Arthur Hayes presents a broad concept for rerouting financial flows into stablecoins. He cites the Eurodollar market and worldwide retail demand as two enormous money-moving pools.
He begins by discussing the Eurodollar market, a between ten and thirteen trillion dollars structure that arose decades ago when banks sought to use US money without being subject to US restrictions. Although this market has expanded significantly, it is uncontrollable by the Fed and has contributed to numerous financial disasters. According to Hayes, investors would lose faith in Eurodollars if U.S. officials ever stopped providing bailout guarantees for dollars kept outside of the country. Stablecoins, which are safer because they are backed by U.S. Treasury bills or deposits in American banks, may be their first choice at that point.
That would include having currency that are safe, traceable, and even yielding for investors. It would give the U.S. government more authority over international currency flows, which the Fed has been struggling with for many years.
The second source of funding that Hayes mentions is global retail investors, particularly those in Asia and other developing nations. Finding methods to exchange weak local currencies into US dollars, which are then used to invest in more robust assets like stocks or real estate, is the primary financial strategy in many of these nations. Regulators, however, frequently crack down, making this process unstable and dangerous. Hayes contends that stablecoins could address this issue by providing a straightforward, digital method for people worldwide to convert their savings into US dollars without depending on dubious banks or shadowy financial networks.
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