Donald Trump has warned BRICS countries that if they try to move away from the dollar, they will be barred from doing business with the United States. 

"We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty U.S. Dollar, or, they will face 100% Tarrifs, and should expect to say goodbye to selling into the wonderful U.S. economy," wrote the future U.S. president on Truth Social on Saturday.

Trump's comments are a response to BRICS - a trading bloc including Brazil, Russia, India, China, South Africa, Iran, the United Arab Emirates, Ethiopia, and Egypt - and their efforts to free themselves from the hegemony of the dollar, including through the development of DLT-based financial solutions.

Fundamental problems prevent countries from breaking their dependence on the dollar. However, since the U.S. intensified its financial sanction politics, countries worldwide have increased efforts to develop alternative settlement methods. Currently, many bilateral schemes already cover oil and gas purchases for countries such as China, Brazil, and Russia.

At a summit in October in Kazan, Russia, Vladimir Putin proposed creating an alternative payment system to the dollar and mentioned DLT as well. China is leading the project mBridge, which could potentially add a cross-border reach to its DLT-based digital renminbi.

Exploring options in Distributed ledger technology is particularly interesting because it could provide a first-move advantage for whoever sees successful implementation.

However, when governments promote the use of decentralized ledger technology, such as by providing free educational resources and setting clear legal frameworks, users become exposed to one of the main use cases of the technology – stablecoins, which brings them back to U.S. dollar.

The major stablecoins in today's market are pegged to the dollar and backed mainly by U.S. Treasury bills. As such, when users from non-U.S. countries use them to perform payments, they increase their country and the world economy's dependency on the dollar.

Dollar-Pegged Stablecoins - An Opportunity for the U.S. is a Challenge for Everyone Else

To make things more murky, the financial technology which has been heralded as a possible facilitator of the world's de-dollarization, has its strongest use case in what the U.S. House Banking Committee calls "tools of American soft power" aka stablecoins.

Stablecoins are by far the most popular use case of blockchain technology, and their growth in recent years has been meteoric. 

Predictions are that the market will maintain its growth trajectory and, by 2029, have a market capitalization exceeding  $3.4 trillion—more than 10% of the current GDP of the United States. 

With a market share of 70%, the major player in the field is currently USDT, followed by USDC, with close to 20%. 

Stablecoins, according to the Housing Banking Committee, can have an important role in communicating "U.S. monetary policy directly to the people living in other countries when American efforts to engage other governments aren't succeeding."

"If stablecoins flourish, citizens of other countries will increase the demand for dollars independent of (and perhaps contrary to) their governments' political decisions."

So, it is no surprise that countries around the world are limiting the use of stablecoins, even at the cost of blocking the technology's development.

The European Union's MiCA regulation, the first comprehensive digital asset regulation in the world, is largely focused on stablecoins and limits the circulation of USD-pegged stablecoins.

Last Friday, November 29, the Central Bank of Brazil published a proposal to regulate stablecoins. Among other things, it wants to forbid exchanges from letting users withdraw stablecoins to self-custody wallets. Local experts have explained that with this measure, the institution is trying to limit the use of these currencies and contain the national economy to the dollar. 

While Trump's aggressive position is a populistic show of strength, the use of stablecoins is a more significant threat to BRICS governments' efforts to de-dollarize their economies. The U.S. either totally neglects this unique advantage of the 'mighty' dollar or quietly nurtures it.

Share this article
The link has been copied!