Stablecoin Thoughts

A curiously tricky question to answer: what percentage of transactions in a day are settled in USD across the world?

It's easy to find information on dollar volumes across the world, with totals reaching $32 trillion, and the amount of dollars held by foreigners exceeding $2 trillion. It's also easy to find information on commodity market volumes or about how over half of global trade was invoiced in USD. But the problem is it only tells you about "payments", not transactions.

We need to know the number of transactions that will be processed in a day. If we assume that everyone above does 1.5 transactions per day on average, that results in ~12 billion transactions per day. The US in this scenario represents only 525 million transactions based on the population! The result is approximately 11.5 billion transactions that aren't settled in USD but have the potential to be.

This metric is the only metric that matters moving forward. Stablecoin growth is not going to be driven by the USA. Stablecoin growth is going to be driven in foreign countries where people seek access to a more stable currency for transactions and daily usage. The billion little transactions are more important than the raw dollar volume of commodity trading across the world. Pennies, not pounds.

Assuming that the currency would be universally accepted in each nation, if we gave every individual in the world outside the USA their option of currency to be paid in, what would their choice be? I think it is fair to say that at least 50% of those ~8 billion people would choose dollars. If this is true, the demand for dollars will rise so dramatically over the coming years that we won't quite know what to do.

The most unique dynamic this creates is that nation states won't own treasuries anymore; the people will. The people will own treasuries by proxy via the reserves of stablecoins. When people own treasuries by proxy, demand aligns closely with each nation's GDP, leading to stable year-over-year growth in treasury demand.

A hot take that emerges from this is that we will be reducing the multipolarity of currencies over the next 20 years, resulting in only a few currencies that will function as we see today. If demand for a currency flattens amongst its own constituency, capital markets will take less interest as well. A death spiral ensues that we can't quite capture or imagine.

This seems more likely than it appears given how many nations have mismanaged their currencies over the years because of and in response to the USA's decisions. At what point do the central bankers of foreign nations adopt the USD as their national currency to avoid this hassle and accept the advantages of a more stable currency? Or more likely, at what point do the people demand the standardized use of USD vs their national currency?