America’s crypto embrace may be a debt sustainability ploy

In 1933, it devalued the dollar by raising the legal price of gold, enabling more money to be printed. In 1971, it abandoned the gold standard entirely when its reserves could no longer cover the dollars in circulation. With reserve currency privilege, it financed its trade deficits by printing dollars and recycling foreign exchange inflows into Wall Street, which eventually triggered the subprime crisis of 2008 and scorched Europe for a decade.

The essence of American financial power is summed up in the phrase ‘My dollar, your problem.’ Empires export their crises while importing prosperity, and then cloak the arrangement in high-minded phrases such as “rules-based international order.”

History shows their playbook when debts become unmanageable. First comes devaluation. Then a withdrawal from contested peripheries. Finally, ‘protection deals’ imposed on allies. Ancient Rome pioneered this strategy, retreating from Britain in the late 4th century while creating tributary client states. Britain followed suit, inventing the Commonwealth and retreating east of the Suez. Both steps signalled imperial decline.

The US appears to be on the same path, only faster. Nato has been recast as a protection arrangement that requires US allies to either invest vast sums in America or face punitive tariffs. Long-standing friendships, such as with India, have soured when partners declined to play along with Washington’s version of events. With its ability to wage extended wars diminished, America has shifted its doctrine inward, prioritizing the homeland while reserving capacity for limited interventions abroad.

Yet, the dollar retains its reserve currency status and the US debt mountain continues to grow. Domestic politics demands more borrowing, which means Washington needs a new lever to increase demand for its debt.

Stablecoins appear to offer that lever. Born in protest after the 2008 crisis, cryptocurrencies promised an escape from state control. Their rallying cry was decentralization, freedom from central banks and independence from fiat currency.

Today, Washington is trying to bring them under regulation, peg them to the dollar (as stablecoins), and mandate that they hold US Treasuries as backup reserves. By channelling the global appetite for crypto into instruments of its own sovereign debt, the US seeks to prolong its dominance of the financial world.

In the past, rulers with waning power often issued new coins backed by old ones to preserve trust in their regimes. The rush to issue stablecoins is an echo of that instinct: a scramble to profit from an empire’s declining currency by recasting liabilities. This is the backdrop to what Russian President Vladimir Putin’s advisor Anton Kobyakov recently said of the US: “They have a $35 trillion debt, they will move it into the crypto cloud, devalue it and start from scratch.”

The irony is unmistakable. A technology designed to overthrow the dollar is now being enlisted to sustain it. For years, Washington dismissed crypto as a fraud, a Ponzi scheme and a vehicle for laundering money. Now, it stands recast as financial innovation because policymakers see it as an instrument of debt management. The rebel’s tool has become the regulator’s device.

The scale, however, is daunting. The global stablecoin market is worth under $200 billion, a tiny fraction of US debt. The likely mechanism would be tokenization: private or semi-public issuers could create digital versions of Treasuries for market absorption. Over time, Washington could tweak maturities and interest payments to influence valuations, while regulation bestows legitimacy.

The debt is not legally erased, but such abstraction would allow obligations to be reshaped, just as Nixon’s 1971 gold shock rewrote the rules yet became accepted as pragmatic.

The moral dimension is hard to ignore. Stablecoins are backed by the same US Treasuries that form the debt in question. The government issues IOUs, sells them and encourages private issuers to repackage them into digital tokens that global investors rush to hold. Unlike currency, which can circulate and fluctuate in value without breaching obligations, debt carries a contractual interest promise that must be honoured.

Yet, Washington allows inflation to quietly erode its real value. The result is debt alchemy masquerading as digital modernity.

Every US debt manoeuvre produces global ripples—currency swings, higher borrowing costs and abrupt capital outflows. Washington’s fiscal ethic remains constant: domestic problems must find international solutions at someone else’s expense.

New Delhi cannot exit the dollar system, but it can prepare by expanding rupee-based payment systems, regulating digital finance with care and calling out global hypocrisy. It must take a clear stance, including keeping cryptocurrencies at arm’s length, rather than sitting on the fence as policy drifts.

Kobyakov’s critique strikes home. An anti-dollar rebellion has, ironically, become the dollar’s last defence. For all the talk of decentralization, crypto is poised to become a state instrument. The cloud that was meant to liberate finance from sovereign folly may instead be the smokescreen behind which America engineers its next great escape. And when the fog lifts, it is the rest of the world that will find itself paying the bill.

The authors are, respectively, a corporate advisor and author of ‘Family and Dhanda’; and co-founder and CTO, DeepStrat.