People hold dollar-backed stablecoins because they believe the US dollar to be the most durable unit of account on the planet.
All the proof you really need for that is that most crypto users outside the US still consider the value of their crypto tokens in terms of how many US dollars it’s worth.
The author of this article talks about this being a “parasite” to the US monetary system, but it’s hard to think of a better thing that could’ve happened for the US. Not only has it reinforced that dominance… it’s also driven hundreds of billions of dollars of US treasury bills purchases from providers like Tether and USDC.
Stable coins are mostly backed by Treasuries, so it’s engineering instability: a run on coin redemption triggers treasury sales which raises interest rates which triggers a run on any asset backed by treasuries like coins, and so on.
It’s like the 2008 crash: people speculating because they think housing never goes down, except a market-scale drop can trigger an uncontrollable rush for the exit. With banks and companies permitted to hold coins as assets, the impact is broad but impossible to regulate ex ante, and difficult to model monetarily.
It’s what I would do if I were Putin and Xi, frustrated with the western controls on the banking system (that have mostly enabled us not to have to go to war).
Keep in mind stablecoins aren't a product built for Americans, they're built for people outside the US financial system to give them access to some of the benefits of the US's relatively solid money.
If it's a fraud, then it's one with a working product.
In 2022 when confidence in stablecoins plummeted after the Terra collapse, $20 billion in Tether was liquidated in a month - $10 billion of that in a single day: https://www.coingecko.com/en/coins/tether
Through that black swan event Tether did its job, processing redemptions for collateral dollar for dollar.
