America's Supremacy Rides on Tokenization

Tokenization is here, and there's no denying it's coming.

But why should you even care?

So that financial institutions can operate more efficiently? So they can move money faster and cheaper?

No.

That's not the real story.

The real story is something a lot larger than CFOs or executives in this space will care to admit because they're not paid to know the bigger reason this is happening.

And that reason has everything to do with a capital war playing out between China and the United States. Tokenization is America's weapon. If it doesn't succeed, we're talking about the U.S. dollar being dethroned as the global reserve asset, and the U.S. dwindling as the economic and military superpower.

Right now, China and the U.S. are in an economic war over who will be supreme in the global economy. China is loaning out massive amounts of money to developing countries to build infrastructure (loans they know those countries will default on) so that China can take control of key ports and infrastructure around the world.

Even in a developed country like New Zealand, where I'm writing this, most of our export income comes from China. So if push came to shove, we'd be in a difficult spot choosing who our alliances are with.

So on one end, you have China building its own circle of economic influence, while the U.S. circle has been shrinking.

But America has one weapon up its sleeve for maintaining economic supremacy over China: the U.S. dollar. Even as America's share of global GDP has dropped over the last 50 years, every major commodity and asset still tends to be denominated in dollars.

Even that has faced setbacks, though, with China increasingly selling U.S. treasuries and American-exposed assets and using the proceeds to buy gold.

So on one end, the U.S. needs treasuries to continue being the reserve asset. On the other, China is backing its currency more with gold.

The only path forward for the U.S. is to keep the treasury as the reserve asset because it doesn't want a landscape with two de facto reserve assets and fragmentation.

And the only way to achieve that is to make the world continue to buy U.S. treasuries.

So what if the U.S. dominates the next generation of financial technology, tokenization, and makes the requirement of using that technology that every cash transaction, under the hood, is actually U.S. treasuries?

Because that's exactly what's happening.

The GENIUS Act mandates that this new form of digital dollar holds U.S. treasuries, and the only way to use this new financial technology is with those digital dollars.

In other words: everyone in the world, without knowing it, becomes both a buyer and a holder of U.S. treasuries every time they hold cash or sell an asset.

And if this technology becomes so integrated that swapping or reverting back is untenable, then the price of admission to unlock all those efficiencies is to keep supporting the dollar as the reserve asset.

So the stakes for tokenization are huge.

This is the strategy America could be employing to win the capital war with China and each company developing this technology to sell to the rest of the world is a soldier in that strategy.

So my plan is pretty simple.

Buy the soldiers I know the U.S. will need to win the war.