accompany chart, potentially matched by Federal Reserve demand, and thus have little direct impact on debt markets. What a fantastic way to pay off loans! The short-term cost of issuing debt would fall. However, the entire cycle of new debt created could be seen as financed by such an adoption, which also provides credibility to a medium of exchange that still has many questions around it and perhaps fuels wealth for those who have waited for such an adoption to reduce volatility to date and thus capitalize on that change in the long term. The federal government has been debating the adoption of digital currency with crypto qualities for years. A solution is unclear because
(Ethereum is a good example) serves as a substitute for other cryptocurrencies, providing a means for users to transact in virtual markets that demand a cryptocurrency without the risk exposure associated with other cryptocurrency assets. If a U.S. Dollar stablecoin (let’s call it USDS here) were adopted to qualify as a “stable” currency in financial markets, the Federal Reserve would need to set aside or print money to maintain a parallel account balance equal to the new USDS supply, thereby creating one-for-one support. The Federal Reserve would not have an incentive to hold such cash idle and would likely purchase Treasury securities. Once the demand for U.S. debt was triggered by a USDS adoption, the federal government could then issue debt to finance spending equivalent to the needs shown in the
economists and policymakers are struggling with how a “digital” dollar may render the Federal Reserve the primary depository institution in practice within a few years after the USDS is adopted. What would happen to commercial banks, savings banks, credit unions and non-bank lenders if they were no longer primary in deposit markets, as consumers and businesses could hold digital/blockchain accounts with the central bank? We will consider that question in a future article. g
Dr. Robert Eyler is professor of economics at Sonoma State University and president of Economic Forensics and Analytics in Sonoma County.
November 2025
NorthBaybiz 19
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