One dollar turns into two? How stablecoins quietly replicate the US monetary system, transforming debt and printing money?

As stablecoins become increasingly popular in the global crypto market, a seemingly fanciful theory is quietly emerging: "Is it possible for stablecoins, through their issuance and reserve mechanisms, to invest in U.S. debt while circulating as digital currency, thereby creating a value of two currencies from one dollar? Could they even become a political tool for the U.S. to achieve the ultimate layout of 'debt transformation' and financial Decentralization?"

Dual currency effect: How can one dollar turn into two dollars?

According to crypto analyst @CryptoPainter_X on X, Tether issues an equivalent amount of USDT and invests the received US dollars heavily into U.S. Treasury bonds, which means that this US dollar has become a Treasury asset and has returned to the market in the form of digital currency via USDT. On the surface, this seems like a normal operation, but it may actually create a "one dollar turns into two dollars" replication effect:

In other words: users can use one dollar to purchase USDT Tether, and with this one dollar, they can buy government bonds. USDT can still be used as a payment tool in the market.

He believes that this move, even if it does not currently violate existing regulations, effectively creates a dual-circulation currency form, similar to the reserve amplification principle of traditional banks, except that the issuer has become a private enterprise.

When Tether Becomes a Bank: Is USDT a Digital Version of the "Fractional Reserve System"?

This mechanism is similar to the financial tool "Yu'ebao" launched by Alipay in early China, or the M2 system in the banking system that creates deposits through credit, but the difference is that the circulation of stablecoins is completely structured on blockchain and digital transaction systems, outside the central bank's view:

When USDT circulates only in the crypto market, the effect of "currency multiplication" is not obvious due to the closed system; however, once it enters the real economy, for example, when USDT is used for consumption within the United States, it may lead to an expansion of the dollar's monetary base, which can be described as an alternative form of "covert money printing."

(Circle plans to apply for a US banking license, will stablecoin issuers become crypto banks?)

National debt vacuum cleaner? Stablecoins become an export of fiscal pressure for the United States.

As the seventh largest buyer of US Treasuries globally, Tether currently has about 80% of its reserve assets in US Treasuries, amounting to over 100 billion USD. This represents the popularity of stablecoins, which in fact guides global dollar liquidity to support the US Treasury, indirectly becoming a "US Treasury vacuum cleaner."

In this context, the United States not only further consolidates the dollar hegemony through stablecoins but also avoids domestic inflationary pressures. This dual effect of capital repatriation and leveraging makes stablecoins a highly potential policy tool in the U.S. economy.

(Tether was the seventh largest buyer of US Treasuries last year. Is USDT really too big to fail? )

CloverAI founder @JackyYi_06 pointed out that stablecoins could indeed become a new tool for the "debt conversion" in the United States:

If the U.S. government adopts a more open policy, such as the crypto-friendly direction advocated by Trump, stablecoins may become the "debt outsourcing tool" for the world.

Looking back at Trump USD1: Does the U.S. want to reshape the dollar hegemony through stablecoins?

@JackyYi_06 went on to say that if Trump successfully gets re-elected and vigorously promotes stablecoin legalization policies, this strategy may take shape quickly, with potential advantages including:

Promote stablecoins as the "decentralized dollar" globally.

Transfer the debt to stablecoin holders

Maintain the dominance of the dollar and diversify inflation risks.

Although Trump has explicitly opposed central bank digital currency (CBDC), it does not rule out the possibility of him using his own (USD1) or private stablecoin as a tool to promote a political strategy that is more closely integrated with Decentralization.

(WLFI airdrop USD1, BitGo launches lock-up staking service, is this paving the way for WLFI to enter the institutional market? )

Can stablecoins become the new stars in finance? Central banks will not sit idly by.

Jacobmei.eth, the chairman of Jkopay, believes that even though the value amplification effect created by stablecoins is similar to the credit creation mechanism of banks, their attempt to break through the central bank's control over the money supply and payment systems may be difficult to succeed.

Central banks are unlikely to allow any private currency to replace the status of legal tender; otherwise, tax revenue and financial sovereignty may collapse. This also explains the reason why the world is accelerating the introduction of CBDC and stablecoin regulatory drafts to seize the dominance of the financial future.

It is also added that, "Although stablecoins such as USDT or USDC have been applied in many payment systems like Pay or Visa, the actual settlement process of transactions is still often conducted through intermediaries exchanging them for fiat currency for settlement."

This design reduces the impact of coin price fluctuations on both parties in the transaction on one hand, and on the other hand, it avoids the direct use of stablecoins as the final payment medium, thus not touching the sensitive red line of central banks regarding monetary sovereignty.

The Truth About Leverage in Stablecoins: Innovation, Illusion, or Risk?

In summary, the stablecoin mechanism may indeed create the effect of assets that seem like "double currency" and assist the U.S. government in achieving a "debt monetization" strategy without inflation risks. However, without transparent regulation and international cooperation, it could ultimately become the fuse for the next financial storm.

Are stablecoins a leverage tool in the new currency era, or a bubble trap under the illusion of monetary power? What is certain is that this is a three-party game between national sovereignty, financial innovation, and market trust.

This article is about turning one dollar into two? How stablecoins quietly replicate the US monetary system, converting debt and printing money? Originally appeared in Chain News ABMedia.