Stablecoins and its Importance in Global Trade
But what about inflation?
The U.S. dollar is losing its buying power year over year. The reason for that can be tied to many things. What we’re lacking is an asset that is able to back the dollar and fortify its strength in global positioning. Since coming off the gold standard in 1933, and completely removing it from international transactions in 1971, we have had a debt-based system held up by the forced reservation and utilization of the U.S Dollar. Hence the Petro-Dollar Agreement. In 1973, the U.S. and Saudi Arabia standardized oil to be priced and traded exclusively in USD, making it a global reserve currency (History.com)
Credits: The Petro-Dollar System Explained - Susan Su via Medium.com
This new era of digital financing is bringing a neutral-bridge asset system that can be used as a global reserve currency to process transactions without showing favoritism to any fiat/government currency. This allows for markets to create itself based off utility and use case, rather than forceful interaction (Tun et. al. "How Petrodollars Affect the US dollar” 2024) via Investopedia.com
How Fiat digital currencies can interact and settle transactions instantaneously through a neutral bridge asset, allowing for conversions to happen with exchange rates in real time.
Stablecoins are exactly what they sound like, stable. Backed 1:1 or in a surplus to represent a currency in a digital form. The U.S dollar is not disappearing. Our paper dollars will still be utilized. However, majority of commerce is moved digitally, creating the need for uniformity and seamless interaction between multiple tokenized currencies. Much in the way rail yards, shipping ports, and trucking standardized shipping containers to make the transfer of goods and products seamless.
If every country had a stable coin pegged to their fiat currency, then the function for a neutral-bridge asset will be to facilitate digital payments instantly, and perform the agreed exchange rate in real time. This would help smaller developing countries to interact in global trade regardless of the amount of U.S. Dollars they hold in reserve.