Today's News Recap
Funding Boost - Cloud startup Nirvana Labs raises $6M seed extension led by Jump Crypto, Crucible Capital.
Strategic Expansion - Robinhood to Acquire Canadian Crypto Firm WonderFi for $179M.
Creator Incentives - Pump.fun launches revenue sharing for coin creators in push to incentivize long-term activity.
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USD Stablecoins Reinforce the Dollar's Global Reserve Status, Now What?
By: Matt Kreiser
It is a well established narrative that US dollar stablecoins export the dollar internationally, thereby reinforcing its status as the world’s dominant reserve currency. There are many benefits for a nation that controls the global reserve currency. These include the ability to borrow at lower rates due to stronger demand for the nation’s currency and debt, and the ability to run persistent trade and current account deficits as other countries are willing to hold the currency as reserves. Moreover, with global trade and finance conducted in the global reserve currency, the issuing nation can impose sanctions as a highly effective tool of soft power to meet its foreign policy objectives.
As an example, earlier this month, the U.S Treasury’s FinCEN proposed prohibiting operation of a financial account in the United States on behalf of Huione Group, a Cambodian conglomerate that runs a Telegram-based marketplace where users can purchase personal data and money laundering services. Elliptic reported that Huione Group transactions total more than $27 billion, making it the largest illicit online marketplace to have ever operated. According to Elliptic, more than $98 billion in crypto assets have been received by Huione Group entities to date for illicit schemes like money laundering, pig butchering, and online scams.
Prior to the FinCEN proposal, in January, Huione launched its own US dollar stablecoin Huione USD (USDH) on Tron with a 100 million supply to “avoid freezing,” alongside its own blockchain, crypto exchange and messaging application. While stablecoins like USDH inherently reinforce the US dollar’s global reserve status as the preferred currency to hold and transact with, their non-censorable nature fundamentally challenges the follow-on benefit of sanctions as an effective tool of soft power for the U.S..
Today, Huione Group transacts extensively in Tether’s USDT stablecoin despite a Huione Pay account being frozen by Tether in July 2024 due to funds linked to North Korea, which is already under U.S. financial sanctions. If the FinCEN proposal targeting Huione Group were to be implemented, Tether could be responsible for freezing all Huione Group affiliated accounts. So while today the vast majority of US dollar stablecoin supply and liquidity are held in freezable USDT and USDC, any percentage shift in supply and liquidity to non-censorable US stablecoins could seriously threaten the effectiveness of U.S. financial sanctions. And with stablecoin supply expected to hit at least $1.6 trillion by 2030, a shift in percentage supply from censorable to noncensorable stablecoins might not even be needed to hamper the effectiveness of US sanctions. Regardless, the growth of non-censorable US stablecoins seems just as inevitable today as the increasing adoption of US dollar stablecoins did at the start of the last cycle in 2020. Groups like Huione stand to benefit enormously, and the expected market cap growth of non-censorable cryptocurrencies that can be used to back non-censorable US stablecoins increases the likelihood of that reality.