Stablecoins as Payment Infrastructure

A stablecoin is a cryptocurrency pegged to the value of a fiat currency — most commonly the U.S. dollar — and issued on a public blockchain. That sentence sounds like jargon, but what it describes is remarkably simple: dollar-denominated value that moves over the internet without touching the banking system. Circle’s USDC documentation defines it as “a digital dollar,” and while that phrasing is deliberately reductive, it captures the essential function. You can send a thousand dollars from New York to Manila in under five minutes, for less than a dollar in fees, settling on a public ledger that neither Visa nor SWIFT controls. Davidson and Rees-Mogg, in The Sovereign Individual, predicted that digital money would eventually route around the gatekeepers of the legacy financial system. Stablecoins are the most concrete fulfillment of that prediction we have seen so far.

Why This Matters for Sovereignty

The sovereignty case for stablecoins is not about speculation. It is not about 10x returns or meme coins or whatever the market is excited about this quarter. It is about infrastructure — specifically, the infrastructure that moves value from one person to another without requiring permission from an intermediary who may not grant it.

Consider what happens when you wire money internationally through the traditional banking system. Your bank sends a SWIFT message to a correspondent bank, which routes it to another correspondent bank, which eventually credits the recipient’s account. This process takes three to five business days. It costs twenty-five to fifty dollars in explicit fees, plus an opaque foreign exchange markup that the bank is not required to disclose clearly. And at every node in that chain, someone can say no. The bank can flag the transaction. The correspondent bank can reject it. A compliance officer in a country you have never visited can freeze the funds in transit for reasons you may never learn.

Stablecoins remove most of those nodes. When you send USDC on an Ethereum Layer 2 network, the transaction settles in minutes. The fee is measured in cents. There is no correspondent banking chain. There is no five-day wait. The value moves from your wallet to the recipient’s wallet on a public blockchain, and settlement is final. This is not a marginal improvement. It is a categorical change in how value moves across borders.

How It Works

Three stablecoins dominate the market, and each occupies a distinct position on the trade-off spectrum between convenience, censorship resistance, and adoption.

USDCis issued by Circle, a regulated U.S. financial institution. Circle publishes monthly attestation reports on its reserves, which are held in U.S. Treasuries and cash deposits at regulated banks. USDC is the “compliant” stablecoin — it satisfies regulators, integrates with traditional financial institutions, and is the default choice for businesses that need to stay on the right side of banking relationships. The trade-off is censorship: Circle can and does blacklist addresses at the request of law enforcement. As of March 2026, Circle has blacklisted addresses holding millions of dollars in USDC . If your USDC is at a blacklisted address, it is functionally gone. This is not a theoretical risk; it has happened.

USDT (Tether)is the most widely used stablecoin by transaction volume, and it is the dominant payment rail in emerging markets across Africa, Southeast Asia, and Latin America. USDT on the Tron blockchain has become the de facto cross-border settlement layer for millions of people who have never heard the word “blockchain” — they just know it is faster and cheaper than Western Union. USDT on Tron processes transaction volumes that rival major traditional payment networks . Tether’s reserve transparency has historically been less rigorous than Circle’s, though the company has improved its reporting. USDT can also freeze addresses, though it has done so less frequently than USDC.

DAI (now rebranded as USDS under MakerDAO’s governance changes) is the decentralized alternative. DAI is not issued by a company. It is generated through a system of smart contracts on Ethereum — users deposit collateral (typically ETH or other crypto assets) and mint DAI against it. No single entity can freeze your DAI balance. No compliance officer can blacklist your address. The trade-off is complexity: acquiring and using DAI requires more technical sophistication than USDC, the peg has occasionally wobbled under extreme market conditions, and the on-ramps from fiat to DAI are less straightforward. For the sovereignty-minded user, DAI represents the closest thing to a permissionless dollar.

The MakerDAO documentation describes the system as “an unbiased, decentralized stablecoin soft-pegged to the U.S. Dollar.” Whether the governance of MakerDAO itself remains sufficiently decentralized is an ongoing question within the community, but the core mechanism — collateralized minting without a central issuer — remains distinct from USDC and USDT.

The Practical Response

The question is not which stablecoin is “best.” The question is which one serves your actual need.

For freelancer payments and business invoicing, USDC is the pragmatic choice. If you are paying an international contractor, USDC on an Ethereum L2 (Arbitrum, Optimism, Base) gives you dollar-denominated settlement in minutes for pennies. The contractor receives dollar value without waiting five days for a SWIFT transfer or losing three percent to a payment processor. Both sides maintain a clear transaction record. The recipient can hold USDC, convert to local currency through a local exchange, or spend it directly with merchants that accept it.

For remittances — sending money to family abroad — USDT on Tron is the practical reality for much of the developing world. The fees are negligible. The settlement is fast. The recipient ecosystem — local exchanges, peer-to-peer markets, informal conversion networks — is more developed for USDT than for any other stablecoin in most emerging markets. This is not an endorsement of Tether’s corporate governance; it is an observation about where the liquidity actually lives.

For savings in dollar-denominated assets in countries experiencing currency instability, stablecoins serve a function that is difficult to overstate. If you live in Argentina, where the peso has lost the majority of its purchasing power over the past decade, or in Turkey, where the lira has experienced similar erosion, or in Nigeria, where access to dollars through official channels is severely restricted — holding USDC or USDT is not a speculative position. It is preservation. You are not betting on crypto. You are hedging against the measurable, documented failure of your local currency to hold value. Davidson and Rees-Mogg anticipated this dynamic: as information technology makes borders more porous, individuals in mismanaged economies gain access to monetary alternatives that were previously available only to the wealthy or the well-connected.

For maximum censorship resistance, DAI is the appropriate tool. If you need to hold dollar-denominated value that no single entity can freeze, and you are willing to accept the added complexity of interacting with the MakerDAO system, DAI provides something that neither USDC nor USDT can: a dollar-pegged asset without a corporate kill switch.

The proportional approach is to hold more than one. USDC for convenience and business use. USDT if you operate in markets where it is the standard. DAI for the portion of your holdings that you want no entity to be able to touch. This is not paranoia; it is the same logic that leads a prudent person to bank at more than one institution. Redundancy is the quiet architecture of sovereignty.

What To Watch For

Regulatory trajectory.Stablecoin legislation is moving through multiple jurisdictions simultaneously. In the United States, stablecoin-specific legislation has been under active consideration in Congress . The European Union’s MiCA (Markets in Crypto-Assets) regulation includes stablecoin provisions that are already in effect. The direction is toward more regulation, not less. This does not necessarily threaten stablecoin utility — regulated stablecoins may become more integrated with traditional finance, not less — but it does mean the landscape is shifting.

Depegging risk. Stablecoins maintain their peg through different mechanisms, and each mechanism has failure modes. USDC and USDT maintain their peg through reserves — if the reserves are adequate and accessible, the peg holds. In March 2023, USDC briefly traded below its dollar peg when Silicon Valley Bank, which held a portion of Circle’s reserves, collapsed. The peg recovered when the FDIC guaranteed SVB deposits, but the episode demonstrated that even “fully backed” stablecoins carry counterparty risk from their reserve custodians. DAI maintains its peg through overcollateralization and algorithmic stabilization, which carries different risks — primarily, a sharp decline in collateral value during a market crash.

Chain risk. The blockchain you use matters. Stablecoins on Ethereum mainnet are secure but expensive during periods of high network activity. Stablecoins on Layer 2 networks (Arbitrum, Optimism, Base) are cheaper but inherit the security assumptions of those networks. Stablecoins on Tron are cheap and fast but Tron’s validator set is more centralized than Ethereum’s. There is no free lunch; every chain choice involves a trade-off between cost, speed, and security assumptions.

The freezing question. Both Circle and Tether have the technical ability to blacklist addresses, rendering the stablecoins at those addresses permanently inaccessible. This is the fundamental limitation of centrally issued stablecoins from a sovereignty perspective. They are permissionless in normal operation — but in extraordinary circumstances, they are not. The sovereignty-minded user accounts for this by not holding all dollar-denominated value in a single stablecoin, and by maintaining a position in DAI or other decentralized alternatives.

The common thread across all of these considerations is the same principle that runs through every article on this site: redundancy, not extremism. Stablecoins are powerful tools for financial sovereignty. They are not perfect tools. The person who uses them deliberately — understanding the trade-offs, diversifying across issuers and chains, keeping informed about regulatory changes — is the person who actually benefits from what they offer.

This article is part of the Alternative Rails & Payment Infrastructure series at SovereignCML.

Related reading: Why Payment Rails Matter for Sovereignty, Bitcoin Lightning for Everyday Payments, Cross-Border Payments: The Sovereignty Case Study