their fiat currency that only has value because the government says it does

Cryptocurrency has its value only because con artists and rubes say it does. And the same could be said of gold. There is no such thing as intrinsic value, and even if you could prove there is no such thing, there is no connection between intrinsic value of a commodity and its use as a medium of exchange.

President Donald Trump’s recent cockamamie proposal to create a strategic cryptocurrency reserve has been the big crypto news, and not without good reason: It’s an illogical idea, has already caused a small crypto bubble featuring insider trading, and appears to be a quid pro quo for crypto political donors. Even some crypto enthusiasts think it’s a bad idea and a waste of taxpayer money.

But the crypto industry has been laser-focused on something more significant: A bill that was voted out of the Senate Banking Committee earlier this month would greenlight a class of crypto assets known as “stablecoins.” Normalizing stablecoins into the fabric of the financial system is critical to broader acceptance of crypto and the crypto casino by banks and other financial firms.

Trump appeared to endorse the legislation on Thursday in a video address to the Digital Asset Summit 2025, saying that he has “called on Congress to pass landmark legislation creating simple, common-sense rules for stablecoins and market structure.”

If this weak bill becomes law and legitimizes these not-so-stable-coins, the next crypto crash could be far more calamitous for crypto enthusiasts as well as the real economy.

What, you might ask, is a stablecoin? Well, most cryptocurrencies lack tangible underlying value, making them highly speculative — people will pay whatever they think other people are willing to pay for them. This makes them infamously volatile and not especially useful to make transactions or as a replacement for money. It’s hard to pay for a loaf of bread, a gallon of milk, or a stick of butter if your crypto token is worth one dollar now, one cent an hour later, or ten cents the hour after that.

Enter stablecoins. These cryptocurrencies are assigned a consistent price tied to (or pegged to) an existing currency (such as the U.S. dollar), and they are backed by a reserve of collateral assets that theoretically can repay investors quickly. People buy stablecoins from an issuer with the promise that their price will stay stable and that they can sell them back to (or redeem them with) the issuer at any time, in full, at their stated price, because the issuer has enough collateral assets on hand to pay them back.

Stablecoins are largely used for crypto investing, like poker chips in a casino. You use your regular money to buy chips to play roulette, then cash out your winnings with the house when you’re done. Crypto investors use stablecoins to buy and sell far more volatile cryptocurrencies. Using stablecoins for these purchases can have lower transaction or conversion fees than using cash.

Most crypto investors use stablecoins as a pool of relatively stable, liquid assets more easily available for crypto investing. But the holy grail of stablecoin promoters is using them for payments. Boosters want stablecoins to replace your debit or credit card as a tool for buying ordinary goods and services, claiming blockchain technology will make that whole process faster and cheaper. In some countries with highly volatile currency and clunky payment systems, some people use stablecoins for cross-border transactions. But in the United States, it is far easier to use your card; the idea we would convert our paychecks to stablecoins to buy groceries is a bit laughable.

Which means the only practical use for stablecoins is gambling on crypto. But there’s truly nothing new under the sun. Stablecoins resemble two existing financial products — bank deposits and money market mutual funds. Banks hold your money, keep records of your account transactions, and give you your money on demand, which theoretically stablecoin issuers also do. And money market mutual funds are used as a slush fund for other investments, like stablecoins are for crypto speculation.

But both bank accounts and money market mutual funds operate under robust regulations, for good reasons. The history of banking includes bank runs and failures, including in recent years — even with safety and soundness regulations and deposit insurance. And runs on money market mutual funds helped amplify the 2008 financial crisis. Investors had lots of money parked in what they assumed were safe accounts. But, when big firms like Lehman Brothers failed, investors rushed to cash out, fueling the stock market meltdown that reverberated throughout the financial system.

Stablecoins have already exhibited these same problems that have left investors in the lurch without any guardrails. Stablecoins frequently become unhooked from their pegged value and many of them lack reliable reserves so that people can get their money out promptly. In fact, a study by international economists that looked at 60 different stablecoins found that they all had lost their peg at least once. Meaning they are anything but stable.

Terraform Lab’s Terra/Luna stablecoin, an esoteric algorithmic stablecoin backed by little more than fancy computer code, was touted by crypto bros as a revolution in finance and was a darling of crypto venture capitalists. But it was a fraudulent house of cards. When Terra’s delicate algorithm began to melt down, investors bailed and Terra collapsed, triggering the 2022 crypto crash. The episode revealed that Big Crypto is just like Big Wall Street, where a handful of deeply intertwined firms can rapidly spread financial contagion. When one collapsed, the others soon followed.

Tether is the number one issuer of stablecoins, and it is seen as a kind of central bank of crypto that props up global crypto trading. But Tether has already settled with the New York Attorney General and the Commodity Futures Trading Commission to resolve claims it misled investors about whether it had enough reserves to cover its coins, and failed to complete audits of its reserve assets. It’s also increasingly the stablecoin of choice for money launderers.

Even Circle, considered a more serious U.S.-based stablecoin issuer, became unhitched from its price peg in 2023 when the crypto friendly Silicon Valley Bank (SVB) collapsed. $3.3 billion of Circle’s allegedly safe reserves were held in uninsured deposits at SVB. Had federal regulators not quickly stepped in and spent billions to keep Circle and SVB depositors whole, the entire crypto industry could have imploded.

Right now, these stablecoins have almost no federal oversight even though they behave like some pretty ordinary and regulated financial products. So, enacting some regulations for these sketchy things sounds good, right? Not so fast.

The Senate proposal has been largely crafted by industry and would essentially allow stablecoin issuers to have their cake and eat it too. It would give stablecoins many of the privileges associated with banking, but fewer of the same responsibilities. For example, the bill would not require stablecoin issuers to get private deposit insurance or have truly stable and robust reserves. Regulators would have little ability to look under the hood, and stablecoin issuers could seek out states with light-touch regulatory regimes to approve their coins.

But the bill’s greatest risk is that it would allow Big Tech platforms like Amazon, Meta, or X to become stablecoin issuers. Congress has long prohibited non-financial firms from becoming banks because the combination of commerce and banking is a recipe for disaster. Company-owned banks have incentives to make imprudent investments in their affiliates, and if the affiliate stumbles, the bank can go down with it. But this bill ignores that firewall almost entirely.

A Big Tech-issued stablecoin would be company scrip for the 21st century. An Amazon with Bezos Bucks would be not only the dominant retailer of goods, but also a de facto bank, issuing its own currency and holding deposits for millions of customers. It could control access, surveil transactions, manipulate the pricing of goods, and the price of its bespoke money. Or, if X printed Musk Bucks, it could cut off access on a political whim. And if either company went under due to a supply chain crisis or bad management, the collapse could wipe out people’s stablecoin accounts and crater the real economy.

In 2019, when Meta (then Facebook) proposed its own Libra stablecoin, there was bipartisan opposition that ultimately tanked the idea. Today, stablecoin backers include both Republicans and Democrats like Senator Gillibrand. What’s changed is that the crypto industry has poured a gusher of money onto a now sycophantic Congress. They have installed crypto hucksters in the White House and in federal financial agencies.

Trump has embraced the industry, saying the U.S. will be the crypto capital of the world and creating his own crypto meme coin, while his family operates their own crypto exchange. This week, he called on Congress to pass stablecoin legislation during a taped address to a crypto trade group summit.

Now the cryptocrats have their best chance to enshrine their anti-government and self-interested ideas into federal law. This is all part and parcel of Elon Musk and his so-called Department of Government Efficiency’s assault on the federal government, including trying to dismantle the Consumer Financial Protection Bureau and defang banking regulators (just as Musk launches his own financial services platform).

You can bypass 90% of paywalls by using reader view then refreshing. Worked for me on this one.

Those with actual interest in crypto aren’t too happy with the current admin, those who are there for a quick buck are happy though.

“Always” only lasts as long as there’s a buyer willing to pay $1. Tether has repeatedly dodged any attempt to audit them to confirm if they really can pay.

Why would anyone buy thether as it will absolutely lose value year on year as the dollar loses value?