The Cypherpunks Wanted to Destroy the Dollar. They Saved It Instead
For the first time, stablecoins have surpassed the Automated Clearing House (ACH) payments network in monthly transaction volume. According to blockchain analytics platform Artemis, stablecoins processed $7.2 trillion in February, topping the ACH’s $6.8 trillion. The ACH is the electronic backbone of US financial life, processing roughly 93% of salary payments, the bulk of direct deposits, bill payments, and interbank transfers. Stablecoins, an asset class that did not exist 12 years ago, just outran it.
The cypherpunks would be appalled.
In 1988, Timothy May circulated a short document at a hacker conference in Santa Barbara, California. The Crypto Anarchist Manifesto predicted that cryptography would make it possible to conduct transactions anonymously, beyond the reach of governments and banks. The state’s power to tax, regulate and surveil financial life would crumble.
Four years later, May cofounded the Cypherpunks — a loose collective of cryptographers, programmers and libertarian activists who met monthly in San Francisco and corresponded on a ferociously active mailing list. Their conviction was explicit and unambiguous: cryptography would offer an alternative to government-backed currencies. “We the Cypherpunks,” Eric Hughes wrote in the movement’s 1993 manifesto, “are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.”
The intellectual godfather was David Chaum, a University of California at Berkeley cryptographer who in 1985 published a paper with the most cypherpunk title imaginable: “Security Without Identification: Transaction Systems to Make Big Brother Obsolete.” He founded DigiCash in 1989 and ran the world’s first digital cash system — anonymous, cryptographically secure, untraceable by banks or governments. It failed in 1998, and Chaum later explained why with a sentence that deserves a monument: “As the Web grew, the average level of sophistication of users dropped. It was hard to explain the importance of privacy to them.”
Satoshi Nakamoto inherited the movement. Bitcoin’s genesis block, mined on Jan. 3, 2009, contained an embedded message: “Chancellor on Brink of Second Bailout for Banks.” It was a political declaration as much as a timestamp — Bitcoin existed in opposition to the financial system that had just required a multitrillion-dollar rescue. The cypherpunks had their coin. Stateless, trustless, designed to make government money obsolete.
Stablecoins are not that. They are dollar bills on a blockchain. More than 99% of stablecoins are pegged to the US dollar, backed one-to-one by US Treasury bills and cash equivalents, issued under US regulatory frameworks, overseen by institutions that comply with the very governments the cypherpunks wanted to render irrelevant. The largest stablecoin issuer, Tether, is now among the largest holders of short-term US government debt on earth — bigger than most sovereign nations. The instrument built to destroy the Treasury market is financing it.
The use cases that have emerged are exactly what the cypherpunks envisioned — and precisely what they didn’t want. In Argentina, more than 60% of crypto transactions involve dollar-pegged stablecoins. Argentines pay a premium of up to 30% over the official exchange rate to obtain them. Prices for freelance work are quoted in stablecoins. Property transactions are denominated in them. This is the cypherpunk use case — borderless, frictionless, beyond the reach of a failing monetary authority — except the currency of choice is the US dollar, underwritten by the US Treasury, regulated by US law.
The same pattern plays out across the global south. In Nigeria, 20% of citizens report that stablecoins account for more than half their financial holdings. In Turkey, the dollar-lira trading pair topped Binance’s global volume charts. These are not crypto speculators. They are ordinary people doing what humans have always done when their government’s money fails them: finding something better. The something better turns out to be the American dollar. On the blockchain.
The World Food Program and the UN High Commissioner for Refugees disburse aid via dollar-denominated stablecoins. Airlines are investigating stablecoin payments as compensation for cancelled flights — because an international carrier with passengers from 150 countries finds it simpler to send USDC than to wire 150 different national currencies.
The cypherpunks foresaw all of these use cases with remarkable precision: frictionless cross-border settlement, aid disbursement without intermediaries, complex multi-currency transactions handled cleanly. They just assumed the underlying unit of account would be something anarchic and stateless. It is, instead, the currency of the United States federal government. Big brother.
Because stablecoin issuers must hold dollar reserves — mostly in US Treasury bills — every new stablecoin minted represents demand for American government debt. The Argentine freelancer hedging against peso devaluation, the Nigerian trader protecting savings from naira collapse, the Turkish shopkeeper keeping accounts in USDT — all of them are financing the US government. The petrodollar required Henry Kissinger and a secret 1974 agreement with Saudi Arabia to construct. Its digital successor pulled itself up by its bootstraps, driven by ordinary people’s entirely rational preference for money that holds its value and is easy to use.
Chaum was right that cryptocurrency technology would be transformative. May was right that it would undermine existing monetary arrangements — just not the ones he meant. Hughes was right that digital cash would cross borders that bank accounts cannot. What none of them anticipated is that the killer application of their life’s work would be making the dollar more durable and more widely distributed than any previous monetary arrangement in history.
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