Christian Catalini
@catalini
Several people have asked why I don’t see dollarization as a strong use case for stablecoins. While it’s currently driving adoption, and the idea of stablecoins reinforcing dollar dominance is appealing, the concept is fundamentally flawed. First, countries have the ability to make the widespread use of stablecoins very hard for consumers, and they will do so if any player gains significant scale. The reason this hasn’t happened yet is that stablecoins are still a rounding error. Libra was seen as a threat from the start due to its potential scale, and any stablecoin that reaches a similar level of regulatory attention will face the same treatment. Second, if you play this out, dollarization is a bug, not a feature. It will lead to new capital controls and won't help USD dominance. The first adopters will be the small economies facing hyperinflation—precisely the ones US Treasury is concerned about destabilizing.
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Christian Catalini
@catalini
So while dollarization is pretty much the only use case with traction today, the industry should focus on applications that will survive at scale and won't undermine stablecoins' long-term potential in global payments. What could the US do to truly enhance dollar dominance? Swiftly implement regulatory infrastructure to integrate these new open networks into our 'money stack,' and foster a competitive, not concentrated, stablecoin market. That's how you lead in this critical new sector and make crypto networks the 5G of money.
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