When people ask me about stablecoins, they usually expect a debate about whether Tether really has the reserves it claims or whether Circle’s USDC is ‘safer’. The real story, however, is historical, revealing something deeper about the relationship between the state and markets.
Stablecoins are the latest chapter in a long-running struggle to balance private ingenuity with public authority in money. If we study the precedents carefully – from Babylonian ledgers to Florentine bills, or from the Bank of Amsterdam to Britain’s industrial tokens, the pattern is unmistakable.
Thousands of years ago in Babylon, merchants recorded grain debts on clay tablets. These weren’t coins minted by kings, but private records of trust. Merchants in Renaissance Italy pioneered bills of exchange to avoid hauling gold around Europe. These private instruments powered long-distance trade, backed not by a king’s decree but again by reputation. And in 18th century Britain, we see the cycle repeat. The Royal Mint couldn’t produce enough small coins to pay factory workers during the Industrial Revolution. Private manufacturers stepped in, minting ‘tradesman’s tokens’ that became the most popular form of retail payment for decades.
The pattern is clear. When the economy changes to agriculture, to feudal, to industrial, to post-industrial, private innovators blaze the trail and produce new kinds of money, with new technology, to support new opportunities. Once a newer model is proven, the state takes over.
The digital echo
Fast forward to the 21st century. Digital forms of cash proliferate and Bitcoin enters the national consciousness. But because it is volatile, the market steps in. Enter Tether in 2014: a blockchain token pegged to the dollar and backed, at least in theory, by reserves. Suddenly, traders had a digital dollar that not only could move at blockchain speed without relying on banks but had made decentralised finance realistic.
Stablecoins are not just a payments story – they’re a geopolitical one. With currency as a tool of influence, a dollar stablecoin that circulates globally extends the US’s monetary reach. But if China issues a widely adopted digital yuan stablecoin, suddenly, Belt and Road trade might settle in Beijing’s coin rather than Washington’s.
The real nightmare scenario for policy-makers may not even be a foreign central bank – it may be transnational big tech.
History suggests states that won’t sit idly by. The European Union is rolling out Markets in Crypto-Assets Regulation, the US has passed the Genius Act and China continues to race ahead with the e-CNY.
Opportunity in absorption
The total value of issued stablecoins has doubled to $250bn today from $120bn 18 months ago, according to McKinsey, and it is forecast to reach more than $400bn by year-end (and $2tn by 2028). When I look at this market, I don’t ask whether the Federal Reserve or the European Central Bank will issue their own. I ask when. History says they’ll wait just long enough for the private sector to prove the model, then fold it into the public monetary order.
But this isn’t just about reasserting control. Done right, it could be an extraordinary opportunity. If states adopt the technology not to smother it but to scale it as CBDCs – making digital currency inclusive, programmable and identity-aware – they could unlock enormous economic gains.
If governments harness the technology wisely, stablecoins won’t just support the global monetary system, they can upgrade it and in doing so, upgrade the economy itself. But the arc is consistent: private innovators create stability, the public flocks to it and the state steps in to claim it.
David Birch is Principal at 15Mb.
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