• The Crypto Fire
  • Posts
  • 💵 The Stablecoin Race: The Battle for US Digital Money

💵 The Stablecoin Race: The Battle for US Digital Money

From Trump’s rumored coin to Facebook’s fallen Libra, here’s why corporations, banks, and politicians are all fighting to control the future of US stablecoin power.

To understand more about US stablecoin, I recommend you guys read part 1 and part 2 of Stablecoin series by us.

This part goes deeper into stablecoin world and the forces surrounding it!

Let’s go!

⭐ Why Big Tech and Wall Street Are Piling Into US Stablecoin

Big names like PayPal, JPMorgan, and even US politicians are suddenly talking about US stablecoins nonstop.
Why? Because they’re the bridge between old money and digital money. Stablecoins give both regulators and investors stability.

They act like crypto but, without the crazy price swings. And they move this digital money instantly, globally, and transparently.

For big companies, this isn’t about crypto hype. It’s about faster payments, better liquidity, and more control.
When you pay online or send money abroad, middlemen like Visa or SWIFT take a cut and slow things down. With US stablecoins like USDC or PYUSD, that friction disappears.

By launching PYUSD, Paypal has built its own digital money system, where payments settle in seconds instead of days.

Wall Street gets it too.
Big funds like BlackRock and Franklin Templeton are turning US Treasury bills (the safest government assets) into tokenized, digital versions. Each stablecoin dollar backed by these assets earns interest, giving them both yield and liquidity.

Everyone wins:

  • Tech companies get faster payments and more users.

  • Banks earn new yields.

  • Governments gain more visibility since regulated stablecoins are easier to track than cash.

⚙️ Stablecoin Types: Pros, Cons, and Real Trade-offs You Can Feel

Not all stablecoins are created equal. When you say “US stablecoin,” it can mean four very different types. And understanding their trade-offs is key:

1. Fiat-Backed (Centralized) Stablecoins

This includes $USDT.X ( ▲ 0.0% ) (Tether), $USDC.X ( ▲ 0.31% ) (Circle), and $PYUSD.X ( ▼ 0.01% ) (PayPal).
They’re backed 1:1 by fiat reserves, which are cash or short-term Treasuries, stored in banks or custodians.

Advantages

Disadvantages

Instant liquidity and high market trust.

Easy to redeem 1:1 into USD.

Regulatory comfort, especially for USDC and PYUSD.

Centralized custody — one freeze order and your funds can be blocked.

Transparency varies: Tether, for instance, has faced years of scrutiny over its reserve audits.

Limited yield for holders — only issuers earn interest from those T-bills.

These coins dominate in volume (over $160B in combined circulation) but come with surveillance and compliance trade-offs.

2. Crypto-Collateralized Stablecoins

Think $DAI.X ( ▼ 0.0% ) from MakerDAO or $LUSD.X ( ▲ 0.02% ) from Liquity. They’re backed by overcollateralized crypto like ETH or staked assets.

Advantages

Disadvantages

Decentralized and censorship-resistant.

Transparent collateral on-chain.

Independent of traditional banking risk.

Overcollateralization (usually 150%+) makes them capital-inefficient.

De-pegging risk during extreme volatility — if ETH crashes too fast, the peg can wobble.

Limited scalability; depends on crypto market size.

DAI now holds a mix of crypto and real-world assets like T-bills via Maker’s Endgame Plan, showing even DeFi projects are blending decentralization with yield-bearing real assets.

3. Algorithmic Stablecoins

The infamous category includes TerraUSD (UST), and IRON Finance.
They rely on market incentives and smart contracts to maintain the peg without full collateral.

Advantages

Disadvantages

Capital-efficient and permissionless.

No dependence on banks or fiat reserves.

Prone to death spirals (as we saw in 2022 with Do Kwon’s Terra collapse).

Market confidence-dependent — once trust cracks, it’s over.

Regulatory hostility due to past blow-ups.

4. Synthetic or Hedged Stablecoins

Newer entrants like $UXD.X ( ▲ 0.1% ) and Synthetix’s sUSD use derivatives or delta-neutral strategies to stay pegged.

Advantages

Disadvantages

Don’t need full collateral or centralized custody.

Flexible design for DeFi hedging.

Smart contract complexity = higher attack surface.

Reliant on liquid derivatives markets.

Limited mainstream adoption (so far).

⚖️ The failure in stablecoin game

We often hear about success stories like USDT, USDC, and DAI, but there’s no shortage of failures too.

Facebook’s Libra (Diem):
Libra’s vision was huge: a global stablecoin backed by a basket of currencies. But governments saw it as an attack on monetary sovereignty.

facebook-libra

Within months, regulators worldwide pushed back, partners like Visa and Mastercard quit, and Facebook rebranded to Diem before shutting down entirely in 2022.

Do Kwon’s TerraUSD (LUNA):
Once hailed as the future of decentralized digital money, TerraUSD $UST.X ( ▲ 0.03% ) used an algorithmic peg linked to its sister token LUNA instead of real reserves.
When sell pressure hit in May 2022, the algorithm couldn’t keep up. UST lost its $1 peg, triggering a $60B collapse that erased fortunes, bankrupted funds, and shattered confidence in algorithmic stablecoins.

do-kwons-terrausd

The fallout didn’t just destroy Terra, it reshaped global regulation, pushing lawmakers to demand fully backed and transparent stablecoins ever since.

IRON Finance:
Real assets and algorithmic mechanisms to hold its $1 peg. In reality, it created the perfect setup for a bank run.

iron-finance

When large holders (whales) lost confidence and started selling, the system’s design couldn’t absorb the shock leading to the peg broke, and prices spiraled down to near zero. Even Mark Cuban, who had invested in the project, called the collapse “painful but educational.”

🚀 Trump, Politics, and the New US Stablecoin

Here’s where things get spicy. For the first time in US politics, stablecoins have become a campaign issue.

Donald Trump, once skeptical of Bitcoin, is now openly pro-crypto. He’s teased his own “Trump Coin” idea and promised to make the US “the crypto capital of the world.” Whether that coin ever becomes real is another story, but the political pivot is significant.

His campaign reportedly accepted crypto donations, and his sons and advisors have met with key industry players. It’s clear: the next US administration, whoever leads it, will shape how the US stablecoin sector evolves.

Why does this matter?

Because a US-issued stablecoin is not just financial innovation, it’s a geopolitical weapon. If the dollar’s dominance can move onto blockchain rails, the US strengthens its position in a tokenized world.

If it doesn’t, China’s e-CNY or decentralized dollar alternatives might fill the gap.

Even Wall Street’s entrance, BlackRock launching tokenized T-bill funds, JPMorgan’s Onyx division running internal stablecoin payments, fits this playbook. The US isn’t fighting stablecoins anymore. It’s racing to control them.

If Trump or any future administration pushes a “regulated US stablecoin”, it won’t just compete with USDC or PYUSD, it could reshape the power map of global finance.

How You Benefit: A Practical User Playbook

1. Use Stablecoins as Digital Cash: Hold and send $USDC.X ( ▲ 0.31% ) , $USDT.X ( ▲ 0.0% ) , or $PYUSD.X ( ▼ 0.01% ) to move digital money globally in seconds, skip bank fees, and access DeFi yields (4–8% APR).

2. Diversify Across Coins: Don’t go all-in on one. Balance between $USDC.X ( ▲ 0.31% ) (regulated), $DAI.X ( ▼ 0.0% ) (decentralized), and $PYUSD.X ( ▼ 0.01% ) (payment-focused) for safety and flexibility.

3. Watch for Depeg Signals: Monitor on-chain data, DEX prices, and issuer audits. If a coin trades below $0.995 for long, or delays attestations → move.

4. Go Beyond Trading: Use stablecoins for real payments such as freelancers, cross-border remittance, or buying goods. Platforms like PayPal, Stripe, and Shopify are integrating them quietly.

5. Earn Yield Smartly: Use DeFi tools like Aave, Compound, or Maker’s sDAI to turn your stablecoins into passive income.

Rate us today!

Your feedback helps us improve and deliver better Crypto content!

Login or Subscribe to participate in polls.

Reply

or to participate.