Stablecoins are financial instruments that upgrade “asset securitization” to “real-world asset tokenization (RWA)” within a digital shadow-banking system — they are in essence a complete digital replica of the offline shadow-banking ecosystem, not a new form of money. The framework uses a five-layer monetary philosophy (unit of account / medium of exchange / means of payment / store of value / world money) to refute stablecoins’ monetary character layer by layer, concluding that stablecoins barely satisfy only the third layer (means of payment). It further argues that domestic US stablecoins do not create new money — they only reconfigure M1 — and that the genuine monetary increment comes from the conversion of overseas cash holdings and non-dollar currencies; moreover, overseas stablecoin purchases of US Treasuries have a theoretical ceiling (the Fed’s reserve balance of USD 3.35 trillion at the 2025-Q2/Q3 data point).
The Framework As It Stands
This section is compiled from research drafts: it preserves the original framework’s structure, terminology, and key formulations, including editorial bridging and supplementary external facts; charts are drawn by the compiler following the structure of the source text.
I. Theoretical Foundation: The Three-in-One View of Money
The word “stable” is somewhat misleading; what matters is what the coin is pegged to or linked with. One unit of currency = one digital receipt (all money is a receipt).
The framework builds a genuine monetary-demand framework using dissipative structure theory plus Einstein’s mass-energy equation: energy = mass (Einstein) → extended to “energy = mass = information” (three-in-one: three perspectives on the same thing) → a large energy input into a system generates division of labor and exchange, and the need for exchange is the genuine demand for money. This extends to a three-in-one monetary system concept: gold = mass + energy / digital payment = information / gold-backed digital payment = three-in-one.
Analytical rule: any analysis of monetary nature must start from the baseline that “money = a set of institutions, not a physical object”; no judgment that “stablecoins are money” can bypass this ontological layer.
II. Main Thesis and Three Undercurrents
Main thesis: stablecoins = a new paradigm of digital shadow banking, upgrading “asset securitization (MBS)” to “asset tokenization (RWA).” Scale (2025-Q2/Q3): USD 230–250 billion; 2028 expected USD 2 trillion (approximately 8×). USDT (Tether) ≈ USD 145 billion + USDC (Circle) ≈ USD 60 billion.
Undercurrent A — Five-layer monetary philosophical structure (Hegel + Marx): Money = a set of institutions; five layers of monetary attributes: (1) being = unit of account (primary) → (2) essence = medium of exchange → (3) phenomenon = means of payment → (4) actuality = store of value → (5) concept = world money. Stablecoins barely satisfy only layer 3 (means of payment); all other properties are borrowed: unit of account depends on the dollar/US Treasuries; medium of exchange cannot be used to buy everyday goods directly; store of value depends on the backing assets; world money has only the concept, with no substance. Analytical rule: any judgment that “stablecoins are money” must be falsified layer by layer.
Undercurrent B — Digital shadow banking = a complete digital replica of offline shadow banking: The US has formed a complete ecosystem: exchanges / automated market makers / crypto banks / arbitrage trading / asset management / mortgage lending / repo / venture capital / insurance / wealth management — a wholesale digital reproduction of the offline shadow-banking system. Analytical rule: understanding stablecoins requires the shadow-banking framework from main course module-03, not a binary “crypto vs. fiat” framing.
Undercurrent C — Anti-race-to-the-bottom must come from outside; stablecoins are the key instrument for China to open up trade with Africa: “Domestic profit margin 3% vs. 3–5× margin in China-Africa trade — Chinese goods are not unsellable; the problem is that payment channels are not open.” Tianjin Free Trade Zone RMBT scheme: A state-owned Tianjin FTZ platform applies for a stablecoin license in Hong Kong (after 2025-08-01) → issues RMBT (Renminbi Tianjin) → an Inner Mongolia enterprise puts in RMB 1 million → 1 million RMBT minted on-chain instantaneously → arrives in an Ethiopian merchant’s digital wallet in seconds → redeemed in birr / invested in tokenized money-market funds → customs “funds out, goods back” closed loop. Potential to cover all of northern China’s trade with Africa, reaching scales in the tens of trillions of RMB.
III. 7 Core Arguments
1. Stablecoins = new paradigm of digital shadow banking: asset securitization (canned pork) → asset tokenization (everything on-chain). Asset securitization = bundling fixed cash flows (mortgages) into MBS cans (same weight, same quality). Asset tokenization = mapping property rights + ownership + income rights together onto the chain as a coin (combining liquidity and payment capability). The crypto ecosystem is a wholesale replica of the offline shadow-banking system; current scale USD 230–250 billion; 2028 expected USD 2 trillion (approximately 8×).
2. Stablecoins are not complete money — five-layer monetary philosophy fully falsified: (1) Unit of account ❌ (depends on dollar/US Treasuries); (2) Medium of exchange ❌ (cannot directly buy everyday goods); (3) Means of payment ✓ (most important innovation = cross-border payments); (4) Store of value ❌ (depends on backing assets); (5) World money △ (concept exists, content does not). The true revolution = a paradigm shift in the method of bookkeeping: from the bank tree structure (SWIFT) to the blockchain mesh structure (peer-to-peer). Historical analogy: before the 15th century, Florentine double-entry bookkeeping dominated → 15th–16th century: Antwerp IOU notes rose / Florence declined (the more advanced system does not necessarily win, because the social network was constrained to familiar circles).
3. Four major advantages and seven uses of stablecoins:
- Cross-border payment revolution: global remittance cost generally 6% / Africa specifically 8–12% → with stablecoins: Africa <3%, time from days to minutes
- Financial inclusion: 3+ billion people globally without bank accounts; downloading a digital wallet enables receipt of overseas remittances
- Hedging sovereign currency risk: Turkey has the world’s highest stablecoin transaction volume as a share of GDP
- Digital banking innovation: tokenization of money market funds (BlackRock BUIDL) + tokenization of short-term US Treasuries → regulatory arbitrage (stablecoins bear no interest + tokenized funds bear interest)
- Seven uses: means of payment / store of value / cross-border remittances (core) / on-chain settlement / commercial payments / on-chain collateral financing / indirect US dollar holdings
4. Stablecoins do not create new money domestically in the United States — they only reallocate existing money. Fund flow: M1 (checking accounts USD 6.6 trillion) → stablecoin reserve accounts (locked) → purchases of US Treasuries/MMFs → bank savings accounts zeroed out. The entire process is a reshuffle among M1/M2/M3 without adding a single dollar of money supply. The reason the GENIUS Act requires stablecoins to be non-interest-bearing: if they paid interest, they would directly compete with bank savings deposits, causing the banking system to collapse. The genuine increment = overseas non-dollar currencies + the more than USD 2 trillion in overseas dollar cash holdings being converted into stablecoins.
5. Overseas stablecoin purchases of US Treasuries produce a double balance-sheet reduction. Four-tier balance sheet structure: Federal Reserve → US banks → overseas banks → stablecoins. When overseas stablecoins buy US Treasuries: Hong Kong HSBC custodian account −USD 10 billion → HSBC in the US banking system −USD 10 billion → JPMorgan’s HSBC account −USD 10 billion → JPMorgan’s reserve account at the Fed −USD 10 billion. Theoretical ceiling = total reserve balances (2025-Q2/Q3 = USD 3.35 trillion) — a one-time purchase exceeding this amount = the entire dollar system collapses. Historical anchor: Friedman, while lecturing to the World Bank/IMF/US Treasury in 1969–1970, was reportedly shocked to discover how poorly these top institutions understood the mechanism of offshore dollar creation — not a single dollar of the US’s overseas dollar stock had ever flowed out of the United States; all of it was created by the offshore banking system itself.
6. Three systemic risks of stablecoins + rescue dilemma:
- Loss of singleness: different issuers hold different asset compositions (Circle/Walmart/Apple etc.: cash reserves 5–10%, short-term debt maturities 93–180 days) → exchange-rate differentials emerge (USDC vs. USDT not a constant 1:1) → recapitulating the chaos of 19th-century free-banking era
- Insufficient elasticity: 100% reserve backing without a multiplier effect vs. the banking system’s 10–20× leverage → trillions shifting from the banking system to stablecoins → monetary tightening → financial crisis
- Regulatory gap + monetary sovereignty jurisdiction conflict: 98% of stablecoins pegged to the dollar but 80% of activity takes place offshore → US regulation cannot reach it → if offshore stablecoins dump US Treasuries during a crisis, it could trigger a US Treasury crisis
- Full rescue dilemma chain: stablecoins have no account at the Fed → during a crisis the central bank cannot provide liquidity → compounded by DeFi collateral-chain collapse (algorithmic coin failure triggers automatic liquidation + contagion). Conclusion: before stablecoins mature, a major crisis may occur that forces legislative completion (including opening Fed accounts for stablecoins)
7. China must lay the groundwork: the Tianjin FTZ RMBT scheme = a concrete action plan for fighting the race to the bottom on an external front. Pain point: a Tianjin enterprise buying Ethiopian coffee beans currently takes 5 months. Scheme: a state-owned platform under the Tianjin FTZ applies for a stablecoin license in Hong Kong (starting after 2025-08-01) → issues RMBT → Inner Mongolia enterprise inputs RMB 1 million → 1 million RMBT minted on-chain instantly → arrives in African digital wallet in seconds → three options (convert to local currency at 1.5% fee / hold RMBT to buy Chinese goods / invest in tokenized money-market fund) → customs “funds out, goods back” closed loop. Covers northern China (Inner Mongolia / Northeast / North China / Shanxi / Shaanxi) → China-Africa trade volume could reach tens of trillions of RMB. Profit: domestic 3% vs. Africa 3–5×.
IV. Key Data Snapshot (data point: 2025-Q2/Q3, as of presenter’s lecture)
| Indicator | Value |
|---|---|
| Current stablecoin market size | USD 230–250 billion |
| USDT market size | ≈ USD 145 billion |
| USDC market size | ≈ USD 60 billion |
| Gold-backed stablecoins (Paxos + Tether gold vault) | Combined approx. USD 1.63 billion |
| Stablecoin 2028 projected size | USD 2 trillion (approximately 8×) |
| US M1 checking accounts | USD 6.6 trillion |
| Fed reserve balance (theoretical ceiling for Treasury purchases) | USD 3.35 trillion (2025-Q2/Q3 data point) |
| Stablecoin usage leader in Africa (Nigeria) | Annual receipts > USD 59 billion |
| Mexico annual remittance scale | USD 63+ billion |
| Global cross-border remittance cost (general / Africa) | 6% / 8–12% |
| Africa cost after stablecoins | <3% |
| Tianjin RMBT potential China-Africa trade scale | Tens of trillions of RMB |
| Domestic vs. Africa profit comparison | 3% vs. 3–5× |
V. Five-Layer Monetary Philosophy + Three BIS Requirements Diagnostic Table
| Layer | Monetary Attribute | Stablecoin Verdict | Reason |
|---|---|---|---|
| 1 (Being) | Unit of account | ❌ | Depends on dollar/US Treasuries; no self-generated standard of value |
| 2 (Essence) | Medium of exchange | ❌ | Cannot directly buy everyday goods |
| 3 (Phenomenon) | Means of payment | ✓ | Cross-border payments are the core innovation |
| 4 (Actuality) | Store of value | ❌ | Depends on backing assets; no intrinsic store of value |
| 5 (Concept) | World money | △ | Has a conceptual system but no substance |
| BIS Three Monetary Requirements | Stablecoin Verdict |
|---|---|
| Singleness (same face value, interchangeable) | ❌ USDC vs. USDT not a constant 1:1 |
| Elasticity (money supply can expand) | ❌ 100% reserve backing without a multiplier |
| Regulatory integrity | ❌ 98% pegged to dollar / 80% of activity offshore |
Compiler’s Perspective
Coordinates: Category = Monetary System & Circulation · axis_h = Shu · axis_v = Its Place in the Whole
The price of technological concentration: cloud data does not belong to you has a precise yet easily overlooked application in the stablecoin context: retail investors who buy USDT/USDC/SLV believe “I hold stablecoins = I hold dollars/gold” — yet the underlying mechanisms this framework reveals are: authorized participants (APs) acting as market makers can borrow ETF shares to redeem physical metal; stablecoin reserves in the form of cash and short-term debt are centrally managed by Circle/Tether and similar institutions; investors have no direct access to the underlying assets. “Digitalization” deepens this centralization rather than dispersing it. This judgment does not come from an abstract warning but from the 2025-Q2/Q3 stablecoin structure as actually tested: how USDT’s approximately USD 145 billion reserve is allocated, how Circle retains 50% of interest income for itself, and who is conducting the regulatory arbitrage of “stablecoins bear no interest + tokenized funds bear interest.”
Proprietary increment — the strategic implications of “double balance-sheet reduction asymmetry” for China: domestic US stablecoin Treasury purchases do not produce a genuine US Treasury increment (they are merely an account reshuffling from M1 → stablecoin → Treasury). The channel that genuinely drives up Treasury demand is the conversion of overseas holders of 2+ trillion dollars in cash + holders of non-dollar currencies in Turkey, Nigeria, and similar countries into stablecoin holders. This means the competitive threat to the Tianjin RMBT scheme is not USDC/USDT itself, but “whether an overseas renminbi/gold system can compete with dollar stablecoins for trust in this channel.” If the Tianjin scheme reaches tens of trillions of RMB in scale, the implication goes beyond commercial profit — it means replicating, in the incremental market of “3.3 billion people in Africa without bank accounts,” the penetration path that dollar stablecoins have already completed in the Philippines, Mexico, and Nigeria.
Connection to the Treasury market: The 2025 US Treasury Market: A Retrospective argument 10 explicitly characterizes stablecoins as a digital branch of shadow banking 3.0; this entry handles the monetary-philosophical positioning of that branch and China’s strategic path. The Monetary Nature of Digital Currency and The Libra Stablecoin Experiment provide the prehistory within the same framework — the Libra experiment already revealed the tolerance boundary of sovereign monetary authorities toward private digital currencies; after stablecoins crossed USD 200 billion in scale in 2025, that boundary was redrawn in the form of the “GENIUS Act + Big Beautiful Bill.”
See Also
- Modern Money Creation: Money as Debt — the monetary creation theoretical basis for the conclusion that stablecoins “do not create new money”
- The Monetary Nature of Digital Currency — philosophical analysis of the relationship between digital currencies, stablecoins, and monetary nature
- China and US Payment Systems — the geopolitical context of the stablecoin cross-border payment revolution
- The Libra Stablecoin Experiment — the 2019 stablecoin regulatory boundary test; the prehistory of the 2025 GENIUS Act
Sources
Compiled draft z-0137 · archived 2026-07.
v2-final (2026-05-17): 6/6 key data points verified against primary sources (reserve balance USD 3.35T / Friedman 1969–70 / Florence vs. Antwerp / Tianjin RMBT / energy = mass = information / five-layer monetary attributes); see original compiled SOURCE_FIDELITY.md §4.1. Data point: 2025-Q2/Q3 (presenter’s lecture time); current usage should attach a timeliness caveat (monitor FRED WRESBAL in real time).