CHAPTER 5 · PART B
The Steel-Manned Case Against Stablecoins
These are the best arguments from the smartest critics, stated at their strongest. The book's
credibility depends on engaging with them honestly, not dismissing them.
"This Is Dollar Imperialism With Better UX"
99%+ of stablecoins are USD-pegged. When a Nigerian farmer saves in USDT instead of naira,
he makes a rational individual choice. But collectively, millions doing this is de facto
dollarization. The IMF warns it strips developing nations of monetary sovereignty, seigniorage
revenue, and the ability to respond to local economic shocks. When the Fed raises rates, the
whole world feels it through stablecoins now, not just through trade channels.
Non-USD stablecoins are less than 1% of the market and show no sign of catching up. The
Eurodollar parallel is instructive — Eurodollars reinforced dollar dominance, and the
consequences played out over decades in ways nobody predicted. If stablecoins lock in dollar
dominance for another century, countries that adopted them for short-term stability may
regret the long-term dependency.
The honest response: the alternative for people in 100%+ inflation countries isn't "preserve
monetary sovereignty." It's "watch savings evaporate." This is a genuine tension without a
clean resolution.
"If They Can Freeze Your Money, This Isn't Freedom"
Circle and Tether have frozen 800+ addresses. Your "self-custodied" USDC can be rendered
worthless with one smart contract call. In what sense is this different from a bank freezing
your account? You've traded one centralized authority for another — one subject to your local
law, the other subject to US law you have no voice in.
The centralization is structural, not incidental. Fiat-backed stablecoins REQUIRE a centralized
issuer who holds reserves and can freeze tokens. Decentralized alternatives have
catastrophically failed. So the choice is: centralized stablecoin that can freeze you, or
decentralized stablecoin that might collapse to zero.
The honest response: stablecoins offer a spectrum. DAI exists as a decentralized option that
hasn't collapsed. ZK compliance is emerging. And even centralized stablecoins offer
improvements over banking: 24/7 access, no minimum balance, no credit check, global
portability. For the 1.4 billion unbanked who can't even GET a bank account to freeze, this is
still a massive upgrade. The question is whether the ecosystem moves toward more privacy-
preserving designs over time.
"The Truly Unbanked Can't Use This"
Stablecoins require a smartphone, internet access, and enough technical literacy to manage a
wallet. The "1.4 billion unbanked" includes many people who lack not just a bank account but
reliable internet, a smartphone, or digital literacy. MoneyGram's 180-country agent network is
real but thin in rural areas. Brazil's 24,000 ATMs are concentrated in cities. The deepest
poverty is correlated with the least digital access.
The honest response: this is valid today, but smartphone penetration in Sub-Saharan Africa
grows roughly 10% annually. M-Pesa IS integrating stablecoins across 8 countries, bringing its
existing agent network to bear. The same pattern happened with mobile money itself — urban
first, then rural as demand proved the business model. Stablecoins don't have to reach
everyone to be transformative. If they reach the 2-3 billion who have smartphones but don't
have good banking, that's already a paradigm shift.
"DeFi Yields Are Just Rehypothecated Risk"
Anchor Protocol offered 20% APY and attracted $18 billion. It was a Ponzi. Celsius offered 8-
18% and was lending recklessly. BlockFi, Voyager — all collapsed. The pattern: stablecoin yield
products attract depositors with unsustainable rates, use funds for risky bets, and blow up.
Even "legitimate" DeFi yields come from leverage — someone is borrowing at 5-10% to
speculate, and when the music stops, liquidation cascades follow.
The honest response: the distinction between CeFi yield products (Celsius, BlockFi) and DeFi
protocols (Aave, Compound, Maker) matters enormously. CeFi collapsed because it was opaque,
under-collateralized, and run by humans making bad bets. DeFi protocols survived because
they're transparent, over-collateralized, and enforce rules via code. MakerDAO navigated a
70% price crash with zero bailouts. The lesson isn't "yield is bad" — it's "opaque, under-
collateralized yield is bad."
"This Recreates the Same Power Structures"
Tether earns $10 billion a year from the float — seigniorage that used to flow to governments.
Circle, backed by BlackRock and Goldman Sachs, is the other dominant issuer. The
"decentralized" stablecoin ecosystem is controlled by two companies, backed by Wall Street. If
Visa, Stripe, and PayPal are the on-ramps and JP Morgan is the custodian, you've rebuilt the
banking system with extra steps and fewer consumer protections.
The honest response: this may be the most uncomfortable argument because it contains real
truth. The short-term trajectory IS toward institutional capture. But two things are different:
the rails are open — anyone can build on them without permission. A Nigerian fintech can
plug into USDC without getting a banking charter from four countries. And the competition is
global with lower barriers to entry. Will power consolidate? Probably. But in a more contestable
way than traditional banking.
"Most of That Volume Is Crypto Trading, Not the Real Economy"
An estimated 88% of stablecoin transactions in 2024 were for crypto trading, not real-world
commerce. Traders moving USDT between exchanges to arbitrage. DeFi protocols recycling
capital through lending loops. Market makers minting and redeeming. Strip out the trading
volume and the "real economy" stablecoin usage is a fraction of the headline $27.6 trillion.
The honest response: the snapshot is accurate but the trend line matters. The 88% trading
share was higher in 2021-22. It's declining as real-world use cases grow. SMB usage doubled
from 17% to 34% between 2024-25. The parallel: early internet traffic was overwhelmingly
academic/military before commercial use exploded. The infrastructure gets built for one use
case and adopted for others. But the book should be honest that today, most stablecoin volume
is financial plumbing, not Pablo sending money to Caracas.
"This Runs on 5% Treasury Yields — What Happens When Rates Drop?"
Tether earned $13 billion+ in 2024. These profits are entirely a product of 5%+ Treasury yields.
At 0.5% yields — where we were from 2009 to 2021 — Tether's profit drops to roughly $1.3
billion, barely enough to cover operations. The VC interest, the new entrants, the institutional
enthusiasm — all catalyzed by a specific interest rate environment that is cyclical, not
permanent.
The honest response: the yield bonanza accelerated adoption but didn't create the use cases.
Nigerian traders using USDT to pay Chinese suppliers don't care about Tether's yield. Pablo's
remittances work at any interest rate. The fundamental draw — instant, borderless,
permissionless money movement — is rate-independent. What IS rate-dependent: issuer
profitability, yield product attractiveness, and the pace of institutional entry. Lower rates slow
the business side but don't reverse the usage side. The risk is that lower rates cause issuers to
cut corners.
Seven arguments. None of them are easy to dismiss. This book's thesis survives them — but
only if we engage honestly with each one, and only if the reader is trusted to weigh the
evidence and decide for themselves.