Stablecoins Are Beneficial to U.S. Economy, Tether’s Custodian Says

• Stablecoins boost demand for U.S. Treasury notes, said Howard Lutnick, the CEO of Tether custodian Cantor Fitzgerald.

• Lutnick says China may see a potential digital dollar as a spy wallet.

One of the long-running debates in the crypto market is whether U.S. dollar stablecoins – cryptocurrencies whose value is pegged to the currency – strengthen the greenback’s global dominance. According to Cantor Fitzgerald’s CEO, they do and are beneficial to the world’s largest economy.

“Dollar hegemony is fundamental to the United States of America,” Howard Lutnick said during a Chainalysis Conference on Wednesday, according to Bloomberg. “It matters to us, to our economy. That’s why I’m a fan of properly backed stablecoins, Tether and Circle.”

Stablecoins are “fundamental for the U.S. economy, driving demand for U.S. Treasury notes and do not pose a systemic risk to the world,” he said.

The dollar’s power in the global economy supposedly allows the U.S. to run large deficits, borrow at lower rates than other countries and impose crippling sanctions on enemy nations.

Cantor Fitzgerald is a custodian for Tether Holdings, the issuer of the world’s largest stablecoin, tether (USDT). As of writing, USDT boasted a market cap of $107 billion, while second-ranked Circle’s USDC had a market value of $32.25 billion, according to CoinGecko.

Crypto traders widely use stablecoins as funding currencies in the spot market and as collateral in derivatives trading. The cryptocurrencies also served as a haven during the 2022 Federal Reserve tightening cycle.

Investor confidence in stablecoins took a hit after Terra’s algorithmic stablecoin, UST, collapsed in May 2022. Tether, however, passed the stress test, honoring redemptions amid lingering skepticism about the reserves that backed it. In January, Lutnick confirmed that Tether had the money to back USDT.

Lutnick, however, is not a fan of central bank digital currencies (CBDCs) and said Wednesday that China may view a potential digital dollar as an American spy wallet.

“My fear is that central banks would like to issue a central bank digital currency, that makes sense right?” he said. “But the problem is what will China think, they will define it as the American spy wallet.”

Lutnick said real-world assets like bonds could be tokenized and traded on the blockchain over the next 10 years once the technology becomes fast and cheap enough.