Arthur Hayes’ “Buffalo Bill”: Stablecoins to Fund US Debt & Transform Global Money

In a provocative new essay titled “Buffalo Bill,” Arthur Hayes, the former CEO of crypto exchange BitMEX, postulates a radical transformation of the global monetary order orchestrated by the United States Treasury. Hayes outlines a strategic blueprint, purportedly conceived by Treasury Secretary Scott Bessent, to harness the burgeoning ecosystem of dollar-denominated stablecoins. This initiative, as Hayes describes it, seeks to consolidate global savings, particularly from the vast eurodollar market and the developing nations of the “Global South,” into US Treasury instruments, thereby securing sustainable demand for American government debt and fundamentally reshaping the mechanisms of U.S. financial power.

• Arthur Hayes proposes a US Treasury-led re-engineering of the international dollar system.
• The strategy aims to consolidate global dollar savings, including the eurodollar market and funds from the “Global South.”
• Dollar-denominated stablecoins are central to this plan, serving as a conduit for these funds.
• The primary objective is to secure stable and sustainable demand for U.S. government debt.
• This initiative seeks to fundamentally reshape the mechanisms of U.S. financial power and global monetary order.

The “Buffalo Bill” Thesis: Re-engineering Global Finance

Hayes employs the “Buffalo Bill” moniker to underscore a profound re-engineering of the international dollar system, drawing an analogy to the fictional character’s transformative ambitions. Historically, the “Pax Americana” has relied on financial dominance and debt, with the dollar serving as the world’s primary reserve currency. Past Treasury Secretaries navigated this landscape, contributing to the rise of the eurodollar system—a substantial offshore market for U.S. dollars largely outside direct American regulatory oversight. This opaque market, estimated at $10-13 trillion, emerged to bypass currency controls and sanctions while facilitating international trade, but its fluctuations have often triggered financial crises necessitating U.S. intervention.

The Eurodollar Conundrum and the Trend of De-Dollarization

For Treasury Secretary Bessent, this eurodollar structure presents two primary challenges: its unknown true scale and its failure to consistently channel funds into U.S. government bonds. Simultaneously, the global financial landscape has been undergoing a quiet process of de-dollarization since the 2008 financial crisis. Post-crisis quantitative easing programs, which prioritized propping up financial institutions over allowing market corrections, eroded trust in the dollar. This erosion is evidenced by a steady increase in gold’s share of international reserves and a significant decline in the gold-denominated value of long-term U.S. government bonds since 2009. President Donald Trump’s administration, committed to stimulating the economy through tariffs while managing debt obligations, requires stable and robust demand for U.S. debt.

Stablecoins as the New Monetary Vehicle

With traditional central banks potentially reluctant to reinvest heavily in U.S. bonds, Hayes argues that the Treasury sees a novel market in the residents of the “Global South.” For many in these regions, the U.S. dollar offers a crucial hedge against rampant local inflation and currency devaluation—for example, the Argentine peso’s precipitous 97% decline against the dollar over seven years. While local regulators often restrict access to foreign assets, these populations are eager to acquire U.S. government bonds, even with low yields, simply to preserve wealth.

This demographic, Hayes contends, forms the core target for a new strategy centered on dollar-pegged stablecoins. The U.S. actively supports “acceptable” stablecoin issuers—those registered domestically with transparent structures—as a mechanism to absorb both eurodollar liquidity and retail deposits from financially underserved regions. Functionally, such a stablecoin issuer resembles a specialized bank: it accepts dollar deposits and invests them exclusively in short-term, low-risk U.S. Treasury bills (T-bills). This model, exemplified by Tether USD (USDT), allows issuers to profit from the interest rate differential between the stablecoin’s zero yield and the T-bills’ yield, which tracks the Federal Reserve’s policy rate.

Re-routing Eurodollars and Empowering the Global South

The implications for the eurodollar system are profound. Historically, the Federal Reserve and Treasury have provided informal backstops to offshore banks, bolstering confidence in eurodollar deposits. However, Hayes suggests this implicit guarantee could be strategically withdrawn or weakened under the Trump administration, especially if political leverage is sought, such as with Europe. Should these assurances vanish, a significant portion of the estimated $10-13 trillion in eurodollar deposits could migrate to U.S.-backed stablecoins like USDT, which place their reserves in federally protected U.S. banks or T-bills—assets considered virtually nominal-risk free. Such a shift would channel trillions directly into U.S. Treasury bills, providing the Treasury Secretary unprecedented control over short-term yields and potentially diminishing the Federal Reserve’s traditional influence over this segment of the market.

The strategy extends to the “Global South,” where American technology giants like Meta (via WhatsApp, Instagram, and Facebook) and X (formerly Twitter) could play a pivotal role. By integrating crypto wallets directly into these widely adopted platforms, users could seamlessly send, receive, and utilize “acceptable” stablecoins. This bypasses traditional banking infrastructure, offering a more efficient and cost-effective alternative to conventional remittances and currency conversions, particularly in regions where local financial systems are restrictive or inefficient. Hayes posits that the Trump administration would actively support and shield these U.S. tech companies from any restrictive legislation imposed by foreign governments, employing trade tariffs or sanctions against national elites as deterrents. The potential inflow of retail deposits from BRICS nations (excluding China, where Western social media is restricted) alone could reach approximately $4 trillion.

Combining the potential liquidation of the eurodollar system and the inflows from the “Global South” and Europe, Hayes estimates a staggering $34 trillion in capital could eventually be channeled into digital dollars. While not all this capital would convert to stablecoins, the sheer scale of the market shift would be monumental. This influx of liquidity is then poised to become a critical bridge to decentralized finance (DeFi), invigorating an ecosystem often limited by capital accessibility and regulatory uncertainty.

Bridging to Decentralized Finance (DeFi)

DeFi’s Role in the New Financial Paradigm

This massive infusion of stablecoin liquidity would significantly enhance the utility and adoption of DeFi protocols. Issuers like Tether would be incentivized to share a portion of their interest margin with users through staking programs and partnerships with crypto exchanges, creating opportunities for passive income on stablecoin holdings.

• Payments and Spending (Ether.fi Cash): Platforms like Ether.fi Cash could offer Visa debit cards directly linked to stablecoin balances, alongside credit facilities. This innovation provides millions in the “Global South” with direct access to dollar-denominated payments, independent of their physical location, effectively replicating traditional banking services on the blockchain.
• Yield Generation (Ethena): For users seeking higher returns, protocols like Ethena offer delta-neutral stablecoin strategies that leverage derivative markets, providing yields potentially exceeding Federal Reserve rates. Ethena’s USDe, for instance, has demonstrated rapid growth by capturing a portion of derivative market funding rates, distributing significant returns to token holders after platform fees.
• Trading and Speculation (Hyperliquid): In an environment where inflation compels individuals to become active participants in markets, decentralized exchanges (DEXs) like Hyperliquid are expected to become primary venues for trading. Hayes projects Hyperliquid could capture a significant share of the global derivatives trading volume, driven by the expanding stablecoin market.
• Lending to Businesses (Codex): Stablecoin-native blockchains like Codex are emerging to serve small and medium-sized enterprises (SMEs) globally. These platforms enable businesses to accept digital dollar payments, automate accounting, and even access credit based on their on-chain activity, bridging the gap between blockchain liquidity and real-world commercial needs.

Implications and Future Outlook

Looking ahead to 2028, the projected end of the current presidential term, Hayes anticipates that regardless of the political party in power, the need for cheap funding to address budget deficits and growing debt will ensure the continued embrace of stablecoins. While initial political uncertainty might trigger market volatility, the underlying structural shift towards stablecoin-backed debt financing is likely to persist. Hayes concludes that this represents a rare, generational transformation of global monetary architecture, creating opportunities unparalleled in modern financial history. He projects the volume of dollar stablecoins in circulation could reach at least $10 trillion by 2028, driven by the escalating need for deficit financing.