by Daniel Brouse
July 15, 2025
Today, the “stablecoin” bill failed to pass a procedural vote in the House. While this does not mean it will never pass, the pause offers an opportunity to understand the potential consequences before Congress moves forward.
Stablecoins are blockchain-based “currencies” that are typically backed by real-world assets such as Treasury bills, with the idea that they enable faster, lower-cost transactions, particularly for foreign exchange and cross-border payments. While the concept may sound appealing for transactional efficiency, in practice, stablecoins present several serious economic and environmental concerns.
First, many retail investors mistakenly treat stablecoins as investments, chasing them like meme stocks under the false impression they will yield high returns. This creates a fragile environment prone to sudden sell-offs and liquidity crises, especially if confidence in the underlying peg erodes.
More critically, stablecoins contribute to the erosion of the dollar’s value and status as the world’s reserve currency. As stablecoins grow, they siphon demand away from traditional dollar-based transactions while relying on the dollar’s stability for their perceived value. This paradox creates a self-reinforcing feedback loop: as the dollar loses global trust and value, partly due to the destabilizing effects of stablecoin proliferation, the stablecoins themselves also lose value, accelerating the decline of both the dollar and the digital tokens that depend on it.
Second, the energy consumption associated with crypto, including stablecoins, is enormous and persistent. Trump was in Pittsburgh today promoting expanded fossil fuel extraction specifically to power data centers and crypto mining operations, creating artificial demand for energy to produce unneeded “digital coins.” This is not only a direct hit to the climate through increased greenhouse gas emissions but also imposes economic costs through environmental degradation, grid strain, and higher utility prices for everyone.
Importantly, this is not a one-time cost. Every stablecoin transaction consumes additional energy and generates recurring environmental and economic expenses that accumulate over time. Ultimately, these hidden costs will be paid by stablecoin holders—through fees, climate impacts, and rising energy costs—while destabilizing both the energy system and the broader economy.
Third, and perhaps most critical for the broader economy, stablecoins could significantly distort the Treasury market. Forecasts suggest that up to $4 trillion in T-bills may be purchased over the next decade to back stablecoins. At first glance, this might appear beneficial, as increased demand could lower yields on Treasury securities. However, the opposite could occur if the market perceives this artificial demand as an inflationary driver. With massive fiscal deficits and elevated issuance of short-term debt, any additional pressure on the Treasury market could spook investors, drive rates higher, and destabilize funding markets.
In summary, while stablecoins are being marketed as a technical innovation to enhance payment systems, they are, in reality, a Trojan horse that risks undermining climate goals, draining energy resources, and adding a dangerous layer of volatility to the Treasury market. Congress and the public should carefully evaluate these hidden costs before moving forward with legislation that could embed these risks into the financial system.