The EU vs US approach to stablecoins is different. What are the dangerous implications?

Let's talk about how the US and the EU approach to stablecoins is different and why.

It is probably not a surprise for you that one of the main drivers of the US economy is the growth of their deficit and the expansion of supply of the US dollars globally. In a way, the dollar is the US main source of export.

The rest of the world has been forced to purchase dollars to? buy oil and trade with each other. However, the recent trend of the de-dollarization has significantly limited this option of dollar expansion, because BRIC countries have been shifting their trades and started using other currencies.

At the same time, the crypto world offered a new opportunity for dollar expansion - USD-pegged stablecoins.?

Did you know that the market cap of Tezos is about 1-2$ billions and of Circle is about 30-40$ billions? It easily puts them into the top 30 holders of the US treasury bills and bonds.

According to the data shared by Whitney Webb and Mark Goodwin in a number of podcasts and books, there are several key connections between stablecoins and the US economy:

• They suggest that stablecoins may be part of a plan to create a new financial system that benefits large institutions (BlackRock &Co) while maintaining US dollar dominance globally, which is why we can easily observe a very deliberate effort to curtail the circulation of non-institutional privately issued cryptocurrencies and at the same an effort to concentrate bitcoins and ethereum offerings via large financial institutions in the form of ETFs, where these holdings must be backed by the US dollar.
• Another interesting theory offered? is that since the idea of introducing CBDCs have failed (at least in their initial iteration, because people simply did not want it), the US government will try to highjack the stablecoins circulation to achieve the same goal - increase the volume of US dollars held outside of the United States. Webb and Goodwin point out that government officials and regulators have been supportive of stablecoins, citing examples like former Treasury Secretary Steven Mnuchin's involvement with Satu Logic and regulatory changes allowing banks to work with stablecoins.

If this theory is true, it creates a number of issues for the? global financial stability, privacy and sovereignty:

• Concentration and single point of failure risk, meaning that crypto ecosystem will heavily?depend on the wellbeing of Circle and Tesoz. And who knows, how resilient they will be in case of the bank runs scenarios.
• When just a few stablecoins dominate international market, it will be super easy for the US government to enforce policing, tracing and sanctioning of actors they do not like.

European Union is less dependent on exporting euros and much more dependent on consumer spending and intra-European trade relationships.

As a result, the vast majority of regulatory efforts in Europe have been focused on making online payments safe and removing frictions and costs from intra-European transactional flows.?

The main focus of SEPA, PSD2, Consumer Protection Directive and MICA is on making sure that European residents and businesses spend as much as possible and save as little as possible. Which is why stablecoins in Europe must fulfil the function of e-money from the regulatory perspective, while large holdings and large offerrings of stablecoins are actively discouraged under MICA.

The predictions are:

• many economic actors from Africa, Asia and Latam? as well as DeFi projects will slowly move away from USDC and USDT, since those tokens will be viewed as the US government money rails.
• Financial institutions will be mandated to hold even more fiat currencies (especially dollars) under Basel III+ when they hold BTC and ETH in any form, including ETFs.
• it will be easier to issue several small-scale Euro-backed stablecoins for specific purposes, but none of them will dominate the market, and they will be primarily used to facilitate cross-border payments and consumer spending.
• domestic consumer savings (meaning savings in the form of safe and secure deposits that earn risk-free interest) will be discouraged and penalized in Europe by unfavorable (too low) rates, unfavorable taxes, unfavorable terms and lock-ins and other measures.

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