| SNEAK PEEK |
— Putting the Pax into Pax Americana with the upcoming “global dollar network”.
— The BoE’s new RTGS system is a go.
— My name is Donald of Arabia, king of kings, look on my towers, ye mighty, and despair.
Howdy partners and happy Eurovision day!
How can anyone concentrate on writing a newsletter when Tom Cruise is in town promoting Mission Impossible 8? Annoyingly, I was in Amsterdam and Brussels this week, so you guys get some thoughtful comments about stablecoins instead.
Do enjoy.
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| THE BIG BLIND SPOT THIS WEEK |
TRUMPIAN PAXOS AMERICANA: While the finance world has been fixated on progression of the “Guiding and Establishing National Innovation for U.S. Stablecoins Act” (aka U.S. GENIUS Act), central bank digital currencies (CBDCs), and the EU’s digital euro ambitions, a far quieter — and far more consequential — operation has been unfolding under our noses. Remember Libra, Meta’s ill-fated 2019 stablecoin project that landed like a Zuckerberg-shaped bombshell, unnerving regulators with its audacious “Zuck Buck” vision?
Back then, under Nick Clegg’s stewardship, Libra was a managed rollout — a fait accompli designed to force the world’s hand. It spooked central bankers so much that China fast-tracked its e-yuan, and the West scrambled to keep Big Tech from seizing monetary control. Regulatory attacks swiftly put Libra on ice.
But here’s the blind spot: the Libra crew never really went away. They’ve been reassembling, piece by boring piece, under the guise of Paxos — a name that now feels like a nod to a new Pax Americana, or perhaps a Trumpian Paxos Americana, given the crypto-friendly administration’s tacit support.
Evidence Paxos is aiming to become the new Libra abounds. In July 2024, for example, Paxos hired Jeannie Lim, Meta’s former Singapore fintech head, to lead its Asia strategy. The move went largely unnoticed. But almost a year later, Meta has announced its return to the stablecoin arena, and from what we hear, it may be partnering up with Paxos officially soon. Call it a coincidence — but in the world of strategic financial plumbing, there’s probably no such thing.
If Facebook’s Libra was a failed blitzkrieg on the monetary system, Paxos’ approach is the opposite. It has purposefully taken the slow, unglamorous route, rebuilding the infrastructure incrementally to the point where no one’s paying attention.
Let’s rewind for context. I’ve been slow to this recognition myself, originally dismissing Paxos as just another onshore stablecoin system due to it operating under strict regulatory oversight without fanfare. Boring, right?
But I was wrong. Paxos’s ambitions are far grander. Not only does it power PayPal’s PYUSD — which is significant in its own right due to the company’s heritage — It’s also building something called the “Global Dollar Network”, which it launched in November 2024. It’s here that the really grand play resides.
Paypal’s original sin: To understand why this matters, recall that PayPal, the original “stablecoin” that propelled both Elon Musk and Peter Thiel to billionairehood, was not some VC lark but a rate arbitrage machine.
People forget this now, but from its earliest days, PayPal was just as disruptive an assault on the financial system as Libra. Among its most contentious aspects was its provision of a money market fund that allowed users to earn on idle balances on the side from the early 2000s onwards.
That fund was only dissolved in 2011 under the weight of zero rates and rising compliance burdens. But the genie had already been let out of the bottle and it wouldn’t be long before the scheme would be replicated in China by Jack Ma.
PayPal’s enduring influence: PayPal’s anti-fraud tech would eventually go on to spawn the world’s most powerful intel darling Palantir. But its footprint on modern financial tech also continues to endure.
On the people side, David Marcus, the former president of PayPal and the driving force behind Facebook’s ill-fated Libra stablecoin, later led the development of the Novi wallet — a digital payments platform that quietly partnered with Paxos to pilot cross-border remittances using the Pax Dollar (USDP). While Marcus now runs Lightspark, a startup focused on the Bitcoin Lightning Network, he remains influential in Trump-aligned crypto circles and is widely seen as shaping the broader digital asset agenda.
Also in the frame, however, is David Sacks, another PayPal alum, who now serves as Trump’s official AI and crypto czar and has been a key architect behind the GENIUS Act, the deregulatory push aimed at boosting U.S. stablecoin adoption. Notably, Paxos itself counts Peter Thiel–linked vehicles such as Mithril Capital among its early investors, underscoring how much of this new financial infrastructure traces back to the original PayPal mafia.
China imitates: In 2014, Alipay — the financial arm of Ma’s Alibaba — officially launched its own money market fund, known as Yu’e Bao. The structure was based on the same PayPal premise, and would soon become the largest money market fund in the world. This dominance, however, alarmed Beijing’s authorities, especially the People’s Bank of China which was not happy with how much influence Ma’s shadow bank vehicles were having on the state-directed financial system. Determined to reassert control, authorities set out as early as 2014 to develop their own emoney equivalent, a project that would eventually pave the way for the launch of the e-yuan.
With the work underway, the PBOC felt ready to make its move on both Alipay and Tencent’s WeChat more decisively. In 2019, it regulated that all payment providers such as them must, from now on, maintain all customer funds at zero interest in a specially segregated full-reserve account at the central bank, known as NetsUnion. The move crushed their ability to continue to operate their cushy arbitrage-based business models.
Ma’s discontent: In October 2020, Ma responded by doing something unheard of: he vocally and publicly criticized China’s outdated financial regulations, state banks’ “pawn shop mentality,” and lack of policy expertise, while advocating for data-driven credit and innovation in a public forum. The outburst ended up costing him everything. To cut him back to size, the government suspended Ant Group’s $37 billion IPO and put Alibaba through an anti-monopoly probe. Ma himself disappeared from public view from late October 2020 to early 2021 (2–3 months), not emerging in public until March 2023.
Libra shrugs. It was at roughly the same time that over in America, Facebook decided to launch its fateful Libra assault on the world — a move that immediately shocked both regulators and central bankers, and jolted them into action.
In Basel, BIS officials admitted as much to me in 2019: the e-yuan and eurozone’s CBDC pivot were direct reactions to private stablecoin’s potential to reroute savings away from national monetary systems. The threat wasn’t the tech; it was the possibility of offshore monetary coordination displacing central bank control.
The PayPal mafia strikes back: Today, stablecoins like Tether and prospective CBDCs like the digital euro and digital pound draw most of the attention. But it is Paxos, that is gearing up to be the true dark horse successor to Libra.
A critical power grab is that PYUSD soon plans to start offering a 3.7 percent yield on wallet balances based on a clever “marketing incentive” frame that should allow it to dodge the SEC’s security classification trap.
With PayPal’s interest-yielding product, Paxos is basically creating Yu’e Bao 2.0, except, built for a world where stablecoins no longer sit on the edge of legality. The product is bank-like, yield-bearing, and inching toward mainstream acceptability, especially once the U.S. passes its key stablecoin legislation — the so-called GENIUS Act. But it is also part of a much bigger play…
Indeed, it’s PayPal’s plans for its Global Dollar Network, which was launched in November 2024 (just as Trump took power), that are really the thing to take note of.
Here’s where it gets geopolitical. The GDN is built around the Global Dollar (USDG), a U.S. dollar-pegged stablecoin issued by Paxos Digital Singapore Pte. Ltd., a Paxos affiliate regulated by the Monetary Authority of Singapore.
Clues that GDN is gearing up to be the new Libra are plentiful. The network already consists of partnerships with heavyweights like Visa, Kraken, Robinhood, Stripe, and even Mastercard. Meta, as noted before, is likely to join the network soon, too. Other clues include the fact the structure is configured to redistribute some 97 percent of its yield to partners, mimicking the Libra Association’s original incentive model. The difference is that, this time, the whole thing will be licensed, modular, and distributed across jurisdictions like Singapore and the UAE.
Stripe’s $1.1 billion acquisition of Bridge Network in February, meanwhile, arms the whole system with the API infrastructure to connect businesses that also operate in fiat to the global stablecoin web, no questions asked.
The acquisition, paired with Paxos’s infrastructure, has enabled Stripe to launch Stablecoin Financial Accounts by May 2025, allowing businesses in 101 countries to hold, receive, and send stablecoins alongside fiat rails like ACH and SEPA. This is what BIS’ mBridge was aiming to become but with a stablecoin interconnection system rather than a network interconnecting CBDC RTGSes.
Eurodollars 2.0: It’s worth noting the GDN is not just a stablecoin network in the making. It looks increasingly like a new dollar operating system for the world, designed to function offshore on a narrow bank basis, while sidestepping the old Eurodollar system’s pitfalls. Hence the generic GDN name we guess.
Capital controls, Trumpian style: It’s worth considering too how Paxos’s rise dovetails with the Trump administration’s latest moves on capital controls. As flagged by Mr. VIX (@yieldercher) and Michael McNair (@michaeljmcnair) on X (H/T Mike E), it looks increasingly like the U.S. is engineering a eurodollar squeeze by eliminating the Portfolio Interest Exemption (PIE), a tax break for foreign Treasury holders. McNair points to a new tax bill, unveiled by House Republicans, that introduces Section 899 — a mechanism to slap a 30 percent withholding tax on interest income earned by foreign investors in U.S. bonds, with a 5 percent surcharge if their home countries impose “discriminatory taxes” on U.S. firms. The bill also tweaks the Base Erosion and Anti-Abuse Tax (BEAT), raising the levy on certain payments to 12.5 percent from 10 percent.
This move, paired with the SLR rollback and GENIUS Act, the pair say aims to force offshore dollar demand back onshore. The resulting selloff of Treasuries by foreign investors, they argue, could create a shortage of liquidity and high-quality collateral in the overseas USD repo market — already strained by the European banking sector’s $80 billion repo usage and negative cross-currency basis. This would push dollar-starved institutions to the U.S. onshore market, driving capital repatriation.
How does this tie to Paxos? Simple: a Eurodollar squeeze makes stablecoins like USDG and PYUSD more attractive. As offshore dollar liquidity dries up, institutions and savers will turn to stablecoins for frictionless access to dollar-based value, especially once they start paying out interest. Paxos, with its regulated infrastructure and global reach, is perfectly positioned to capture this demand.
Coding the PAX-Operating System: While the GENIUS Act stalled in the Senate last week, POLITICO reported this week that its latest draft has since been amended with several notable changes to address specific political, institutional, and legal concerns. The hope is the bill will now be put up for a procedural vote on the floor early next week.
Under the new draft, the Act will stop stablecoins from being classified as securities or commodities, meaning they will come under the prudential umbrella of the FDIC and the OCC. It also ensures that stablecoins with over $10 billion in outstanding tokens will be overseen on a federal rather than state basis, while granting exemptions from U.S. prohibition to foreign stablecoin issuers if their home jurisdictions are deemed to have a comparable regulatory regime to that of the U.S.
Importantly, reserves will have to be fully segregated and not rehypothecated with the exception of Treasury repos below 93-day maturities.
Techbro control: The new draft takes a swipe at future tech-platform issuance with a clause outlining that non-financial firms will require unanimous approval from the certification committee and agree to strict data use limitations before issuing stablecoins (to guard against the emergence of dystopic social-credit-type systems such as those Ma was pushing in China).
Why it matters? If the amendments satisfy Democrats, the U.S. global stablecoin onslaught could begin as soon as June.
BTW WHAT IS TETHER UP TO? Tether CEO Paolo Ardoino’s speech at Token 2049 was finally uploaded to Youtube this week, and what’s worth your attention is just how diversified the company’s operations are getting.
As Ardoino explained, the company is now involved in: 1) An educational platform, aiming to make education unstoppable and promote independence; 2) Tether Evo, a biotech arm focused on brain computer interfaces, aiming for an open-source “brain operating system” to help people with disabilities. They believe their technology is more advanced than Neuralink; 3) Tether Data, investing in AI and brain computer interfaces; 4) Tether Finance; 5) Kit, a highly scalable, peer-to-peer telecommunication platform (calls, file sharing) designed to work without servers and be resilient in challenging conditions, including adding features for communication even without electricity; 6) An investment of $75 million in Rumble to support freedom of speech, and, last but not least (because, of course), Tether AI.
It’s an example of just how influential and powerful these stablecoin providers could get while operating almost entirely outside of governmental regulatory reach.
COMMENT: Now contrast everything above with what’s going on in Europe. While central bankers won’t officially admit the EU’s digital euro push is being driven by fears that European savers might flock to USD stablecoins, behind the scenes, that’s exactly what we hear is motivating such developments.
Over in the U.K., the Bank of England is taking a more nuanced approach, aiming — we think — to position itself as an intermediary between the two systems.
In that context, Paxos’s stablecoins could become the yin to CBDCs’ yang. CBDCs, managed by central bankers for the risk-averse, will balance themselves with traditional monetary tools. But when growth falters, they’ll import capital from the offshore stablecoin world — narrow banks by design, offering higher trust than the old eurodollar system. Over time, these stablecoins might evolve to hold more diverse multilateral collateral — think bonds from supranational bodies or even global public goods like health R&D or defense infrastructure — creating a distributed, market-led system.
The euro stablecoin dream, however, will likely remain elusive; just as the post-Bretton Woods SDR defaulted to the USD, we think it’s unlikely — bar the mass issuance of eurobonds — that any euro stablecoin would be able to grow without defaulting to an over-dependency on German Bunds, overburdening Germany disproportionately.
And hence why Europe has no choice but to go down the digital euro path.
| BUSINESS, ECON AND FINANCE |
TOKEN OF INTEREST: Token 2049, which occurred in Dubai at the end of April, has posted the videos of its sessions online, and we thought it worthwhile to give you some highlights. Here, for example, is Eric Trump telling the founder of Tron, Justin Sun, that “until my family got into politics I didn’t realize how fragile [the financial system] was and the second you start saying something that goes against the system they’ll cancel you, they’ll ostracize you, they’ll come after you“. He goes on to assert that it was being financially cancelled that motivated his family to get into the stablecoin and crypto game.
Zach Witkoff, co-founder of the Trump-affiliated World Liberty Financial stablecoin, meanwhile, told the room that banks were opaque and mysterious, asking the crowd: “Tell me where you’d rather keep your money. Something that’s backed one to one, you know, treasuries and short-term cash equivalents, or something that’s fractionally backed by, you know, you, you don’t even know what”.
ARABIAN NIGHTS: While Northern Europeans delighted in the first thrusts of summer weather last week (in the entirely tolerable high 20s degrees range), the Trumpian elite jetted off to the Gulf for a much hotter experience. Among those attending the Saudi-U.S. Investment Forum on Tuesday included Scott Bessent, Sam Altman, Elon Musk and Larry Fink.
And with the heat hitting 40-degree highs on the day in Riyadh, we’re pretty confident the mini golf carts that wheel VIPs around from the King Abdulaziz International Conference Center and over to the Ritz-Carlton multiple times a day were in proverbial overdrive. The contradictions of the Kingdom’s enthusiasm (or should that be Crown Prince Mohammed bin Salman’s enthusiasm) for all things AI and robotic continue to stand out. When The Blind Spot attended the Kingdom’s state-sponsored AI conference last September, also in the King Abdulaziz International Conference Center, we were struck by irony of a Wahabist state being so consumed with reverence for godlike superintelligence. The contradictions don’t end there. Back then, the grand opening on stage was melodically amplified with the sacrilegious and subversive tones of John Lennon’s Imagine. This time Donald Trump walked out to gay anthem YMCA. Go figure.
The good, the bad, and the AI: There were many high-level panels that took place in Riyadh, but most striking were comments from Palantir CEO Alex Karp. When asked to give his outlook on AI, he told the audience. “It’s very dangerous,” adding “and if the dangerous bad people get the upper hand, which is possible because a lot of it, it all looks the same, and some of it’s a joke and some of it’s not, and some of it’s deadly — we will have a world that is not the one we want. And it’s not inherently good. So I basically disagree with most people on the panel. It [AI] is good in the hands of good people. It’s not inherently good. It’s a dangerous weapon.”
When asked: “Is it in the hands of good people?” He replied, gesturing to himself: “Well, it will be”.
| CBANKING |
SETTLE DOWN! RTGS 2 IS A GO: After more than seven years in development, multiple delays, and one of the least flashy debuts in fintech history, the Bank of England quietly flipped the switch on its long-awaited real-time gross-settlement (RTGS) renewal — and it actually worked. RTGS2, the successor to the Bank’s 29-year-old real-time gross settlement system, went live on April 28.
Goodbye to 30 years of COBOL: “It’s launched. And it’s working,” BoE Governor Andrew Bailey told me (speaking under my POLITICO hat) on the sidelines of a banking conference in Amsterdam on Tuesday, gleefully adding that he was “touching wood” that everything continues to go well because so far the system was working “perfectly”. “I’m really excited by it, and it’s a huge credit to everybody who worked on it, both in the bank and in the banks as well. That’s the core of the intraday liquidity system,” Bailey said. The old RTGS platform — built in COBOL and launched in 1996 — was, in Bailey’s words, “venerable.”
But what’s new? The new system offers “a huge amount more flexibility and a huge amount more scope for innovation,” said Bailey. So much so, in fact, it likely negates the need for the Bank to even talk about introducing a so-called “wholesale CBDC”. “We don’t need it,” Bailey said. The new system should, in theory, offer similar tokenization capabilities, sparking “huge efficiency effects in wholesale markets.” It is also designed to be operable on a 24/7 basis.
The price of progress? No official cost has been published for the multi-year project, but anyone familiar with enterprise IT rollouts won’t be shocked to hear it’s run over time and over budget. The launch was initially slated for 2022.
What’s not to like? A fintech expert familiar with RTGS systems told the Blind Spot the really exciting bits include RTGS 2’s potential to synchronize payments with other asset transfers — ideal for smart contracts or cross-asset clearing. There are also plans afoot to implement a global liquidity management function, which would be made of multiple “liquidity bridges” that interconnect with other RTGS systems, allowing participants to draw on collateral from other accounts, potentially even in different currencies. There’s even talk of a “synchronization operator,” basically a programmable escrow agent embedded into the core. But it’s not clear if those features are live yet.
The liquidity-saving workhorse: Perhaps RTGS2’s most quietly transformative feature is a turbocharged Liquidity Saving Mechanism (LSM). Originally introduced in 2013, the LSM helps banks economize on costly intraday liquidity by matching queued payments and settling them in offsetting cycles every two minutes. According to Bank material, this alone saved CHAPS participants 20–30 percent of their intraday liquidity in 2019 — helping to reduce unnecessary hoarding of central bank reserves.
CURIOUS SIDE FACTOID: The original RTGS was already integrated into the ECB’S TARGET2 system by way of a euro cash “liquidity bridge”, which connects to the Dutch central bank. BoE RTGS2 consultations, however, found industry was far more keen on developing a sterling–dollar bridge.
But as one payments expert speculated to us about the rationale for introducing that euro brideg: “I always wondered if that wasn’t to help RBS,” the expert speculated. “The BoE list of eligible collateral includes Dutch residential mortgage-backed securities, and those of no other country.” RBS merged with Dutch bank ABN Amro in 2007 in a deal worth €71 billion. It was at the time one of the highest value bank mergers of all time.
Risk awareness: Intraday liquidity tools like RTGS liquidity bridges are often sold as neutral plumbing, but in practice, they can and do influence broader monetary and financial stability.
FED GOES DOGE: Fed Chair Jerome Powell is moving forward with a 10 percent attrition plan for central bank staff. Officially, it’s about “efficiency” and “modernization.” But the messaging has echoes of Elon Musk’s Department of Government Efficiency and the broader libertarian turn in Trumpworld.
Could this be a quiet pivot toward leaner monetary statecraft — one less focused on macroprudential oversight and more amenable to private-sector liquidity tools like stablecoins and programmable money? Watch for more signals in upcoming speeches
RTGS2 may have gone live and be functioning perfectly, but its most ambitious — and potentially dangerous — features are still waiting in the wings. The real story is that the infrastructure now exists to silently reshape who gets paid, when, and for what, with zero price discovery and zero democratic oversight.
Stablecoins, may have begun as dollar proxies — but they still have the potential to become dynamic liquidity-pricing instruments that reintroduce price signals into an otherwise administratively rationed world.
If that’s the case, price differentials between stablecoin and fiat RTGS rails may soon be destined to become signals of policy failure, inefficiency, or imbalance. Between each respective zone.
For its part, the BoE seems to be positioning itself very strategically as open and interoperable with both worlds.
| SWF |
AMERICAN SWF: From the mutual love of gold trim and grandiose decor to the shared flair for skyscrapers and ceremonial pomp, it’s no wonder the Trump aesthetic harmonizes so effortlessly with Gulf princely tastes. But there’s one status symbol the Gulf royals flaunt that Trump doesn’t yet possess: a sovereign wealth fund.
It’s a gap that clearly pains Trump. Speaking in Doha this week, the Donald wistfully acknowledged that the U.S. might need to clear its debts before pursuing his long-held dream of creating an American sovereign fund. “You know, these people have no debt,” he said, gesturing to his Gulf hosts — custodians of some of the largest SWFs on Earth. “It’s nice to have the fund. I say to [Commerce Secretary] Howard [Lutnick], we’re a little early because we have debt.”
So how does a heavily indebted superpower conjure a sovereign fund out of thin air? One budget-neutral idea making the rounds in Washington is the push to sell off underutilized federal land. In fact, that’s precisely what Republicans attempted this month with a quiet amendment to the Reconciliation Bill — aimed at offloading small tracts of public land in Nevada and Utah for private development. That’s not going down too well with Democrats.
But then what? Trump’s SWF may appear theoretical for now, but that hasn’t stopped U.S Treasury Secretary Scott Bessent from staffing it up. In February, Bessent announced that former private equity executive and air force veteran JR Gibbens would be appointed as an “adviser for strategic investments and plans related to the establishment of a U.S. wealth fund”. Gibbens joins the Treasury from the Office of Strategic Capital, a unit of the Department of Defense that invests in areas critical to national security.
| WHAT WE’RE PROCESSING |
— The FT’s Ed Luce and MAGA’s Steve Bannon appear to have become besties. The love affair started here.
— The steel mills of tomorrow look like this.
