The New Financial Order of the 21st Century: The Reshaping of Stablecoins and National Power

1. The Rise of the Digital East India Company

History always repeats itself in astonishing ways. When Trump signed the "Genius Act", a new era of the East India Company was quietly born. This act is ostensibly a technical adjustment to financial regulation, but in reality, it has issued a charter for the "Digital East India Company" of the 21st century, initiating a transformation that reshapes the global power structure.

New Power Charter

Four hundred years ago, the Dutch and British East India Companies, with state authorization, became a hybrid of merchants, armies, and colonizers. They controlled the lifeblood of globalization in that era - maritime trade routes. Today, the "Genius Act" is granting legitimacy to the power giants of the new era - stablecoin issuers. These "crowned" companies will control the global trade routes of the new era - a 24/7 uninterrupted, borderless digital financial landscape.

From trade routes to financial tracks

The East India Company exercised power by controlling physical trade routes. The new era "Digital East India Company" will define the rules by controlling the financial tracks of global value flow. A USD stablecoin recognized by regulators, once it becomes the default settlement unit for global cross-border payments, DeFi lending, and RWA transactions, gives its issuer a deeper and more intangible power than controlling physical shipping routes.

and the symbiosis and confrontation between countries

The history of the East India Company is an epic that evolves in relation to its mother country. Initially, they were strategic agents of the state, but as they developed, they gradually became independent centers of power, even conflicting with national interests. This history foreshadows the potential dynamic relationship between future stablecoin issuers and the U.S. government. As these companies grow into "too big to fail" global financial infrastructures, their institutional interests may conflict with national policies, triggering a new round of interest games.

II. Global Currency Tsunami: Dollarization, Great Deflation, and the End of Non-Dollar Central Banks

The "Genius Bill" not only gives rise to new power entities but will also trigger a global monetary tsunami. For countries where sovereign credit is already fragile, the future will force the populace to choose between a collapsing local currency and the easily accessible digital dollar. This will lead to an unprecedented wave of super dollarization, ending the monetary sovereignty of many nations and bringing about devastating deflationary shocks.

The ghost of the Bretton Woods system

After the collapse of the Bretton Woods system in 1971, the US dollar became a purely fiat currency, laying the foundation for half a century of dollar hegemony. Stablecoins are the ultimate technological form of the post-Bretton Woods system, enhancing the liquidity supply capacity of the dollar to a whole new dimension, capable of directly permeating every capillary of the global economy.

The arrival of super dollarization

Traditional dollarization has many obstacles, while stablecoins completely dismantle these barriers. Anyone with a smartphone can exchange their local currency for stablecoins in seconds and at a very low cost. This "enhanced substitutability for sovereign currencies" will transform dollarization from a gradual process into an instantaneous tsunami, delivering a fatal blow to governments with fragile credit.

The Great Deflation and the Erosion of National Power

When an economy is swept by super dollarization, its sovereign state will lose the core power to make up for deficits and regulate the economy through printing money. The consequences are catastrophic: the local currency falls into hyperinflation, while there is severe deflation in the dollar-denominated economic activities. The government tax base evaporates, leading to fiscal collapse and completely destroying the governance ability of the state.

White House vs. Federal Reserve: The Power Struggle Within the United States

This currency revolution could even trigger a crisis within the United States. The privately issued digital dollar system regulated by the Treasury will create a parallel currency track. The executive branch could indirectly or even directly intervene in the money supply by influencing the regulatory rules for stablecoin issuers, thereby circumventing the Federal Reserve. This may lead to a profound crisis of trust regarding the independence of monetary policy.

3. The Financial Battlefield of the 21st Century: America's Opposition to China's "Free Financial System"

The "Genius Act" is an important strategic deployment for the United States in its competition with China. It aims to build a global financial network based on the US dollar stablecoin, which is open, efficient, and ideologically opposed to China's state-led model.

The Financial Iron Curtain of the New Era

After World War II, the United States led the establishment of the Bretton Woods system, which not only rebuilt the economic order but also created a Western economic group that excluded the Soviet Union. Today, what the "Genius Act" aims to construct is a new version of the "Bretton Woods system" for the digital age.

Open Encirclement vs. Closed: Permissioned vs. Permissionless

The strategic paths of China and the United States in digital currency show fundamental differences. China's digital renminbi is a typical "permissioned" system, operating on a privately controlled ledger by the central bank. In contrast, the stablecoins supported by the United States are built on a "permissionless" public blockchain, allowing anyone to innovate on this network without the need for approval from centralized authorities.

Bypassing SWIFT: A dimensionality reduction strike that pulls the rug out from under.

Stablecoin trading based on public blockchains fundamentally does not require intermediaries like SWIFT or any traditional banks. This means that the United States no longer needs to laboriously defend the old financial fortress (SWIFT), but instead opens up an entirely new battlefield. In this new battlefield, the rules are defined by code and protocols, rather than intergovernmental treaties.

Win the Battle of Network Effects

The core war in the digital age is a war of network effects. Through the "Genius Act", the United States is merging the dollar with the crypto world, and the resulting network effects will be exponential. In contrast, the closed, RMB-centered e-CNY struggles to compete globally with this open dollar ecosystem.

4. The "Decentralization" of Everything: How RWA and DeFi Undermine State Control

Stablecoins are just the beginning of the revolution. The grander transformation is to convert all valuable assets into digital tokens that can freely flow on a global public ledger. This process, known as "real-world asset on-chain" ( RWA ), will fundamentally sever the connection between assets and specific national jurisdictions, achieving the "denationalization" of assets.

stablecoin: the "Trojan Horse" to a new world

Regulated stablecoins seem to be a "Trojan horse" that tames the crypto world, but in reality, they have built a massive user acquisition channel for truly decentralized non-sovereign currencies. Users may initially be drawn to the convenience of stablecoins, but once they become accustomed to on-chain transactions, the gap between them and truly decentralized assets is just a click away.

RWA Revolution: Assets Breaking Free from National Boundaries

RWA converts assets from the physical world or traditional financial systems into tokens on the blockchain. This is not only a superior payment track but also a financial parallel universe that almost ignores national political and legal boundaries. It promotes the "denationalization of currency", "denationalization of finance", and ultimately achieves the "denationalization of capital".

the end of the traditional financial system

A new financial ecosystem driven by stablecoins and based on RWA is a comprehensive impact on the traditional financial system. Blockchain technology provides a new trust mechanism through "code is law," making most functions of traditional financial intermediaries seem redundant and inefficient.

V. The Rise of Sovereign Individuals and the Twilight of the State

When capital can flow across borders, when assets can escape judicial jurisdiction, and when power shifts from nation-states to private giants and online communities, we have reached the end of this transformation - a new era marked by the dominance of "sovereign individuals" and the conclusion of the Westphalian system.

The prophecy of "The Sovereign Individual" comes true

Published in 1997, "The Sovereign Individual" predicted that the information age would fundamentally change the logic of violence and power. The emergence of stablecoins, DeFi, and RWAs is the real-world version of "cyber currency" and "cyber economy" mentioned in the book. They have built a global, low-friction value network that truly allows capital to take flight.

The End of the Westphalian System

Since 1648, the basic unit of world politics has been the sovereign state. However, when the most creative individuals conduct their economic activities and accumulate wealth "beyond borders", the boundaries of territory lose their meaning. The state may devolve into a shell, its function limited to providing welfare for those unable to access the global digital economy.

The Last Frontier: The Final Battle Between Privacy and National Taxation

As privacy technologies such as zero-knowledge proofs mature, future financial transactions may achieve complete anonymity and untraceability. When a global, stablecoin-based financial system is combined with powerful privacy technologies, it poses the ultimate challenge to national tax capabilities. This will be the final form of "de-regulation."

The revolution initiated by stablecoins aims to dissolve the "territorial sovereignty of nation-states" through "network sovereignty" and "individual sovereignty". It is not a transfer of power, but rather a "decentralization" and "denationalization" of power. This is a more fundamental and thorough paradigm shift than the French Revolution. We are standing at the dawn of the disintegration of the old world and the emergence of a new order.