The passage of the US dollar stablecoin bill would mean that the US government has gained the "curve minting power."
Author: 0xCousin
Monetary policy has always been an extension of politics
Throughout history, currency has never been a neutral tool. From ancient emperors privately minting copper coins to modern states manipulating credit through quantitative easing, currency has always been an extension of politics.
"From Silver Coins to Copper Coins" in the Roman Empire
In the later period of the Roman Empire, to pay for the enormous military expenses and bureaucratic system, emperors began to gradually reduce the silver content in silver coins, from 90% to 70%, 50%, 30%, and finally to almost pure copper "silver coins." Essentially, the Roman Empire was taxing all its people with devalued currency, which was also a precursor to ancient inflation.
Emperor Wu of Han's "Three Grades of Platinum"
Emperor Wu of Han waged war against the Xiongnu for many years, leading to an empty treasury. With the national finances out of balance, the court attempted to change the "form of currency" by implementing the "Three Grades of Platinum" (gold, silver, and cowrie shell coins) to bypass the traditional copper coin minting system for war financing, trying to expand the treasury through monetary innovation. However, the market did not accept it, resulting in monetary chaos.
Nazi Germany's "Mefo Bills"
In 1933, after the Nazis came to power, to escape the financial shackles imposed by the Treaty of Versailles, Nazi Germany created "Mefo Bills." Through this monetary system, Nazi Germany concealed its fiscal deficits and circumvented international oversight, with the government creating massive national debts through Mefo Bills, which the public and businesses bore the financial risks of this "false prosperity."
History serves as a mirror, revealing the rise and fall of empires. Throughout history, the rise and fall of dynasties, apart from the outcomes of wars, also hide financial threads. The chain of "fiscal deficit - currency devaluation - regime collapse" has repeatedly played out.
The Separation of Powers in the United States
The decline of empires often begins with fiscal mismanagement. In past empires, the government held all powers of "printing money," "spending," and "regulation." At the founding of the United States, there was an attempt to change this situation. The United States implemented a political system of "separation of powers," where the three major powers—legislative (Congress), executive (President), and judicial (Federal Courts)—are independent and check each other.
This "functional separation of powers" is also reflected in fiscal and monetary policy. To prevent the government from abusing its currency issuance power, Congress passed the Federal Reserve Act in 1913, establishing the Federal Reserve and choosing to delegate the minting power to it. Fiscal policy is controlled by Congress, which decides "how much to spend and how to spend it," while government departments are responsible for executing the spending; monetary policy is controlled by the Federal Reserve, which decides "how much to print and how to regulate it," independent of presidential control.
Since then, the US government (Treasury) has held the power to issue national debt, while the Federal Reserve has held the power to issue currency. Fiscal policy is led by the US Treasury, focusing on taxation, debt issuance, and spending; monetary policy is led by the Federal Reserve, which uses interest rate adjustments, buying and selling national debt, and quantitative easing to macro-manage the economy. The two are independent but occasionally coordinate, preventing the excessive issuance of dollars and ensuring the value of the dollar.
This mechanism essentially realizes the founders' ideal: fiscal power belongs to the government, and monetary power belongs to the Federal Reserve, creating a system of checks and balances to prevent "the government from using currency to abuse power."
The Gradually Uncontrolled US Finances
After two world wars, the United States emerged as the sole victor. Against the backdrop of globalization, the Bretton Woods system and the petrodollar settlement mechanism helped establish the dollar's status as the global reserve currency.
From 1945 to 1971, the gold standard constrained US finances, as government spending was limited to anchor gold reserves, leading to relatively restrained fiscal policies.
After 1971, the Bretton Woods system ended, and the dollar was no longer pegged to gold. The US fiscal deficit no longer faced substantial constraints, ushering in an era of "fiscal-monetary collusion"—the government issued debt and spent money while the Federal Reserve printed money to buy national debt.
The US began to operate its fiscal deficit through a cycle of "debt issuance - money printing - global absorption." To date, US fiscal expansion has led to a national debt exceeding $36 trillion, with an average annual deficit of over $1.5 trillion, and interest payments on the national debt exceeding $1 trillion, making it one of the largest single items in the federal budget.
The US fiscal situation is showing signs of losing control, falling into four major dilemmas:
First, debt dependency: Fiscal policy can only rely on issuing new debt to roll over old debt, which may worsen if interest rates do not decrease;
Second, political compromise: Both parties find it difficult to cut spending, with Democrats wanting welfare and Republicans wanting tax cuts;
Third, the inertia of the Federal Reserve picking up the tab: Although the Federal Reserve appears independent, it has historically printed money to rescue the fiscal situation during crises;
Fourth, the impact of global de-dollarization: An increasing number of countries are choosing to hold gold and diversify foreign exchange reserves, leading to rising refinancing pressures on US debt.
In the face of these four dilemmas, the US government has an increasingly strong demand for liquidity from the Federal Reserve. Trump has repeatedly tweeted calls for interest rate cuts, but the Federal Reserve remains committed to "monetary policy independence."
Trump's New Move: On-Chain Curve Minting
The Trump administration is pushing for the US dollar stablecoin bill. Whether it is the "Stable Act" or the "Genius Act," both allow for the issuance of dollar stablecoins based on US national debt.
If the dollar stablecoin bill is passed, it would mean that the US government has gained the "curve minting power." The logic of dollar stablecoin curve minting is as follows:
The US Treasury has the authority to issue national debt;
Issue dollar stablecoins collateralized by national debt;
Dollar stablecoins can then be exchanged for dollars, pressuring the Federal Reserve's monetary policy.
The US government could, through the path of "national debt - dollar stablecoin - dollar," indirectly seize the minting power of digital dollars and intervene in the Federal Reserve's monetary policy independence.
In a sense, this could become a "hunting" of the Federal Reserve by the US government.
In multiple speeches, Trump has stated that he would abandon CBDC (Central Bank Digital Currency) and support dollar stablecoins. Many people do not understand the difference between the two: CBDC is issued by the central bank (the Federal Reserve), meaning the minting power remains with the Federal Reserve; whereas dollar stablecoins allow commercial companies, banks, and other entities to issue them, but the underlying collateral is US Treasury bonds, which are issued by the US Treasury. Therefore, CBDC strengthens the Federal Reserve's authority, while dollar stablecoins strengthen the Treasury's authority.
From the perspective of the Trump administration's maneuvers, there is suspicion of "seizing minting power."
As a side note, the US Treasury could also mint coins. The minting power in the US is divided into two parts: paper dollars are issued by the Federal Reserve, while coins are issued by the Treasury's "Mint." In the past, some have suggested that the Treasury could mint a few platinum coins with a face value of $1 trillion, deposit them into the Federal Reserve's account, and use them directly to pay off debts or cover expenditures. This was an early idea of seizing minting power. The White House vetoed such ideas, as they would raise market concerns about the dollar's credit.
Further questions arise, and here are ChatGPT's responses:
1. Will the US government really seize minting power?
ChatGPT's answer: It's not a matter of "whether it will happen," but rather "it is already in progress." The Constitution permits Congress to have minting power; there is political will, as Trump openly opposes CBDC and supports dollar stablecoins; there is fiscal need, with ongoing deficits and high-interest burdens; there are implementation plans, with collateralized national debt minting on-chain stablecoins; and there is legal basis, as the stablecoin bill is being advanced. Therefore, the key lies in whether the government can legitimize and institutionalize this "soft coup" through on-chain monetary mechanisms and gain recognition from global markets.
2. Will this cause instability in the dollar?
ChatGPT's answer: In the short term, it will not, as stablecoins are anchored to national debt and commercial bank deposits, and the Federal Reserve still controls the interest rate anchor; in the medium to long term, it may shake the structure of dollar credit, especially when the Treasury bypasses the Federal Reserve and continues to expand on-chain dollars, the value anchor of the dollar will no longer rely solely on the Federal Reserve's control. If in the future, assets like Bitcoin and gold are introduced as reserves for stablecoins, it will be a precursor to a "new Bretton Woods system."
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