How a new crypto creation will combat global poverty – and save you money!
Ric Edelman: It's Thursday, September 28th. PayPal has launched a stablecoin. They're the first major financial institution to do this. It's dollar denominated meaning you pay $1, you get one Stablecoin. Stablecoins play a key role in connecting traditional markets with crypto markets. You use stablecoins to move in and out of trades without paying high fees or to transfer money across country borders without anybody needing a bank account. And you can move money 24 seven. Who cares if banks are closed?
PayPal USD is the name of the coin. USD for US Dollar and it's issued by Paxos. That's a crypto company regulated by the New York State Department of Financial Services. When you send a dollar to PayPal and you tell them to convert it into their stablecoin, they take your dollar, they give you a stablecoin and they put your dollar into short-term US treasuries. So these stablecoins are backed 100% by government securities. In addition to sending your stablecoin to other people, you can exchange them for bitcoin, BitcoinCash, Ethereum and Litecoin. Four of the biggest digital assets. Soon you're going to be able to do this on Venmo as well. PayPal and Venmo owned by the same company.
What did Congress have to say about all this? Patrick McHenry is chair of the House Financial Services Committee, and he said, “This announcement is a clear signal that stablecoins hold promise as a pillar of our 21st century payments system.”
That is a pretty strong endorsement. And Brian Brooks, who was comptroller of the Currency in 2020 and 2021, and Charles Calomiris, who was chief economist of the Office of the Comptroller of the Currency at the same time, he's now also dean of economics at the University of Austin; they wrote a joint Op-ed saying that stablecoins are at the heart of a dollar based revolution happening throughout the developing world.
Think of them as digital versions of prepaid cards with the potential to be important tools of American power. In a world where the role of the dollar is in question. They wrote that stablecoins could bolster the dollar's dominance in global trade and generate the biggest reduction in global poverty ever. There are already hundreds of billions of dollars in dollar-backed stablecoins. Stablecoins are attractive to people who live in countries where the economy is shaky or the government corrupt. And you don't need a bank account to use stablecoins. All you need is a cell phone. You don't even need a smartphone, just an old, ordinary, old school cell phone and some stablecoins even pay interest with no minimum balance and no transaction fees.
Brooks and Calomiris say stablecoins could be to finance what the Voice of America has been to diplomacy. They can communicate U.S. monetary policy directly to the people living in other countries and have stablecoins flourish. Citizens of other countries will increase the demand for dollars regardless of what their governments do.
The fact that a financial services institution as big as PayPal has launched a stablecoin and that you have major government officials supporting all of this tells you that the rest of the financial industry won't be far behind. Before you know it, you'll have stablecoins in your phone just like you already have PayPal, Venmo and Zelle.
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