Currency of Power

1/ 🚨 New @EuroStableWatch edition ➡️ Europe pursues both CBDCs and stablecoins but treats them as rivals instead of partners.

🇺🇸 The US makes more sense if you think of it as the world’s biggest and most successful investment firm: America Capital Partners, or ACP. Its business is managing access to the world’s most valuable business ecosystem — America. For decades, the rest of the world funded that ecosystem because America was considered the safest place to park money. But the world is changing. These days, capital is less interested in safety and more interested in returns. A few thoughts on what that means for ACP 👇 1️⃣ America’s trade deficit is the engine that makes the system work. The US buys more from the world than it sells. As a result, it sends hundreds of billions of dollars overseas every year. In turn, countries that earn those dollars have historically recycled a large share of them back into the US by buying American assets. For a long time, foreign nations behaved like lenders. They bought mostly US Treasuries, accepted modest returns and left the upside to America. Only now are those investors starting to ask for a share of the gains. 2️⃣ ACP used to work much like Berkshire Hathaway’s insurance business. Foreign exporters parked their surplus dollars in low yielding Treasuries, accepting returns that barely kept pace with inflation in exchange for safety and liquidity. Just as with Berkshire’s famous “insurance float”, that gave ACP an enormous pool of cheap, patient capital that could be rolled over almost indefinitely. Every maturing lender was replaced by the next country running a trade surplus. America invested that capital into US businesses and other domestic productive assets that earned much higher returns. The lender received a fixed return while ACP captured almost all of the upside and distributed it mostly to domestic investors. 3️⃣ As we say, past performance doesn’t say much about future returns. A system that has worked one way for decades is not necessarily bound to continue doing so in the future. Indeed, over the past century, the world has moved from gold, to gold backed dollars under Bretton Woods, and then to a purely fiat dollar after Richard Nixon closed the gold window in 1971. And as written by @adam_tooze last week, the practice of central banks holding huge pools of unhedged dollar reserves is a fairly recent chapter in economic history rather than a permanent feature of the global system. 4️⃣ When most people think of the dollar, they’re thinking about the period after 2000 — what Adam calls “Bretton Woods 2.0”. Back then, China (which had just joined the WTO) kept its currency cheap, exported manufactured goods to America, and accumulated huge amounts of US Treasuries almost automatically. This was the era of safety seeking capital. Foreign central banks such as China’s wanted liquidity and stability rather than higher returns. Per Adam, that era largely peaked around 2015. 5️⃣ The biggest shift today is who is supplying the capital. China has stepped back, using capital controls to keep domestic savings at home and direct them into its own industrial base. I think of this model as “Middle Kingdom Ventures”, or MKV — a very different beast from ACP. The money now flowing into America comes much more from Europe, Japan, South Korea and Taiwan. Most of those flows now come from private investors and sovereign wealth funds that are looking for returns. Very different from the safety obsessed lenders of the previous era. 6️⃣ As the investors changed, so did their portfolios. @Brad_Setser notes that the dollar still makes up about 57% of official central bank reserves. Among investors chasing returns, however, dollar assets account for roughly 65 to 70% of portfolios, and for some Taiwanese life insurers the figure approaches 95% 👇 They are buying America because they want exposure to the best performing assets, especially US tech companies. They have moved further up the risk curve in search of higher returns. 7️⃣ That shift is producing two very different flows. Official reserve managers at the world's central banks are steadily moving into physical gold, buying more than 1,000 tonnes a year as a hedge against sanctions and financial risk. Meanwhile, private investors are moving into American equities, especially tech, while remaining inside the dollar system. 8️⃣ Markets respond to flows before fundamentals. Research from @AQRCapital (Antti Ilmanen and Thomas Maloney, 2025) suggests that most of America’s stock market outperformance since the 1990s has come from investors paying increasingly higher prices for company earnings rather than from stronger earnings growth. In our recent interview on @CurrenPower with @mariekeflament, @michaelxpettis concurred with this idea: a soaring US stock market reflects the fact that enormous amounts of foreign capital, generated by America’s trade deficit, need somewhere to go. And if more capital is chasing an ever narrower segment of the US stock market, prices have nowhere to go but up. 9️⃣ This is where the ACP model starts to come under pressure. The old spread depended on foreigners lending cheaply while America owned the highest returning assets. Now those lenders increasingly want to own the assets themselves, especially the best performing tech stocks. That creates pressure from both directions: • America still needs buyers for its growing pile of Treasuries, so borrowing costs rise as demand weakens. • At the same time, the returns from owning the best assets are increasingly shared with foreign investors. The gap between cheap funding and high returns is narrowing. @adam_tooze calculated that foreign investors now own roughly $24.6 trillion more in American assets than Americans own abroad, leaving the US with a net international investment position approaching 90% of GDP. 🔟 One final difference between today’s investors and yesterday’s: safety-seeking capital is patient; return-seeking capital moves much faster. The original ACP model depended on investors who were happy to sit quietly in Treasuries and accept modest returns. But as inflation erodes real bond returns and confidence in the dollar becomes less automatic (euphemism), many investors have left the Treasury market and moved into equities. They no longer want to finance America’s success from the sidelines. They want to own a larger share of it. And once global investors begin chasing the upside, the world’s greatest investment platform starts to look less like Berkshire Hathaway and more like a hedge fund exposed to investor redemptions, where capital can leave when performance disappoints. (This hedge fund comparison was made earlier this year by @helene_rey.) In other words, the lenders have become LPs, and they are no longer satisfied with a fixed return. They now expect the GPs to deliver consistent performance. If they do not, capital can leave, especially as governments around the world rediscover capital controls and financial repression as tools for keeping domestic savings at home. That may very well be the next chapter — cc @dskilling @kofinas @TSGResearch.

Tether is not a stablecoin company. It used a stablecoin to bootstrap a conglomerate the financial system has no name for yet. $13B profit. 300 people. More Treasuries than most sovereigns. More gold than most central banks. 140+ investments. Almost none disclosed. This week, in @CurrenPower we deep-dive into Tether and ask ourselves, is this haute finance reborn, the perfect play for the monetary reset already underway or something no one has fully grasped? currencyofpower.co/p/tether-is-no…

🕊️ Pax means peace. But if we look around in 2026 — trade wars, chip embargoes, rare earth weaponisation, drone-contested borders — peace is probably one of the last word that comes to mind. Every era of geopolitical dominance has been called a Pax. Because every hegemon needs the story of peace, even when what they're really building is power. More importantly: every Pax has been backed by a coin. 🏛️ Pax Romana → the denarius 🐉 Pax Sinica → silver 🦅 Pax Americana → the petrodollar Strip away the military history and the diplomatic treaties, and what sits at the centre of every hegemonic order is a monetary truth. The coin is the architecture. So here's the question that we've been looking at: what is the coin of the AI age? We argue it's the dollar stablecoin — and that Pax Silica, the US-led AI supply chain initiative launched in December 2025, is less a technology alliance than a monetary strategy dressed in the language of semiconductors. The same elegant machine Henry Kissinger assembled in the oil fields of Arabia, rebuilt for the age of compute. Three harder questions follow from that: → Can you actually bifurcate an intelligence economy the way you bifurcated an industrial one? AI was trained on the global internet. Can export controls undo that? → China is betting that controlling the unglamorous middle — rare earths, energy infrastructure, AI Belt and Road deployments — will eventually let it contest the monetary layer. Is that bet wrong? → And Europe? Is it writing regulations for a monetary contest it might be losing? Check out our new article in @CurrenPower with @Nicolas_Colin open.substack.com/pub/eurostable…

This week in @CurrenPower: "The Yield, the Ban, and the Blueprint" Dollar stablecoins are expanding global dollar dominance outside the traditional banking system. Existing monetary infrastructure wasn't built for this, and every jurisdiction is now being forced to respond. When it comes to the US, the direction is clear: stablecoins are a core part of a dollar dominance strategy. After the GENIUS Act, the US are now moving on the Clarity Act, debating whom within the stablecoin food-chain should have the right to give yield. Yield on stablecoins is a customer acquisition cost. The competition for currency is now happening at the individual wallet level, globally. If I'm sitting in Europe and I can earn 5% on USDC, why would I hold euros? Responses from across the globe are starting to come. Brazil banned regulated fintechs and FX providers from settling cross-border payments in stablecoins. In Europe, Christine Lagarde's rejected the need for Europe to have euro stablecoins has the only answer and advocated for public infrastructure, which won't be ready until 2028. Meanwhile the Coinbase + AWS announcement showed USDC being embedded as the default payment layer for AI agents. The US is competing for wallet share and building out the AI agent payment stack while everyone else draws up plans. Read on the full breakdown in this week's Currency of Power, which @Nicolas_Colin co-author. currencyofpower.co/p/the-yield-th…

What an honour it was to interview @HowardJDavies for @CurrenPower with @Nicolas_Colin. Sir Howard Davies has been at the helm of large financial institutions for the last 50 years - giving him a unique perspective on what happened but also where things might go from here. We deep-dived into the crisis of 2008 and what could regulators have done better; Brexit and how it interrupted London’s journey to become the onshore financial market for Europe; why Beijing is taking international capital standards seriously and why stablecoins make sense for Europe. Full episode 👇 open.substack.com/pub/eurostable…

New podcast on @CurrenPower: we sat down with @neha for an in-depth conversation on CBDCs, Stablecoins, Privacy, Quantum and Geopolitics outlook. Neha has a unique ability to explain very clearly complex concepts - a must listen! open.substack.com/pub/eurostable…

.@neha Narula trained as a software engineer and now heads the Digital Currency Initiative at MIT. The latest @CurrenPower episode with her and @mariekeflament covers a lot of ground. Four things I wanted to highlight. 1️⃣ Programmability vs control. Programmable money executes automatically. What Neha calls "restricted money" can only be spent on certain things — think SNAP benefits / food stamps for instance. The fear that killed CBDC research in the US was the idea that government money could become conditional money. That fear is now in the politics of every country still considering a retail CBDC. (And it applies to stablecoins too. Tether freezing $500M of USDT at the US government's request shows where the control actually sits.) 2️⃣ CBDCs and stablecoins are less different than the debate suggests. A stablecoin backed by a central bank balance sheet is effectively a wholesale CBDC wrapped by the private sector. What matters is the design: what is it backed by, who can redeem, what happens in bankruptcy. The label is secondary. 3️⃣ Quantum. Bitcoin's cryptography will eventually be vulnerable. The technical path to post-quantum resistance exists. The hard problem is coordination — no CEO to mandate a migration, Satoshi's coins may be permanently inaccessible, and parts of the community do not accept the premise. Neha's view: build the signature scheme, enable migration, defer the rest until a quantum computer is actually close. 4️⃣ Geopolitics. Iran's reported willingness to accept payments in stablecoins and Bitcoin signals that these instruments now matter at the level of nation states working around sanctions. That is a story about the limits of dollar infrastructure and who controls the pipes. 🎙 Full episode and transcript here: currencyofpower.co/p/money-is-a-s…

New interview at @CurrenPower with @mariekeflament. @izakaminska on eurodollars, @tether, and why stablecoins are best understood not as a financial innovation but as a stabilisation operation — a controlled way of unwinding an asymmetry that has been building for thirty years. Full interview: open.substack.com/pub/eurostable…

After weeks in London, Zurich, NYC, and Cannes for @EthCC, one thing is clear: we are witnessing the end of native digital assets. I’ve been covering crypto for nearly 10 years and visited financial hubs all over the world - this is the first time I’m seeing a shift this big. Almost no one is talking about native tokens anymore. It’s striking how fast the conversation has changed. For the past decade, blockchain meant native digital assets - Bitcoin, Ether, SOL, and thousands of others. But that era is ending. Most native tokens have collapsed because, in reality, they don’t do much. Bitcoin remains because it became digital gold. Ethereum and Solana remain because their networks have real utility - tokenization and payments. But let’s be clear: their token prices are not protected by fundamentals. Both networks could function perfectly with much lower token prices. The rest? They’re fading away. Because the native token model never truly proved its value. In many cases, it was simply a way to raise money without the constraints of equity. That model isn’t sustainable. Investors are realizing it. Some projects - @AcrossProtocol being one example - are already rethinking their token models and exploring equity structures. This will not be an isolated case. Examples like this will multiply. We are now entering a new era: The era of non-native digital assets. The real opportunity is no longer assets created for blockchains - but assets moving onto blockchains. This wave is already being driven by companies like: - @circle - @tether - @KriptownFR - @tradeon21x - @Securitize - And many others Stablecoins are the clearest example. Over $300B of dollars are already on-chain. Soon, this will become trillions. Next: - Stocks - Bonds - Funds And this is exactly why TradFi is now entering at scale. The first decade of crypto was about creating new assets. The next decade is about bringing the world’s assets on-chain.

Two systems are competing to replace the petrodollar. 🇺🇸 Cryptodollars: compute as the new oil, stablecoins as the new recycling loop. 🇨🇳 Electroyuan: own the grid, choose the currency. The rest of the world just gets to pick a dependency 👇 @CurrenPower

New episode of @CurrenPower with the one and only @psneville -- a fantastic wide ranging 2h conversation, from the early days of @circle and USDC to building an AI-native financial organisation with @catena_labs open.substack.com/pub/eurostable…

Our CEO @khem sat down with @mariekeflament and @Nicolas_Colin on the @CurrenPower podcast. The main takeaway: not every gold token is the same. Most people assume tokenized gold is just a digital ETF. It isn't. When you hold $DGLD, you own the actual physical metal safely secured in a Swiss vault (not a paper claim on another piece of paper claim). You can even redeem it down to a single gram. Kurt also shared some fascinating lessons from his time at PayPal, why Diem actually failed (spoiler: it wasn't the tech), and how zero-knowledge proofs will fix digital identity. It is a great conversation. Enjoy it.

The most consequential trend of our time

Markets have been the ultimate constraint on Trump. It was like that in April 2025 when China tariffs went to almost 150% and arguably also in January 2026 over Greenland. Markets are now very distressed. Trying to take Kharg Island just isn't realistic. robinjbrooks.substack.com/p/how-bad-is-t…

We already know the winner in the war with Iran and that's Russia. The closure of the Straits of Hormuz has swung Russian crude from pariah to prized commodity. Urals oil price is the highest since right after the Ukraine invasion. Putin is loving this... robinjbrooks.substack.com/p/markets-in-t…

@mariekefl/note/p-190261608?r=1kzl0&utm_medium=ios&utm_source=notes-share-action" target="_blank" rel="nofollow noopener">substack.com/@mariekefl/not…

This week in @CurrenPower — Wide Open, Locked In. For decades, America and China have been locked in a structural embrace that neither could easily escape. China manufactured; America consumed. China saved; America borrowed.

Exactly this. And on top of the compounding macro problems, the geopolitical backdrop is vastly different. What does coordination (which was essential to stabilizing the global economy in the GFC) look like in the age of the 'Donroe Doctrine'?

Iran’s foreign exchange system is another example of dysfunction in the economy. Subject to decades of sanctions, capital controls, and state intervention, it is no wonder that it’s fragmented. It never got better because the multi-tiered exchange rate system enabled corruption and split the economy into haves and have-nots, which appeared to be absolutely fine by the regime. open.substack.com/pub/hegemoney/…

A Graeberian view on AI, by @biancoresearch 👇