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STABLECOINS ARE INFLATION MACHINES
- khazzaka
- Nov 18, 2025
- 25 min read
New interview of Michel KHAZZAKA by Surfin’ Bitcoin with Jonathan Herscovici, published on November 16, 2025, available at this link:
Introduction
Well, hello everyone, and welcome to the Surfin’ Bitcoin podcast. As you know, we get together every Sunday at 10 a.m. for a new episode.
And today, we’re joined by Michel Khazzaka. Hello Michel. Hello.
Michel is, of course, a regular guest on Surfin’ Bitcoin. You’ve come to several—if not almost all—Surfin’ Bitcoin events, except perhaps the very first one.
Except for the first one. You were notably at the latest Surfin’ Bitcoin in Bordeaux. We’ll actually be re-publishing your keynote soon, which was fascinating.
We’ve already had you on the show for a first episode about the morality of money — a great conversation. And today, we’re going to dive into a completely different but equally fascinating topic: stablecoins.
Stablecoins could become something extremely important in the coming years.
But before we get into the subject, could you briefly introduce yourself?
Presentation of the speaker
[Michel Khazzaka (1m02s)] Yes, as a reminder, I’m Michel Khazzaka. I’ve been working in the payments industry for a very long time.
But originally, I’m a computer engineer — and also a cryptologist. I’ve published papers on cryptography, payments, general cryptology, and cryptanalysis.
I had the good fortune of working in a very niche field. But that allowed me to discover many other professions and many countries, because this field is used everywhere.
I also teach. I’m a member of the France Payment Forum, which is an association of payment industry professionals in France.
And I want to clarify that everything I say today reflects only my personal views and those of my company, Valuechain.
I am not speaking on behalf of my clients — who include bankers, central bankers, and merchants — nor on behalf of the association, by the way.
Within that association, I’ve been leading the working group on crypto-payments for several years. And on top of that, I teach and publish research papers.
Okay, so we can consider you a specialist in payments and crypto-payments. That makes you highly qualified to talk about stablecoins.
I know quite a lot about them, yes. I can certainly talk about the topic.
Rational behind the invention of stablecoins
Alright. So the title of this podcast is deliberately provocative: “Stablecoins—The Greatest Monetary Scam of the 21st Century?”
I chose that title on purpose, because although many people have heard of stablecoins, very few have actually explored their larger monetary and macroeconomic implications.
And that’s exactly what we’re going to dive into today: maybe stablecoins are, in fact, the new face of the US dollar. And that’s what makes this topic so interesting.
We often talk about stablecoins as tools that simplify payments or provide liquidity in crypto markets.
But in reality, stablecoins like USDT and USDC have become pillars of the global monetary system. They now represent roughly $300 billion, and they directly contribute to the financing of US government debt.
So my first goal here is to set the stage clearly: stablecoins are not a crypto gadget or a payment convenience. They are an extension of the global monetary system, whether we like it or not.
Michel, what’s your first reaction to what I just said?
It’s very provocative, Jonathan. We might upset some people. But we’re going to speak honestly about the risks and the usefulness of stablecoins — no problem. If stablecoins exist, it means they serve a purpose.
What was the original value proposition of stablecoins? It was meant to address price volatility in crypto.
Look at Solana, Ethereum, even Bitcoin — the prices move too much. And if at some point you wanted to avoid selling your crypto just because selling would trigger a taxable event, that was the true reason stablecoins were created. We need to remember how this all began.
For everyone who says, “crypto prices are volatile, that’s why we need stablecoins,” that’s wrong. That is not why stablecoins were invented. Otherwise, you could simply sell your crypto when needed — end of story.
Because to move from Bitcoin to a stablecoin, you must sell your bitcoin. Be aware of that fact.
So the true purpose of stablecoins — and I’m being provocative here too — is tax avoidance. Fiscal evasion.
“I want to stay in crypto, but stable, without paying capital-gains tax.”
And the ones who created, or rather who caused the creation of stablecoins, were not Bitcoiners or blockchain builders. It was the State — the regulator. Regulation pushed the market to create a tool that stays inside the crypto ecosystem and, at the beginning, did not trigger capital-gains taxation.
It’s a controversial claim, I know.
Of course, yes, there were people who needed temporary stability — traders, for example. But it wasn’t the world’s major merchants who said:
“We’re tired of Bitcoin’s volatility, please create a stablecoin for us.”
There was no such market demand.
That origin story matters.
Let me jump in here — because in the collective imagination, everyone believes that this is the main utility of stablecoins. And I have trouble understanding why people think that. And again, we’ll get into this throughout the podcast. I think many listeners will learn a lot today.
Exactly. And in particular, regarding this next point — which is my first real question. I don’t remember the exact numbers, but I think you might. Today, Tether is one of the major contributors — or at least increasingly contributes — to financing the US national debt.
More than $150 billion.
Right, in terms of financing the US debt.
So let’s start with that immediately.
People don’t realize this. So maybe start by explaining the business model of a stablecoin, so people truly understand how it works.
Absolutely.
We started already with the original factor that triggered the creation of stablecoins: the tax event problem.
People needed a way to stay in crypto while staying stable.
The Business Model of Stablecoins
So yes, there is a promise behind stablecoins — and as you said, society tends to have a short memory.
People say, “We created them to stay stable.”
And that’s fine — there are legitimate use cases, such as cross-border payments.
But the real question is: what is the business model?
Let me answer that first, and then we’ll come back to the utility of stablecoins.
The business model of a stablecoin is simple:
for every dollar issued, there is supposedly one dollar held somewhere as collateral.
You might say: “That makes no sense.”
But it does make sense once you understand that this is all about distribution channels.
In traditional banking, money circulates through what we call commercial bank money — scriptural money — electronic money.
This money only exists inside the bank’s ledger.
And for it to move from one bank to another, it must be bought and sold, so to speak — I’m being deliberately provocative.
It must pass through the central bank, through clearing and settlement systems, through interbank compensation.
In practice, we “burn” euros at BNP and “mint” euros at Société Générale when you make a transfer.
Technically, this is done through the balances banks hold at the central bank, which settle these burn-here/mint-there movements.
I’m using crypto terms on purpose.
These traditional mechanisms of electronic money form a closed distribution channel — a closed banking ecosystem. Even with Visa, Mastercard, or the French “carte bancaire,” your card is just a cryptographic key to trigger this same movement.
Burning “BNP euros,” which are privately issued by BNP, and minting “SG euros” is still private bank money. It only works inside the banking system.
And if you want to move from euros to dollars, the money must exit the liquidity of one country, enter the liquidity of another country, and be converted through foreign exchange mechanisms.
Stablecoins: a completely different distribution channel
A stablecoin is a higher-level distribution channel.
It flies above countries.
This comes with real advantages — we’re not here just to criticize.
Quite the opposite: stablecoins solve real problems.
A central banker recently said:
“By 2030, people will expect to send money the way they send a WhatsApp message.”
He said this as if it were a future prediction — but we’re already years late.
People can instantly send messages with attachments of hundreds of kilobytes anywhere in the world, yet we still can’t send one euro instantly across borders.
So yes, the banking system desperately needs modernization.
And stablecoins are currently solving part of that problem.
With stablecoins, I can now send money almost anywhere.
But how does that work?
I deposit one euro or one dollar as collateral in a bank,
and in exchange, the issuer gives me a cryptographic representation of that dollar on a blockchain.
But these issuers aren’t banks
Well, you mention “banks,” but we should be precise: stablecoins are not issued by banks. They’re issued by private companies.
Let’s take the example of Tether.
Behind Tether there are banks, payment institutions, and electronic money issuers.
But in the end, what happens?
Tether deposits your collateral in a bank.
If you hold one USDT, there is supposedly one US dollar sitting in a bank.
Now let’s return to Tether’s business model.
How does Tether make money?
Tether is — and this is not an exaggeration — one of the most profitable companies in the world.
They are likely in the global top 10.
And they reportedly have fewer than 100 employees — perhaps even fewer than 50.
Yet they manage hundreds of billions and generate billions in profits.
How?
Because the collateral sitting in the bank is not idle.
It must remain liquid — if I redeem my stablecoin, they have to return the dollar immediately.
But as long as I don’t redeem, that dollar “sleeps” in the bank.
Except it never sleeps.
It is invested.
The bank invests it in US Treasury bonds.
Exactly — that’s the key.
So the bank pays interest.
We’ll discuss the problems with this later, but for now, let’s stay focused on the business model:
Tether gets paid.
Imagine $150 billion of stablecoins in circulation.
That means $150 billion is sitting in one or two US banks, being invested.
The bank pays interest: 2%, 4%, whatever the rate is.
That interest becomes profit for Tether.
And that’s not all:
When you buy stablecoins, there is a fee.
Don’t think one dollar buys one USDT — you pay a commission.
When you use stablecoins for transactions, there is a fee.
When you redeem, there can be a fee.
So the business model includes:
buy/sell fees
transaction fees
and — the most lucrative by far — interest on the collateral invested by banks
It is an excellent business model for stablecoin issuers.
So far, nothing seems problematic — everything looks great.
Of course… we’re about to transition into the heart of the issue.
Stablecoins: a “Genius Act” to Save the Dollar
In preparation for this podcast, you told me something striking:
stablecoins are the new debt machine — and even more, they were designed to save the U.S. dollar.
Can you explain how this works? It brings us back to monetary creation, or rather infinite debt creation, which paradoxically strengthens the dollar instead of weakening it.
Let’s break down this theory.
From “stablecoins are dangerous” to Trump’s Genius Act
There has been extensive debate in the U.S. around the impact of stablecoins on monetary policy and on government financing.
Under Joe Biden, before Trump returned, the message was clear:
“Stablecoins are dangerous. Stop them. Regulate them. Slow them down.”
The SEC and the Federal Reserve actively worked to curb the explosive growth of stablecoins at the exact moment they were becoming dominant globally — with the United States leading the market.
Then, almost overnight and without any clear logical transition, Donald Trump introduced what he literally called a Genius Act.
He declared that stablecoins were “fantastic,” “a gift,” “pure honey” for the United States.
Even before being elected, at a Bitcoin conference in Nashville, Trump had already announced that CBDCs were “poison” and that he would end Biden’s digital-dollar project.
He kept that promise.
What was not yet obvious at the time was how bullish he would become on USD stablecoins. That came later — and today, it makes perfect sense once we understand the financial mechanics.
Why Trump calls stablecoins “an act of genius”
Trump explained the logic very clearly — something almost no one else had realized before him.
He understood that stablecoins allow the U.S. government to access a new source of funding, globally, without raising taxes on Americans.
How?
Because the collateral deposited for each USDT or USDC — the dollars sleeping in the bank — is used by banks to buy U.S. Treasury bonds.
Which means:
Global citizens buy stablecoins
Their collateral is invested in U.S. debt
The U.S. government immediately receives that money
And uses it to finance its deficit
Thus, stablecoins indirectly fund U.S. government spending.
Trump realized something extraordinary:
“Banks will receive the collateral… and they will give it to us — the government. We will borrow against it.”
This is why he called it a genius act.
Because it provides:
global demand for dollars
global funding for U.S. Treasuries
global tax revenue, without asking Americans to pay more
deeper international dollarization, precisely when it was weakening
a new engine to sustain U.S. hegemony
All at the expense of… everyone else.
A global tax on humanity — in favor of the U.S.
As Trump saw it:
The “small Egyptian,” the “small Frenchman,” the “small Pole,” the entire world will buy dollar stablecoins… and their savings will finance the U.S. economy.
It is worldwide taxation without representation.
At a time when:
petrodollars are weakening,
Russia sells oil outside the dollar,
global dollarization is under pressure,
and U.S. debt is at historic highs…
Stablecoins restore the U.S. dollar’s global dominance.
They are — from Trump’s perspective — the perfect geopolitical tool.
This is also why he shut down the U.S. CBDC project:
A central bank digital dollar would compete with USD stablecoins.
Why would Trump sabotage a system that finances the U.S. for free?
It makes no economic sense for the U.S. to issue a CBDC when stablecoins do the job better and at no cost.
Stablecoins: the hidden machine accelerating inflation
Now we get to the “elephant in the room” — the part no one wants to see.
And as far as I know, I’m the first to formally identify this mechanism.
I’ve searched, looked everywhere, and found nothing.
So I’m publishing a scientific paper on it.
The real hidden problem with stablecoins is: inflation — through double spending of the same dollar.
Here is how it works:
The stablecoin issuer gives you a tokenized dollar
The same dollar is simultaneously used by the U.S. government
One dollar.
Two spenders.
Two parallel economies.
Stablecoin holders spend their USDT/USDC:
to pay salaries abroad
to purchase goods
to make cross-border transfers
to settle contracts
Meanwhile, the U.S. government spends the same underlying dollar:
to pay soldiers and federal employees
to buy oil
to fund public services
to finance deficits
This is exactly what Bitcoin was designed to prevent:
the double spending problem.
Stablecoins reintroduce double spending — on a global scale.
And Trump understood this perfectly:
He saves the dollar at the cost of global inflation.
To him, that trade-off is negligible.
Why this generates explosive inflation
People might argue:
“But the collateral dollar remains untouched, it’s not circulating.”
Not true. Stablecoins have very high velocity. They move constantly.
Others say:
“But the Treasury bonds will be repaid later.”
False again.
Governments never repay their debt — they roll it over by issuing new debt. This means:
the stablecoin-side dollar continues circulating
the government-side dollar continues circulating
interest accumulates and must be financed
debt grows exponentially
the total monetary mass behaves as if it were doubled
Even worse: Stablecoin collateral must remain highly liquid by law (MiCA in Europe, Genius Act in the U.S.).
So the banks buy short-term U.S. Treasuries — 3-month, 6-month bills.
They must constantly be rolled over.
And when interest rates suddenly rise, their market value collapses.
We saw this with Silicon Valley Bank and others:
Bonds became unsellable
Banks took 50–80% losses
The government had to intervene
Which required new money creation
Which produced more inflation
This loop is structural, unavoidable, and accelerating.
The hidden inflation impact
According to my initial models:
If stablecoin growth continues at current speed:
they will add 3% to 6% additional inflation on top of existing inflation within a few years.
This is enormous.
It doubles central bank inflation targets.
And this shock comes from a tiny monetary base.
Which means the effect is highly amplified.
Even if in theory one leg of the “double spending” disappears when the debt is repaid, in practice:
Governments never repay debt — they renew it
Stablecoins must remain liquid — so nothing is locked
Short-term bonds are constantly replaced
Collateral always re-enters circulation
The double spending mechanism never ends
Which means the inflation engine is permanent.
A sophisticated new layer added to an already broken system
We already live in a global financial system with massive structural imbalances and unsustainable debt.
Stablecoins do not fix these problems.
They amplify them. They add:
more complexity
more monetary creation
more leverage
more inflation
more systemic fragility
It’s like placing a turbocharger on an engine that is already on the verge of exploding.
Stablecoins are a time bomb — a silent, invisible one — even within the crypto ecosystem itself.
Qui porte la responsabilité de cette inflation causée par les stablecoins?
Pardon, peut-être avant de parler des CBDC, je voudrais terminer sur le problème des stablecoins sur un point qu'on n'a pas évoqué.
Pourquoi la loi crée l'inflation ? Pourquoi on a ce problème sur les stablecoins ? Naturellement, on n'aurait pas eu ce problème.
Pourquoi tu l'as bien expliqué déjà. En général, c'est interdit maintenant par la loi de rémunérer les stablecoins.
Donc partager les gains. Le Tether, elle est bien rémunérée, elle a des gains gigantesques. C'est d'ailleurs pour ça qu'en Europe, ils veulent justement freiner le développement des stablecoins pour cette raison-là d'ailleurs, me semble-t-il.
Le discours officiel de langue, pas de bois, c'est de dire que nous, on a mis un cadre juridique pour permettre une stabilité, une prédictibilité, comme ça le marché va bien.
On sait bien que les lois ont été mises pour freiner le développement des stablecoins pour permettre le lancement des monnaies numériques de banque centrale.
Mais comment on a freiné ? On a interdit deux choses. On a interdit de détenir un montant supérieur à X en stablecoin en Europe, par exemple 100 000 euros. Une transaction ne peut pas dépasser ce montant, par la loi. Et on a dit interdiction de rémunérer la détention de stablecoins.
Donc en gros, l'émetteur des stablecoins est rémunéré, mais celui qui porte le stablecoin n'a pas le droit de partager une partie du gain. Donc en soi, c'est immoral. Alors, il ne faut peut-être pas utiliser le mot immoral de façon légère, mais ce n'est pas éthique. Ce n'est pas juste.
Parce que celui qui a émis cette monnaie, il est gracieusement rémunéré, mais il n'a pas le droit de partager une partie de ce gain avec moi, seulement pour qu'il n'y ait pas un bank run, pour que les gens ne quittent pas le système bancaire et se réfugient tous dans les stablecoins.
Pour la raison que ce serait risqué et instable un stablecoin. On en a vu des stablecoins qui s'effondrent. Mais pourquoi je dis que celui qui est cause de cette inflation, c'est l'État ? C'est parce que c'est l'État qui a interdit la rémunération des stablecoins et c'est l'État qui a imposé que le collatéral doit être investi dans des bons de trésor.
Donc en gros, l'État a dit vous me donnez cet argent du collatéral, pas de problème et vous ne rémunérez pas les gens pour qu'ils ne se fluent pas et quittent pas les banques. Donc j'alerte aussi sur le fait que Mica et le Genius Act sont la cause de l'inflation qui va être produite par les stablecoins. Et là, j'arrête la démo ici.
Non, non, mais écoute, merci pour cette précision. Mais quelque part, c'était aussi dans la continuité de ma question. Parce que il y a forcément une opposition idéologique, politique de l'Europe sur les stablecoins où là, clairement, on a vu que la Banque Centrale et les autorités ont clairement désincité, voire freiné le développement des stablecoins.
Peut-être pour les raisons que tu viens d'évoquer ou des raisons idéologiques et c'est là où on peut se poser la question de
Who Is Responsible for the Inflation Caused by Stablecoins?
Before talking about CBDCs, there’s one crucial point about stablecoins that we haven’t addressed yet:
Why is this inflation problem created by law?
Because naturally, without certain legal constraints, the mechanism I described earlier wouldn’t produce the same inflationary effect.
Today, in most major jurisdictions, it is forbidden to remunerate stablecoin holdings. In other words, the yield generated by the collateral is not shared with the people who actually hold the stablecoins.
Take Tether as an example: the company earns enormous returns on the assets backing USDT. That’s one of the reasons why, in Europe, regulators are keen to slow down the expansion of stablecoins — at least officially, in the name of “stability” and “predictability” for the market.
The public narrative is:
“We’re creating a legal framework to bring clarity and security, so the market can function properly.”
In reality, everyone understands that much of this regulation was designed to contain stablecoins and clear the way for central bank digital currencies.
How did lawmakers slow them down?
By imposing two major constraints:
• First, caps on holdings and transactions: in Europe, for example, you cannot hold or transfer more than a certain amount in stablecoins (e.g. €100,000 per transaction).
• Second, a ban on paying interest on stablecoin balances.
So we end up with a fundamentally skewed system:
• The issuer of the stablecoin earns the yield on the collateral
• The user who holds the stablecoin gets nothing
From an ethical standpoint, that’s highly questionable.
The entity creating this private form of money is generously compensated, but is legally forbidden from sharing any of the return with the people whose capital makes the system possible — just to avoid a bank run from traditional deposits into stablecoins.
The official justification is that stablecoins are “risky and unstable”, and yes, we’ve seen some of them collapse. But that’s not the heart of the issue.
The real point is this:
👉 It is the State that structurally causes this inflationary mechanism.
Why?
Because:
The State forbids remunerating stablecoin holders, concentrating all the yield at the issuer level.
The State forces the collateral to be invested in government debt (Treasury bills, short-term sovereign bonds, etc.).
In other words, governments are effectively saying:
“Give us your collateral, we’ll use it to fund our debt — and you’re not allowed to reward users with the interest it generates, otherwise they’ll flee the banking system.”
That’s why, in my view, frameworks like MiCA in Europe and the Genius Act in the U.S. are not neutral. They are direct drivers of the inflation that will be produced by stablecoins.
This isn’t just a side effect — it’s built into the legal and monetary architecture.
CBDCs and Privacy
There is a widespread fear that central bank digital currencies (CBDCs) will dramatically increase financial surveillance.
But this idea is often misunderstood. In reality, the level of control would be exactly the same as today.
If Bitcoiners — and I consider myself a strong Bitcoiner, even a maximalist — want to criticize CBDCs on the grounds of surveillance, that argument is misplaced.
The real debate is not about CBDCs, but about electronic money in general.
Whether payments are made with cards, bank transfers, or any digital form of money, banks already:
authorize or block transactions
monitor suspicious flows
report to regulators under AML and KYC rules
A digital euro distributed by banks would follow the same authorization logic as current electronic money.
So strictly speaking, CBDCs do not add new surveillance capabilities beyond what already exists.
The European CBDC: catching up, not leading
If we focus specifically on the European Central Bank and the digital euro, the project is primarily about modernization — digitizing cash for the 2025 economy.
It is not “cutting-edge innovation”, but an attempt to update a system that is technologically outdated.
In addition, the ECB openly says it aims to preserve a degree of privacy:
small transactions (e.g., under €50) could be processed offline, without traceability.
This privacy guarantee is not perfect — far from it — but it is more than what many expected from a central bank.
Remember: the ECB is a slow-moving institution with legacy systems.
It does not yet use advanced techniques like zero-knowledge proofs or homomorphic encryption, though it could in the future.
Why Europe’s strategy differs from the U.S. Genius Act
Christine Lagarde’s strategy is fundamentally different from the American approach for one main reason:
Europe has already lost the stablecoin battle.
Euro-stablecoins never gained traction.
Dollar-stablecoins dominate globally, and their growth is exponential.
Worse: privately issued stablecoins carry risks.
Not theoretical risks — real, demonstrated risks.
Take Binance’s stablecoin (BUSD) in October:
it lost its peg and fell to $0.65.
A 35% collapse.
This could have triggered a catastrophic crypto-wide crash similar to FTX.
Market cap dropped by $400 billion during that episode, and real losses reached $19 billion.
Why did the stablecoin depeg?
Not because the issuer was irresponsible, but because regulation forces part of the collateral into instruments that are not always liquid or safe (e.g., certain types of government bonds).
If these assets must suddenly be sold, losses appear — and the peg breaks.
Stablecoins therefore carry a regulatory risk, structurally built into the law.
Where there is never a depeg: central banks
A CBDC issued by a central bank cannot depeg.
It doesn’t rely on bank deposits or liquid government bonds.
It is collateralized directly by central bank money — the most fundamental, risk-free asset in the monetary system.
And if anything goes wrong, the central bank simply guarantees convertibility.
Therefore, when Christine Lagarde says:
“I am not against stablecoins, but I want to issue a European one myself,”
this position is actually legitimate.
She is not wrong to do it.
Whether one supports or criticizes the ECB, issuing a central bank stablecoin is a rational act of monetary sovereignty.
Why Europe refuses to compete with dollar stablecoins
Some might argue that Europe should launch its own euro stablecoin to fight the U.S. on equal footing —
a “stablecoin war”.
But Lagarde’s stance is the opposite:
she wants the ECB to retain control of money creation, not outsource it to private issuers.
Because:
The U.S. now uses stablecoins to reinforce the global dominance of the dollar
Europe cannot win that battle
The euro-stablecoin race is already lost
Issuing a CBDC is the only remaining sovereignty tool
Therefore, even though I have many criticisms of Christine Lagarde — and I will express them later —
on this specific point, she is correct:
A digital euro is a legitimate and necessary instrument of sovereignty, especially now that private dollar stablecoins dominate the global monetary landscape.
The Digital Euro Will Not Be a Currency
Now let me add one more point:
What is the difference between a currency and a stablecoin?
Because a stablecoin is not a currency.
And here is where I will probably shock a few people:
The digital euro is not a currency either.
When Christine Lagarde, the Governor of the Banque de France, or any central banker repeats that “Bitcoin is not a currency,” then by their own definition, the digital euro is not a currency.
This is not my opinion — it is theirs.
To avoid confusion, notice how they no longer use the expression “CBDC.”
Look carefully: “Central Bank Digital Currency” has almost disappeared from their vocabulary.
They now systematically say “digital euro”, because legally and functionally, it is not designed as a currency at all.
Even in official documents, they explicitly state that it is merely a payment instrument, not a new form of money.
And here’s why:
1. A currency must be holdable without limits
With the digital euro, you will not be allowed to hold more than a fixed amount —
€1,000, €3,000, maybe €5,000 at most.
Beyond that? Forbidden.
But a true currency allows you to store as much as you earn. There is no ceiling on holding euros, dollars, or Bitcoin.
2. Merchants will not be allowed to keep digital euros
If a merchant receives a digital euro payment:
He will immediately receive zero digital euros.
The digital euros will be instantly burned, replaced on the spot by commercial bank money (BNP, Société Générale, etc.).
The ECB even gave this an extraordinary name —
the “reverse waterfall” mechanism — thankfully abandoned, but still revealing.
This is not how a currency behaves.
A currency must have:
store-of-value capability
the ability to circulate
the ability to be held at will
The digital euro explicitly removes these three properties.
Therefore, by design — and by confession — it is not a currency.
Why such an odd limitation?
Because the ECB fears a massive outflow of liquidity from commercial banks.
If citizens start saving in digital euros, banks lose deposits.
With fewer deposits, they lose their ability to create credit through fractional reserve banking.
So the ECB openly states:
“We do not want people to hold digital euros.
We only want them to use it for payments.”
This confirms it is not a currency, but merely a payment tool.
So what’s the point of a digital euro if it is not a currency?
Strangely, once more, I find myself defending the central bank.
Europe today has no pan-European payment method.
The French Carte Bancaire does not work in Italy.
Instant payments are clunky and require IBAN gymnastics.
QR code payments lack a unified standard.
SEPA is not real-time nor user-friendly enough.
Visa and Mastercard dominate nearly every cross-border euro payment.
So the digital euro’s real purpose is:
to create a sovereign European payment method,
to break dependence on Visa/Mastercard,
to unify payments across Europe,
and to reduce commission fees paid to U.S. networks.
It is not a blockchain.
It is not interoperable with stablecoins.
It is not a parallel euro.
It is simply a long-overdue European payment network, delivered under the label “digital euro.”
A mountain giving birth to a mouse.
Bitcoin vs. Stablecoins
You advise several entities — which we won’t name — but you are genuinely at the heart of the reactor, and therefore highly legitimate to speak on this topic. And I think your analysis is extremely valuable.
What I take from everything you’ve said so far is that the digital euro is not a currency.
Correct — it isn’t.
Let’s keep that conclusion in mind as we close the CBDC chapter.
(This does not apply to the wholesale digital euro, which would indeed be a form of money — but that is another topic.)
Now, to conclude this podcast, I’d like to highlight what I see as the only debt-free alternative in this entire landscape.
Between:
stablecoins — based on private debt, as we explained,
CBDCs — based on public debt,
Bitcoin introduces a third paradigm:
A monetary asset without debt, without counterparty risk, without promise.
This positions Bitcoin as the only moral and systemic counterweight to today’s debt spiral.
Because ultimately, whether we’re talking about stablecoins or CBDCs, we remain stuck in systems built on expanding debt.
Bitcoin is the “third player” — offering a form of long-term stability.
And in my view, all of this will coexist.
I’m not a utopian maximalist predicting hyper-bitcoinization or the disappearance of fiat money.
I believe:
everything will coexist,
Bitcoin will serve as a refuge asset,
its main utility in Europe and the U.S. will remain store of value,
and its use as a payment method will stay marginal except in certain regions where it is already indispensable.
But Bitcoin’s role as a store of value — already undeniable today — will become even more important tomorrow.
So what’s your reaction? As you said, you consider yourself a Bitcoin maximalist as well, which makes your nuanced position even more interesting.
The Limits of Control — and the Bitcoin Option
I wasn’t trying to defend the digital euro for its own sake.
I simply wanted to bring facts that recalibrate the conversation.
Yes, there are concerns about control — but these concerns already exist in today’s electronic money.
So if we want an alternative to escape this control, we must ask:
Does Bitcoin really allow that escape?
Not always.
But here’s the key:
Bitcoin gives you the option to escape.
With Bitcoin held on centralized exchanges, you face the same degree of surveillance and control.
But with self-custody, running your own node, using your own keys, you regain a substantial degree of monetary freedom.
So, several things come to mind in response to what you said.
The Deutsche Bank Report: Bitcoin Now Follows Gold’s Monetary Trajectory
A recent Deutsche Bank report — published just weeks ago — concluded that:
Bitcoin’s adoption curve
and Bitcoin’s valuation curve
are following the same historical pattern as gold.
And this is not a cosmetic comparison.
The report concludes that central banks will have to start holding Bitcoin on their balance sheets in the coming years.
Not because they want to.
But because it will become an economic necessity.
This is not prophecy — it is macroeconomic calculus.
And indeed, we already see the first signs:
BlackRock
JP Morgan
Strategy (financial association)
the U.S. Strategic Reserve Fund
All of them now treat Bitcoin exactly as digital gold.
Both gold and Bitcoin reached all-time highs in September–October.
Even their reaction to VIX movements — the U.S. volatility index — is now identical.
Correlation does not imply causation.
But it is a fact: Bitcoin behaves like gold.
And second fact:
It is now economically rational for central banks to hold Bitcoin.
Christine Lagarde herself acknowledged recently that this might eventually happen — even if she personally dislikes the idea.
Central bank governors change.
Policies shift as political cycles shift.
If Biden→Trump can lead to a 180° turn in stablecoin policy, nothing prevents a future ECB president from adopting Bitcoin reserves out of necessity.
The U.S. Strategic Bitcoin Reserve: A Quiet Revolution
Let’s clarify:
This reserve was not created by the Federal Reserve.
The Fed does not want Bitcoin.
This was created by the U.S. government, following campaign promises by Trump and RFK Jr., commitments made publicly at Bitcoin conferences.
The Bitcoin lobby helped elect them.
And they delivered.
Trump is not a saint — but he is pragmatic.
As he stated:
“I will not use taxpayer money to buy Bitcoin. That is not the role of a President.”
But he also said:
“I recognize the vital economic interest of building a passive strategic Bitcoin reserve.”
How?
Bitcoin seized by the government remains in reserve and is never sold.
Legal penalties can be paid voluntarily in Bitcoin.
Over time, the Treasury accumulates BTC without spending a dollar of taxpayer money.
This policy is extremely recent — only since May 2025.
Yet the U.S. reserve already holds $25 billion in Bitcoin.
You may think that’s small for the U.S.
But:
They did not buy those 25 billion.
They accumulated ~17–19 billion worth of BTC,
and the value appreciated to 25B.
The unrealized gain (MVRV) is about $7 billion already.
This is not anecdotal.
This is part of a long-term strategic plan:
Stablecoins (Genius Act)
→ protect dollar liquidity and U.S. debt today.
Strategic Bitcoin reserve
→ protect the dollar’s relevance tomorrow.
Trump’s team estimates that if accumulation continues:
100B
500B
1,000B
or more
could be held within a couple of decades.
Because historically, Bitcoin has averaged over 100% annual returns since inception.
Past performance does not predict the future — but it explains the strategy.
The long-term goal?
Use Bitcoin reserves as collateral to borrow at lower cost.
Use Bitcoin appreciation to gradually eliminate U.S. national debt.
Or alternatively, fund a universal American social security system.
The Case for a Strategic Bitcoin Reserve for France
This brings us to a crucial point: there is a genuine strategic rationale for holding a national Bitcoin reserve.
At Valuechain, I have been conducting a study on this exact subject — I can’t yet disclose for whom the work is being done, but the paper is nearly finished.
The question we explore is simple:
What would happen if France created a strategic Bitcoin reserve, using a passive accumulation strategy comparable to the recent American approach?
Let’s imagine — hypothetically for now, perhaps even utopically — that France calls StakingSat, calls Jonathan, and says:
“I want to implement a national DCA plan. Every month, I will buy a small amount of Bitcoin. Please execute it with your low fees.”
The idea is not to use taxpayer money — no new taxes, no extraordinary budget measures.
This point is essential.
A strategic reserve could be built exactly as the United States is doing:
through seized Bitcoin during bankruptcies,
by accepting certain state debts or penalties settled in BTC,
by passively holding these amounts in a Treasury-managed reserve (not the central bank).
This would be handled by the French Treasury (DGT), not the Banque de France.
Now let’s consider a simple scenario:
➡️ France allocates 0.1% to 0.5% of its GDP per year to accumulate Bitcoin.
France’s GDP is enormous — 0.5% is a significant amount in absolute terms, but tiny relative to the national budget.
And again:
this does not require taxpayer funds.
The reserve grows passively, mainly through seizures and voluntary BTC payments.
What does such a passive strategic reserve become over time?
Here are the modeled results:
After five years → more than €20 billion
After ten years → over €500 billion
After twenty-five years → in pessimistic Bitcoin valuation scenarios → over €2,000 billion
For anyone skeptical, these numbers come from conservative models.
We do not assume 100% annual growth as in Bitcoin’s historical average (which would create astronomical figures).
Instead, we use a logarithmic decay curve, where Bitcoin’s annual return starts high and decreases dramatically each year — dropping all the way to 2% per year after 25 years.
Even under these extremely cautious assumptions, the result is the same:
A passive strategic reserve could wipe out the entire French national debt within 25 years.
Think about that.
France’s debt is currently considered unpayable.
Budgets no longer balance.
Interest payments explode year after year.
No government has found a path out of the debt spiral.
And yet, a simple long-term passive Bitcoin strategy —
0.5% of GDP per year, with a steadily declining growth curve —
could eliminate the national debt entirely.
This is the transformative potential of a Bitcoin strategic reserve.
And the advantage goes entirely to the early adopters.
The host concludes by noting:
Michel, I think that’s the perfect way to end this episode. This reminds me of your first appearance on this podcast, where you also put forward several bold proposals. And this is exactly what our channel is about: promoting Bitcoin, yes, but also promoting ideas — new ideas, alternative ideas, ideas worth debating.
Maybe this proposal will even be picked up by candidates in the 2027 French presidential election — who knows?
Surfing Bitcoin will continue covering economics, Bitcoin, and education, and we are delighted to have had you for these two episodes.
Thank you, Michel — and we will certainly have you back soon.
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