"A Special Article by Lawyer Shang Lun" Stablecoins and the Marriage with US Treasuries

Stablecoins are the hottest crypto asset topic in recent times, why are stablecoins so connected to US Treasuries (US Treasuries)? (Synopsis: U.S. Treasury Secretary Bencent: Stablecoins will become big buyers of Treasuries!) Discussions have been held with Tether and Circle) (Background added: Bauer 8/22 global central bank annual meeting to release pigeons and hawks? Goldman Sachs predicts: cut interest rates three times this year, optimistic about short-term U.S. bonds Recently, a core question has emerged in the cryptocurrency community: why do virtual currencies, especially stablecoins, which essentially pursue "decentralization", choose to be deeply linked to the symbol of "high centralization" - US Treasuries (US bonds)? This seemingly contradictory combination actually reveals the necessary path for crypto assets to mature and be accepted by the mainstream financial system, but there may also be unexpected risks at the end of this road. The Appearance of Contradictions: The Ideal of Decentralization and the Bridge of Centralization The core appeal of decentralized finance (DeFi) lies in its intermediary-free, transparent, and censorship-resistant nature. However, for any emerging technology to become widespread, it cannot be completely separated from the existing social and financial framework. The rise of centralized exchanges is a prime example of this, sacrificing some of the purity of decentralization in exchange for admission to a large number of users. Similarly, when stablecoin issuers choose to allocate reserve assets to U.S. Treasuries, it is a strategic "bridge-building" that leverages the most trusted assets in the traditional financial system to build a bridge to legitimacy and mass adoption of stablecoins. The Inevitability of Regulation: The Pursuit of Legality and "Least Reprehensible" From a legal and regulatory point of view, the core of stablecoins is "stability". Past decoupling events have sounded alarm bells for regulators around the world, and since then, regulatory frameworks have gradually taken shape across countries, with a highly consistent core requirement: stablecoins must have sufficient, transparent, and high-quality liquid assets as reserves. U.S. Treasuries, the gold standard for such assets, are the least risky and most acceptable choice for stablecoin issuers to comply in the current environment. Market Signals: Recognition and Empowerment of Traditional Finance When the stablecoin ecosystem becomes a large buyer of US bonds, it is undoubtedly a milestone in the two-way journey between traditional finance (TradFi) and decentralized finance (DeFi). It represents the formal participation of traditional finance and provides the strongest endorsement of the dollar value of crypto assets in the traditional world, indirectly enhancing the stability and credibility of the entire crypto market. Geopolitical Strategy: A National Strategy From the perspective of the U.S. government, this regulatory design is a clever national strategic layout. It not only creates a new "rigid demand" for astronomical US Treasury bonds, but also cleverly realizes "digital dollar hegemony" without issuing CBDCs. At the same time, it incorporates the regulatory "alienation" of the past into its financial jurisdiction and ensures U.S. leadership in global fintech innovation. This strategy transforms a potential threat into a powerful tool to consolidate its core national interests. Critique and Reflection: Potential Risks and Conceptual Compromises However, this seemingly win-win marriage is not without cost. As the author has always held, if we look at it completely from the perspective of risk management and the original intention of cryptocurrencies, over-reliance on U.S. bonds also lays several far-reaching hidden worries: Reshaping the "single point of failure of centralization": Cryptocurrencies were born to get rid of dependence on a single centralized institution. Today, betting the cornerstone of the value of the global digital dollar entirely on the sovereign credit of a single country is tantamount to rebuilding a huge centralized point of risk. U.S. fiscal discipline, domestic political stability, and even its geopolitical decisions will directly impact the security of crypto assets for hundreds of millions of users around the world. Reduced to political weapons: When stablecoin issuers are brought under U.S. regulation, their assets become tools for the U.S. to enforce its foreign policy. Censorship resistance is one of the core value propositions of blockchain, but in the future, the US government may require issuers to freeze stablecoin assets of specific countries, entities, and even individuals with a single executive order. This makes stablecoins from a neutral financial instrument to an extension of their "financial long-arm jurisdiction". Bitcoin's founding was a reflection on the failure of the financial system endorsed by the state during the 2008 financial tsunami. Now, stablecoins are going back and basing their credibility entirely on the system they were trying to surpass. In exchange for immediate legitimacy and market size, is the crypto industry selling its core values of decentralization and censorship resistance? Conclusion: Between pragmatism and risk The core goal of stablecoins is to revolutionize payment systems. Starting from this functional goal, choosing to link to US bonds is indeed a shortcut that is efficient, pragmatic and in line with current regulatory needs. However, we must not lose sight of the enormous risks and philosophical compromises behind it. The combination of stablecoins and U.S. bonds is a delicate balance between idealism and harsh reality for crypto assets, but it is also a fragile balance. While it brings legitimacy to the industry, it also puts heavy shackles on it. Will this be a Trojan horse that erodes core values like crypto or coin decentralization? This is worth pondering for all involved. 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