Double Emission: How Stablecoins Like USDT & USDC Multiply Dollar Supply & Create Global Economic Risks

13 Sep, 2025
| Salome K

Double Emission: How Stablecoins Multiply the Dollar Mass and Create New Risks for the World Economy

The financial world has encountered a paradox, which is becoming more and more obvious with the growth of the popularity of cryptocurrencies. On the one hand, the Federal Reserve System (FRS) of the USA conducts its monetary-credit policy, managing the emission of the dollar. On the other hand — private companies like Tether and Circle issue digital stablecoins (USDT, USDC) with the prefix USD, whose turnovers are estimated in hundreds of billions. A persistent feeling is created that the emission of the dollar is doubling or even tripling. Is this true in reality and to what hidden risks does this process lead?

Mechanics of “Digital Duplication”

Technically, stablecoins are not a direct emission of the American treasury. When Tether prints 1 billion USDT, the company declares that it places an equivalent in “real” dollars or in highly liquid and reliable assets (for example, short-term US treasury bonds — Treasuries) into its reserve account. Thus, a new digital dollar does not appear out of nowhere — it is secured by an already existing traditional asset.

The key problem lies in the multiplier effect. The same treasury bill, lying in Tether’s reserves, continues to be accounted for in the traditional financial system. But at the same time, it serves as security for a digital token, which lives its own, much faster and more aggressive life in the crypto ecosystem. In fact, one basic asset begins to work in two parallel worlds, substantially increasing the overall liquidity and creating the illusion of “doubling” the money supply.

Hidden Risks: Hostages of the Virtual Dollar

Such a model creates systemic risks, the scale of which is yet to be assessed.

Risk of opacity and incomplete backing. Trust in stablecoins is based solely on the belief that the issuer indeed possesses the declared assets. The history with the fall of TerraUSD (UST) showed what algorithmic models without full backing end with. Even for backed stablecoins, questions periodically arise regarding the composition and liquidity of reserves. What if a significant part of them consists not of cash and government bonds, but of commercial papers or even crypto loans? In case of mass pressure for withdrawal of funds (“bank run”) this pyramid could collapse.
Regulatory risk and fragmentation. Stablecoins operate in a gray zone. Their legal status is not fully defined in practically any jurisdiction. The threat of a sudden ban or harsh restrictions from regulators (as has already happened with algorithmic stablecoins in the EU under the MiCA regulation) hangs like a sword of Damocles. A sharp tightening of the rules of the game can instantly collapse liquidity and cause panic on the market.
Systemic risk for traditional finance. Stablecoins have ceased to be an instrument for speculation on crypto exchanges. Large funds, corporations, and even states are beginning to use them for international settlements. Their banking partners — often large systemically important banks. A crisis of one large stablecoin issuer, caused by a loss of confidence or a regulatory check, can through these banks instantly transmit into the traditional financial system, provoking a classic liquidity crisis.
Risk of loss of monetary sovereignty. This is perhaps the most serious challenge for states. The money supply de facto begins to be managed not by central banks, but by the boards of directors of private companies, who make decisions on emission based on commercial interests. The Fed can tighten policy, trying to cool the economy, and Tether — issue billions of USDT, neutralizing these efforts and pouring liquidity into global markets.

Possible Exits: Between Ban and Assimilation

Ignoring this problem is no longer possible. The world community faces a choice from several scenarios.

Harsh regulation and 100% backing. The most obvious path is to equate stablecoin issuers to banks or money market funds and oblige them to back tokens exclusively with high-quality liquid assets (cash, government bonds). Regular independent audits and full transparency of reserves must become a mandatory condition. The Lummis-Gillibrand bill in the USA is moving exactly in this direction. This will legalize the industry, but deprive it of flexibility and part of its profitability.
Displacement by state digital currencies (CBDC). Central banks see stablecoins as a threat and are accelerating the development of their own digital currencies (digital ruble, digital euro, digital dollar). CBDCs will be able to offer all the advantages of stablecoins — speed, transparency, programmability — but without the risk of private backing and with full control from the state. In this struggle, stablecoins may lose as a less reliable and regulated instrument.
Natural selection and crisis. A pessimistic scenario, in which regulators do not have time to react, and one of the large issuers does not withstand the test of strength. A cascading bankruptcy will cause a collapse in the crypto market and serious shocks in traditional finance, after which a harsh and reactive, rather than balanced, regulatory reaction will follow around the world, for a long time slowing down innovation in the industry.

The emission of stablecoins is not the direct printing of dollars, but a powerful mechanism of their digital leverage, which multiplies liquidity and creates a parallel financial system. Its growth is an objective response to the demand of the global economy for fast and cheap cross-border payments. However, the absence of rules of the game turns this instrument into a financial mine of delayed action.

A sustainable future is possible only with symbiosis: private initiative must be clothed in harsh regulatory frameworks ensuring stability, and states — must not fight windmills, but offer a modern and competitive alternative in the form of CBDC. Otherwise, the world risks facing a crisis, the epicenter of which will be located not in traditional banks, but in the opaque world of algorithms and private stablecoin-reserves.

Search for Balance: The Role of Crypto Exchanges and DeFi Protocols

One of the key links in the chain of emission and circulation of stablecoins are crypto exchanges and DeFi protocols. It is here that the main volume of trading, conversion into other cryptocurrencies, and use as collateral for lending takes place. Exchanges stimulate the release of new stablecoins by offering high yields for their storage and use in trading pairs. DeFi protocols, in turn, create complex financial products based on stablecoins, increasing their turnover and influence on the market. Regulation of this sphere becomes critically important for controlling emission and risk management.

International Cooperation and Harmonization of Standards

The problem of stablecoins is global in nature and requires coordinated actions at the international level. The absence of uniform standards and regulatory approaches creates opportunities for arbitrage and evasion of control. International organizations, such as the FATF and the Financial Stability Board (FSB), must develop common recommendations and standards for the regulation of stablecoins, ensuring transparency, reliability, and protection of consumer rights.

Technological Solutions: Proof-of-Reserves and Self-Regulation

Besides state regulation, technological solutions can play an important role in ensuring the stability of stablecoins. There are projects offering Proof-of-Reserves mechanisms, allowing to track the composition and liquidity of stablecoin issuers’ reserves in real time. Furthermore, self-regulatory organizations and industry associations can develop codes of conduct and standards for market participants, increasing the level of trust and reducing risks.

The Future of Stablecoins: Evolution or Revolution?

The fate of stablecoins largely depends on which path regulators and market participants choose. If a balance between innovation and control is found, stablecoins can become an important element of the digital economy, ensuring fast and efficient settlements. Otherwise, the world awaits another financial crisis, provoked by the opacity and uncontrolled emission of digital assets.

The development of technologies and the expansion of the scope of application of stablecoins will inevitably lead to the emergence of new challenges and opportunities. One of the promising directions is the integration of stablecoins into the systems of state digital currencies (CBDC). A harmonious combination of private and state stablecoins can create a more stable and innovative financial system, combining the advantages of decentralization and state control.

However, it is necessary to consider the potential risks associated with the competition between stablecoins and CBDCs. States may strive to monopolize the digital currency market, limiting the use of private stablecoins. In this case, it is important to ensure equal conditions for all market participants and not to allow the suppression of innovations.

A key factor of success will be increasing the financial literacy of the population. Users must understand the risks and advantages of using various types of stablecoins, be able to assess the reliability of issuers and choose the most suitable instruments for their goals. Without this, the widespread adoption of stablecoins can lead to undesirable consequences, such as an increase in the number of financial pyramids and fraudulent schemes.

In the end, the future of stablecoins will be determined by their ability to adapt to changing market conditions and meet user demands. With the right approach, stablecoins can become a powerful instrument for the development of the digital economy, increasing financial accessibility, and stimulating innovations.