Obstfeld's stablecoin analysis is basically rediscovering the Eurodollar system. Soviet banks in the 1950s parked dollars at Banque Commerciale pour l'Europe du Nord (SWIFT code EUROBANK, literally) to avoid US seizure risk, and that kicked off $13+ trillion in offshore dollar liabilities that exist completely outside the Fed's balance sheet. Stablecoins are just Eurodollars with better settlement rails. The seigniorage shift he flags at the end is the real story though. Right now the US captures ~$50B/yr in float from physical bills abroad. Tether alone already holds more Treasuries than most G20 nations. If stablecoins absorb that $1.2T in overseas cash, the seigniorage doesn't vanish, it just moves from the Fed to Circle and Tether shareholders.
Obstfeld's stablecoin analysis is basically rediscovering the Eurodollar system. Soviet banks in the 1950s parked dollars at Banque Commerciale pour l'Europe du Nord (SWIFT code EUROBANK, literally) to avoid US seizure risk, and that kicked off $13+ trillion in offshore dollar liabilities that exist completely outside the Fed's balance sheet. Stablecoins are just Eurodollars with better settlement rails. The seigniorage shift he flags at the end is the real story though. Right now the US captures ~$50B/yr in float from physical bills abroad. Tether alone already holds more Treasuries than most G20 nations. If stablecoins absorb that $1.2T in overseas cash, the seigniorage doesn't vanish, it just moves from the Fed to Circle and Tether shareholders.