How America’s Stablecoin Gamble Could Backfire—and Hand China the Advantage
By passing the GENIUS Act, the United States has signaled its dedication to constructing a stablecoin-based economic system. Through this initiative, it goals to strengthen the international dominance of the greenback. However, Yanis Varoufakis views it as a recipe for catastrophe.
In an unique interview with BeInCrypto, the Greek economist and former finance minister warned that the laws might set off a monetary disaster much more extreme than in 2008. Against this backdrop, he argues that China’s extra state-controlled and disciplined method to financial energy is best positioned to prevail.
Washington’s Stablecoin Power Play
Since the finish of the Bretton Woods period, the United States has maintained its international dominance largely by way of monetary energy and greenback supremacy.
However, this dominance, as soon as supported by a strong industrial base, has advanced as America’s manufacturing capability has declined. Today, Washington’s affect rests as a substitute on two pillars: Silicon Valley’s command of Big Tech and the greenback’s management over international payments.
This potential to route most international transactions by way of the US monetary system offers Washington immense leverage. It permits the nation to impose sanctions, finance deficits at low value, and preserve its geopolitical affect.
“If you wish to ship cash from anyplace to anyplace, it’s important to undergo the greenback system… That’s why [the US is] utilizing sanctions as a weapon towards anyone that they don’t like, for higher or for worse,” Varoufakis instructed BeInCrypto, including, “It’s the hegemony of the greenback that makes America not nice, however robust. And they know that in the event that they lose that, they’re completed.”
Now, in a bid to strengthen its greenback dominance, the US is popping to stablecoins.
A New Strategy for Dollar Control
In November 2024, American economist Stephen Miran—a close ally of Trump and now a member of the Federal Reserve Board—launched an financial framework referred to as the Mar-a-Lago Accord.
At its core, the plan entailed a managed devaluation of the greenback to cut back commerce deficits and revive US manufacturing, whereas maintaining the currency’s role as the world’s reserve normal.
“On one hand, [Miran] desires to cut back the trade worth of the greenback. On the different hand, he desires to maintain the greenback as the major fee system in the world,” Varoufakis defined.
The GENIUS Act aligns intently with this imaginative and prescient. By supporting a regulated stablecoin economic system, it successfully extends dollar dominance, reinforcing America’s financial energy by way of crypto-based infrastructure quite than conventional banking.
However, in accordance with Varoufakis, this method is dangerously short-sighted.
When Stablecoins Become Systemic Danger
By allowing banks and private issuers to construct and pilot the stablecoin economic system, Varoufakis warned that it reinforces the very dynamic that has lengthy outlined the American system– a authorities dictated by Wall Street.
“We know that the Federal Reserve will not be an unbiased central financial institution. It’s unbiased of the American folks and Congress, however it’s completely depending on JPMorgan and Goldman Sachs… Its function is to do some little bit of regulation, nothing that annoys Wall Street an excessive amount of,” Varoufakis defined.
The deepened privatization of financial energy, he argued, is a recipe for systemic fragility.
If a significant stablecoin have been to break down—by way of mismanagement, hypothesis, or a disaster of confidence—the results would ripple throughout borders. Foreign economies utilizing dollar-backed tokens would don’t have any recourse, since they can’t print {dollars} to stem the panic.
“As we communicate, there are Malaysian corporations, Indonesian corporations, and corporations right here in Europe that more and more use Tether… which is a large downside. Suddenly, these international locations… find yourself with central banks that don’t management their cash provide. So their capability to impact financial coverage diminishes and that introduces instability,” Varoufakis added.
Such a failure might unleash a sequence response harking back to the Great Recession. Varoufakis warned that this could quantity to a self-inflicted international disaster—pushed by America’s effort to digitize and outsource its monetary empire to the very establishments that after pushed it to the brink of collapse.
“Just like in 2007-8, when the entire factor goes pear-shaped, there will likely be second and third era results that may have destructive repercussions in the United States. So I feel that that is going to be the subsequent monetary disaster popping out of the stablecoin market.”
In distinction, China has constructed a state-coordinated monetary and technological ecosystem designed to stop exactly such instability.
China’s Controlled Capitalism Pays Off
While the US authorities solutions to Wall Street, Chinese bankers and tech leaders reply to the state, in accordance with Varoufakis. Private corporations are allowed to revenue, however they function inside strict limits set by the authorities.
“You could name this authoritarianism, I name it prudent,” he stated.
Varoufakis described China’s integration of Big Tech and finance as notable. Platforms akin to WeChat Pay and the digital yuan have established a unified and environment friendly fee community working below state supervision.
By distinction, the US can’t simply replicate this mannequin, as Wall Street stands firmly in the method. Integrating digital funds with credit score and banking would undermine its management over the monetary system.
“You could recall that Mark Zuckerberg a while in the past tried to introduce his own Facebook cryptocurrency and he was smacked down by Wall Street with the assist of the Fed,” Varoufakis defined.
He doubled down on this distinction by arguing that the US has superior know-how however no clear path, leaving personal monopolies to dominate. As a outcome, it stays technologically robust however politically stalled, unable to modernize or construct successfully.
“To me, the Chinese have gotten it proper, and the United States have gotten it… sensationally fallacious… I consider that if Adam Smith was alive at present, the guru of free market capitalism, he would have agreed with what I’m saying. He would have been aghast with what’s occurring in Washington and New York,” Varoufakis emphasised.
In his view, this distinction will outline the coming struggle for global economic power—and in the end decide which system survives.
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