bank held long-term Treasuries and mortgage-backed securities, about as safe as assets get. But when interest rates rose, those bonds lost market value. In March 2023, depositors tried to withdraw $42 billion in a single day, and SVB couldn’t sell its bonds quickly enough at a sufficient price to cover the demand. The bank was gone within 48 hours. The 2008 financial collapse was worse, because the assets were subprime mortgages that were hardly marketable at all.
Dines notes that the dollar traded globally has long been “liability-based.” The vast offshore “eurodollar” market runs on dollar IOUs created by banks in London and elsewhere, banks that lack reserve accounts with the U.S. central bank and are beyond the reach of U.S. regulators. When that market froze in 2008, the Fed had to open emergency swap lines to foreign central banks to keep it from collapsing. According to Dines, it is that “liability-based” system that is being left behind.
Changing What Backs the Dollar
The GENIUS Act, signed in July 2025, set up an alternative to liability-based dollars backed with bank IOUs. Regulated dollar stablecoins are backed one-for-one with cash and short-term Treasury bills. In a June podcast, Dines said the Act pulls the dollar toward “an asset-based definition,” a dollar that “anchors back and is reserved one to one with U.S. Treasury debt.” The old offshore dollar is “being left out to dry.”
When the GENIUS Act was signed, Treasury Secretary Bessent declared that “the dollar now has an internet-native payment rail that is fast, frictionless, and free of middlemen.” (A payment rail is the network that carries money from one account to another.) He predicted a “surge in demand for US Treasuries, which back stablecoins.” In November 2025, he projected that the stablecoin market, then about $300 billion, “could grow tenfold by the end of the decade.”
Most stablecoins are held overseas, many by people and businesses seeking a currency more stable than their own. A business in Argentina or Nigeria that wants dollars buys dollar stablecoins. The stablecoin issuer then takes that money and buys U.S. Treasury bills. The world’s appetite for dollars thus becomes an appetite for U.S. government debt. In the new stablecoin model, the Fed would no longer need to buy Treasuries with reserves newly created through QE, because a global network of digital dollars would be buying them instead.
An Asset-Backed Dollar? Not Quite, But Close
Technically, a stablecoin is also a liability: it is the issuer’s promise to redeem your token for a dollar. When you hand Circle, the issuer of USDC stablecoins, $100 for 100 USDC tokens, Circle owns the Treasury bills it buys with your money. You just own a claim on Circle for that sum. The shift then isn’t really from a liability to an asset. It’s from a liability backed by private loans to a liability backed by public debt.
But that is still a meaningful difference. Under the GENIUS Act, stablecoins must be backed one-for-one by cash, bank deposits, overnight repos or Treasury bills maturing in 93 days or less. The issuer can’t lend the money out or buy ten-year bonds that lose value when rates rise. There’s no “maturity mismatch” and no “fractional reserve” problem. If everyone redeems at once, the money is there. An SVB-style collapse from long-dated bonds losing value isn’t supposed to be possible.
But the safeguard isn’t perfect. In fact, the biggest scare in the regulated stablecoin world came from SVB itself. Even stablecoins need banks to hold their funds, and in March 2023, Circle had $3.3 billion of USDC’s reserves sitting on deposit in SVB. USDC broke its dollar peg, falling to about 87 cents, until regulators guaranteed the deposits. But with reserves held mostly in short-term Treasuries, the stablecoin structure is still sounder than the bank money it would replace.
There are, however, other problems with the new plan.
Who Gets the Interest?
Bessent promised a payment rail “free of middlemen,” but this isn’t actually true. The stablecoin issuer is the middleman, and it is enormously well-paid.
When you give the issuer a dollar, it gives you a token worth a dollar and puts your dollar into Treasury bills paying 3% to 4%. But you get no interest. In fact, the GENIUS Act prohibits issuers from paying interest to holders. In effect, the issuer has borrowed from you at zero interest and lent to the government at the market rate.
The results are spectacular – for the issuer. Tether, the largest issuer, reported more than $10 billion in net profit for 2025, with a staff of just over 100 in 2024. It holds over $120 billion in U.S. Treasuries, making it one of the largest holders of U.S. government debt in the world. Circle, the issuer of USDC, reported $2.7 billion in revenue for 2025, about 95% of it from interest on reserves.
Scaling that up to Bessent’s $3 trillion market, the reserves would earn more than $100 billion a year at 3.5%. And the interest is paid by U.S. taxpayers, through interest on the federal debt. The public pays interest to private companies, so that those companies can issue the public’s own currency and keep the spread.
That’s the privilege known as seigniorage, the profit from issuing money, and it would be handed to a few private firms. Hamilton’s American System used public credit to build the productive economy. The private stablecoin model looks more like the British System of speculation and rent collection that Hamilton was trying to escape.
Stablecoins Move Money, but We Need Banks to Create Credit.
There’s a second problem with the stablecoin plan, which works counter to the “growth through credit” part of the dollar reset proposal. Dollars moved into stablecoins typically come out of bank deposits, which banks need to back their loans. The stablecoin issuer can’t lend that dollar back out. By law, it can only park it in safe, short-term assets, mostly Treasury bills. Money that was supporting loans to local businesses ends up financing the federal government instead.
An economy that is growing needs a money supply that can grow with it, and in our system that expansion happens when banks lend into new production. Stablecoins can move existing money around the world at lightning speed, but they can’t finance factories, farms, water systems or small businesses.
The Treasury’s Borrowing Advisory Committee has flagged trillions of dollars in bank deposits as potentially at risk of migrating into stablecoins. Hardest hit would be community banks, which depend on ordinary deposits. According to the FDIC, community banks hold 36% of small business loans and 70% of agricultural loans, though they hold only 15% of all bank loans.
So far, most of this risk has been overseas. Tether, two-thirds of the stablecoin market, is generally not sold to Americans, and Circle’s CEO has estimated that 70% of USDC use is outside the United States. Ordinary American savers have had little reason to trade an insured bank account for a token that pays no interest. But a loophole could change that. The GENIUS Act bars issuers from paying interest, but it doesn’t stop crypto exchanges from paying “rewards.” The Coinbase exchange pays customers a rate on USDC close to what Treasury bills earn, funded by the share of reserve income Circle pays to it. A checking account paying next to nothing can’t compete. Banks are lobbying Congress hard to close the loophole, for good reason: it’s the channel through which local deposits could be drained away.
A full-reserve stablecoin can only recycle existing dollars into government debt. So the two halves of the dollar reset pull against each other: one wants credit steered to Main Street, while the other drains the deposits Main Street’s banks need in order to lend. Werner has long argued that the most productive credit comes from small, local banks lending to local businesses, the model behind Germany’s Sparkassen and its strong Mittelstand of mid-sized firms.
Is there a way to get the benefits of digital dollars without losing the interest to private issuers or the deposits to the Treasury market? Two states are already testing an answer.
The Public Option: Wyoming and North Dakota
In August 2025, Wyoming launched the Frontier Stable Token (FRNT), the first stable token issued by a U.S. state. Like USDC and Tether, it is backed by cash and short-term Treasuries, in this case 102% of the tokens outstanding. The difference is in where the interest goes. Instead of going to private stablecoin issuers, the income from FRNT’s reserves goes to Wyoming’s school foundation program.
North Dakota is also doing something interesting from a public banking perspective. The Bank of North Dakota, the nation’s only state-owned bank, has launched its own Roughrider Coin. The Coin isn’t for retail customers, and the public can’t buy it. It is designed for the state’s banks and credit unions for fast bank-to-bank payments.
According to Startup Fortune, the system is designed to serve more than 90 North Dakota banks and credit unions. The transactions are recorded on the Solana blockchain, and banks reach the coin through Fiserv, the financial technology company whose software many community banks already use for their accounts and payments.
What the coin is good for is speed. The older ACH (Automated Clearing House) system processes payments in batches that settle overnight. Solana was chosen, the article says, for the “sub-second finality that overnight ACH rails simply cannot offer.” Banks can thus settle with each other almost instantly instead of waiting for the batch to clear. Critics such as Catherine Austin Fitts warn that putting deposits on a programmable ledger could make accounts easier to freeze automatically. For that reason public and community banks, answerable to local oversight, are better placed than Wall Street to build in human review.
Plugging the Deposit Drain
Transaction speed is good, but the risk to deposits remains. When the coin was announced, North Dakota Bankers Association president Rick Clayburgh warned that a stablecoin “can possibly drain deposits from an institution,” noting that deposits are “what’s used to loan money out.” What the Roughrider Coin has going for it is who sponsors it: a public bank whose mission for more than a century has been to support local lenders, not compete with them. According to Startup Fortune, community banks that have “spent a decade losing deposit share and talent to bigger rivals” now have “a stablecoin product they didn’t have to write a line of code for.” A bank that can offer digital-dollar payments through its own channel gives its customers less reason to take their money elsewhere.
For keeping deposits in the local lending system, however, a different tool is needed – and there is one, the “tokenized deposit,” an ordinary bank deposit recorded on a blockchain. It moves as quickly as a stablecoin, but it remains a deposit the bank can lend against, and it is insured by the FDIC up to the usual limit. JPMorgan has launched one for its institutional clients, and five regional banks have formed a network to exchange tokenized deposits that “do not leave the insured banking perimeter.” At the Jackson Hole symposium where the Prasad paper was presented, Pablo Hernández de Cos, general manager of the Bank for International Settlements, said tokenized deposits “preserve the tight link between deposit-taking and credit provision.” But he warned that smaller banks “might struggle with high upfront implementation costs” to create the tokenized deposits, with “knock-on effects for small business and local lending.”
That is a gap a public bankers’ bank could fill. BND already provides North Dakota’s banks and credit unions with correspondent services, including wire transfers, ACH payments and Federal Reserve settlement. With Roughrider, it has made a shared digital platform accessible to more than 90 financial institutions. It could likewise give them shared tokenization infrastructure: digital dollars that remain local deposits, available for local loans.
Critics such as Catherine Austin Fitts warn that putting deposits on a programmable ledger could make accounts easier to freeze automatically. For that reason public and community banks, answerable to local oversight, are better placed than Wall Street to build in human review.
Echoing Hamilton
Combining what Wyoming and North Dakota have done, states could issue stablecoins for making payments, and keep the interest for public purposes. And public and community banks could do what stablecoins can’t: lend, creating new money for local businesses, farms and housing.
Hamilton would have approved. His First U.S. Bank wasn’t just a place to park the national debt. It extended credit to commerce and built the productive base that made the debt’s repayment possible. That was the heart of what came to be called the American System, as opposed to the British System of finance serving finance.
If the current Administration is rebuilding the dollar on a foundation of Treasury debt, as Dines suggests, the result could be sturdier money than the eurodollar IOUs it replaces. But growth takes a credit engine, and that means local banks with deposits to lend.
If a few private issuers keep the interest and share it with exchanges as customer “rewards,” the reset will have produced a new generation of princes of the dollar. But if more states join the ranks of issuers, working through public banks in partnership with Main Street banks, the reset could echo Hamilton’s reforms. A growing share of the national debt would be absorbed as backing for the world’s digital dollars, while public and local banks supplied the credit to grow our way out of the debt.
Ellen Brown is an attorney, founder of the Public Banking Institute, and author of thirteen books including Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. Her 500+ blog articles are posted at EllenBrown.com.
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