Bitcoin and the US Dollar have developed a unique symbiotic relationship, a concept explored by Sam Lyman, head of research at the Bitcoin Policy Institute (BPI). This Washington DC-based digital asset advocacy organization highlights how the two financial entities benefit from each other, driven by increased adoption and strategic regulatory developments.
Bitcoin’s Role in US Financial Systems
According to Lyman, Bitcoin plays a crucial role in the US financial landscape. The largest Bitcoin trading pair is BTC/USD, or through Tether’s USDt (USDT) stablecoin, which is backed by cash reserves and short-term US government debt. Lyman explains, “Bitcoin is beneficial to the US system because BTC is most frequently traded in dollars.” This underscores a mutually reinforcing dynamic, countering the belief that Bitcoin might undermine the dollar.
Stablecoins and the Dollar: A Modern Petrodollar
Lyman equates the relationship between Bitcoin and dollar-pegged stablecoins to the historical petrodollar system, where international oil sales were priced in dollars, enhancing demand for the currency. He advises US lawmakers to continue refining stablecoin regulations under the GENIUS framework to bolster the US dollar’s global dominance and maintain geopolitical competitiveness.
China’s Stance on Bitcoin and Stablecoins
In contrast, China has consistently clamped down on Bitcoin and stablecoins, viewing them as threats to its capital controls, essential to the Chinese economy. Lyman notes, “The entire Chinese economy depends on capital controls, preventing the elite from moving money out of the country.” Despite these bans, China’s influence in crypto remains significant, with mining pools there contributing over 36% to the global mining pool hashrate.
China’s preferred approach is launching the digital yuan, a central bank digital currency (CBDC), to manage capital flows and capture more of the foreign exchange market. However, these bans have not entirely curtailed permissionless crypto activities, including Bitcoin mining.
