Refactoring Sovereignty
A Thought Experiment. Or Not.
It’s no secret that America and the broader West have a debt problem. Logically, not to mention historically, this should be a death knell to the system. But what if it’s not—or, more accurately—what if it doesn’t have to be? What if . . . there’s actually a plan?
Designed in Washington. Executed in Basel.
One that quarantines the debt problem inside a walled garden of legacy obligations, while building a new, programmable, compliant, AI-monetized empire on top of it.
It's not a solution, as much as a controlled fork of civilization.
Nothing I’m about to say is officially happening. And it might not ever. At least not publicly. This is a sojourn into the minds of those in charge of the most powerful institutions on Earth. I don’t share their beliefs. But if I did, this is what I’d do.
Let’s go down the rabbit hole.
President Trump has made no attempt to hide his disdain for the uniparty or his desire to use his second term in office to transition beyond the post-War order and, in particular, beyond the Bretton Woods Conference—where America last reshaped the global financial system.
His aim is straightforward: to structure the coming century—both in terms of geopolitics and finance—with America firmly at the helm. (And his name on the plan.)
There’s just one problem. America’s broke.
That’s not hyperbole—it’s math. The numbers are staggering:
Total National Debt: $36 trillion (and rising)
Annual Deficit: Over $2 trillion per year (approximately 7% of GDP)
Interest Payments on Debt (FY 2025 Estimate): Approaching $1 trillion annually—more than the U.S. spends on national defense
We’re staring down a debt spiral.
A debt spiral occurs when a borrower—an individual, business, or government—is forced to take on increasing amounts of debt just to service existing obligations. This leads to an unsustainable cycle where debt accumulates faster than income or economic growth. It isn’t just a political talking point; it’s an existential threat to American dominance and global stability. Left unchecked, it will lead to economic stagnation and monetary devaluation.
Oh, and we’ve reached the point where austerity alone won’t solve the problem.
Spending cuts—even in the trillions—can’t fix this. The federal government eliminating entire departments, reducing the workforce in those that remain, and slashing spending across the board still won’t fully close the gap. Even if we touch the third rail of entitlement programs, it’s still not enough. That’s how bad it is.
Why? Historically, federal revenue has averaged roughly 17.5% of GDP, and spending has been slightly over that leading to a 3.5% deficit. Not ideal, but manageable because the US economy has historically grown at a real rate of around 1.8-2% per year, with inflation contributing an additional 2% nominal growth. But recently spending has ballooned to 24-25% of GDP, leading to the aforementioned 7% deficit that’s now impossible to bridge with any one method alone. The national debt is increasing faster than GDP, meaning that even strong growth would only slow, not reverse, the fiscal deterioration.
Economic growth and spending cuts are crucial, but they cannot be the sole strategies to resolve the fiscal crisis. Not if we want to maintain—and have a chance of improving—our way of life.
A strong Treasury matters. Americans have called upon it in times of need to save us—and, by default, the world. It’s a simple reality of today’s global economy that Treasury’s ability to borrow matters—not just for our own stability, but for maintaining global confidence in the dollar.
Weaponized tariffs? Ongoing negotiations? It’s all part of the plan to restore a strong dollar and, ultimately, to create a strong market for our Treasuries.
But that’s not the plan we’re here to discuss, so let’s move along.
Enter the Big Beautiful Bill.
The wild thing about omnibus bills is you can literally put anything in them. And, as Theo Von recently joked with congressman Thomas Massie, to induce you to vote aye, the bill usually contains something akin to “oxygen for Grandmas.”
Who wants to be against Grandma?
The Big Beautiful Bill, or BBB, while omnibus, is also technically a reconciliation bill, which means it is subject to constraint—namely The Byrd Rule (named after former Senator Robert Byrd). The rule blocks “extraneous” provisions, meaning those that don’t directly impact federal spending or revenue. Each provision is subject to parliamentarian review, and, if found noncompliant, can be stripped from the bill unless 60 senators vote to waive the rule.
So, what was the administration’s gem hiding in the BBB?
Let us direct our attention to Section 899, colloquially referred to as “the revenge tax” and, until Friday, June 27th, a key point of contention.
For those not familiar with the provision, here’s a bit of what it entailed:
Suspension of Reagan-era exemption for sovereign holdings of Treasuries
Impose a 20% tax on U.S.-sourced income from Treasuries and other assets
Lower the effective yield for foreign reserve holders by ~100bps
Undermine foreign demand for U.S. debt
Spike long-term yields, tank the dollar, and accelerate global de-dollarization—all at a time when the U.S. needs record debt issuance
The internet is replete with articles and videos of analysts, politicians, and newsletter prophets alike who took the section at face value and outlined the disastrous implications of a direct attack on the very mechanism that allows the U.S. empire to fund itself.
In other words, folks who missed the point.
While president Trump has been known to wield a blunt instrument from time to time, 899 was no such thing. It was targeted. Strategic. Turning capital flows into battlefields—if and when the U.S. deems convenient.
Think of 899 not as a keystone, but as a wedge tucked beneath it—never needing to be pulled. It’s mere placement was enough to make the entire structure shift.
What structure, you ask? The global rails of post-War international finance.
The beauty, of course, is that 899’s removal from the BBB doesn’t matter. Power isn’t always exercised through laws—increasingly, it’s through infrastructure. In other words, the real play here was never just about legislation. It was about power.
Power play accomplished, the U.S. re-assumed its global role of magnanimity.
On June 27th, secretary Bessent issued a long statement on X requesting that Congress drop section 899 from the BBB, citing the OECD Global Tax Deal—in particular, an understanding among G7 countries that OECD Pillar 2 taxes will not apply to U.S. companies and agreement among G7 countries to expand this understanding across the G20 Inclusive Framework. Legitimately, a big deal.
Congress—in the dark as ever and grateful to have one less item that could be used against them in their next election—immediately removed the provision.
Most people won’t give a second thought to 899. And that’s exactly the way the administration likes it. Meanwhile, behind the scenes, in conference rooms and dining rooms across the globe, the real battle for control of digital money rages on.
It’s no coincidence that Donald Trump’s unambiguous power has been on display coinciding with the successful OECD negotiations and removal of 899. America has once again re-emerged on the world stage as the dominant superpower, without question to be taken at her word.
In the wake of Operation Midnight Hammer, the U.S. strike on Iranian nuclear facilities, NATO members were tripping over themselves with praise for the American president. At the NATO summit in The Hague on June 25th, NATO Secretary General Mark Rutte went so far as to call him “daddy”—metaphorically, of course. Not one to disappoint, Trump promptly released a video montage: “Daddy’s Home.”
These days, he’s the man. And the man is a negotiator.
The key to any negotiation is ensuring that whoever sits across the table from you believes you’d actually do what you’re threatening. And Donald Trump has made an art of it. The president isn’t bothered by stories about incompetence by those too naïve to understand his plans. He’s here to accomplish his goals and change the course of history. A little accelerationist financial warfare is nothing—especially, when backed by an actual plan.
One that’s expedited by—and greatly values—external consent, but doesn’t require it to succeed.
In the case of 899, it would look something like this:
Create fear and volatility in foreign Treasury markets
The resulting U.S. bond sell-off weakens the dollar and raises FX tensions
Other central banks then begin competitive easing to protect exports and prevent reserve losses
Meanwhile, with favorable treatment baked into future policy, U.S. institutions begin pivoting to onchain rails (think blockchain-based financial networks)—stablecoins and other tokenized dollar products alongside bitcoin reserves
Foreign capital, now burned by legacy market exposure, ultimately moves onto U.S.-regulated and led onchain rails—ironically, making the U.S. more dominant in centralized financial flows under the guise of “decentralization”
It’s dangerous. It’s brilliant. It’s do-able.
Disrupt global coordination, collapse outdated trust systems, and rebuild monetary credibility on brand new terms.
In other words, burn down the old Bretton Woods-based foreign exchange and debt system just enough to force a transition—and have a new, U.S. dominant system waiting in the wings. Think crypto-as-hedge-against-Treasury-default, but weaponized at the state level.
If one were to ever play these games—to ever contemplate such a bet—there’s one man you’d want in the room. Trained by the best, as a young man he had the insight—and the gall—to suggest taking down the Bank of England. Oh yeah, and it worked. His name is Scott Bessent. And he just happens to be our U.S. Treasury Secretary. How convenient.
The world is quickly approaching a bifurcation point: who will control money in the onchain era?
For years now, two scenarios have been building. One is the Chinese and European model: public-sector central bank digital currencies (CBDCs) and the continued government control of money.
The other is the American model: privately-issued, Treasury-backed stablecoins. Think of it as a parallel rails strategy built on the simultaneous embrace of stablecoin infrastructure, criticism of CBDCs, and Fedwire access talk for crypto platforms.
The upcoming Congressional summer showdown is critical for the American model’s success.
The Senate-passed GENIUS Act:
Defines “payment stablecoins”—digital assets used for payments or settlement, redeemable at par, not securities or commodities
Requires 1:1 backing with cash or safe, liquid assets (e.g., U.S. Treasuries)—no fractional or opaque reserves
Mandates monthly audits, reserve reporting, and BSA/AML compliance (banking and anti-money laundering regulations)
Allows banks and qualified non-bank institutions to issue stablecoins (public companies can only issue with unanimous approval from a Stablecoin Certification Review Committee)
Prohibits issuing interest or yield on stablecoin holdings, aiming to separate them from investment vehicles
Seeks to bring Tether (USDT) into compliance—potentially, forcing de-listing if they don’t meet transparency and backing standards
The CLARITY Act (H.R. 3633):
Clarifies the regulatory roles of the SEC vs the CFTC—treating digital commodities as CFTC’s domain and reserving SEC authority over investment contracts
Exempts payment stablecoins from SEC/CFTC classification (under GENIUS, they have a unique stablecoin regime)
Protects self-custody and decentralized finance, while defining national supervision frameworks for digital assets
Establishes clear rules for trading platforms
Passing GENIUS alone is helpful, as it sets stablecoin rules in stone. But without CLARITY, there is no broader market context (think trading, custody, and platforms). Pairing the two (as the House now seems likely to do) builds a durable, interoperable digital finance stack capable of rivaling offshore systems—requisite if the U.S. wishes to reclaim digital finance leadership, preserve the dollar’s supremacy, and, ultimately, win the global money race.
Failure is not an option.
But before we get ahead of ourselves, let’s take a step back to the European scenario and examine why such a profound tension exists between the two.
While the European model is predicated on CBDCs and centralized government control over money, they recognize that stablecoins will exist and, therefore, must be dealt with. The core issue isn’t regulation itself, but rather control over monetary sovereignty.
Stablecoins, by their nature, should be frictionless, fungible, and universally redeemable. In short, global digital cash. But the EU’s Markets in Crypto-Assets Regulation (MiCA) and the ECB are forcing stablecoins to behave more like ring-fenced e-money products—removing the very essence of stablecoins that makes them so elegant: global liquidity, seamless settlement, and abstraction away from back-end complexity.
As a stablecoin user, you don’t care whether your token came from Circle U.S., Circle France, or Circle Mars. But the ECB does care. A lot.
To understand what the ECB wants (and MiCA enforces), let’s take a simple example of kids playing with piggy banks.
Imagine you have two piggy banks: one in Europe and one in the U.S. They both have tokens that seem to you to be exactly the same—let’s call them “Magic Dollars”—and can be used for anything you want.
The rule is that if you got your Magic Dollar in Europe, you’re supposed to get your money back from the EU piggy bank. And if you got it in America, you should go to the U.S. piggy bank to redeem it.
But remember: the Magic Dollars appear fungible. So the smart kids figured out they could get Magic Dollars in America and run to the EU piggy bank any time they wanted their money back because the EU piggy bank is nicer and faster. More convenient.
And when lots of kids start using the EU piggy bank who were never supposed to, it runs out of money.
That’s the nightmare scenario the ECB is worried about: a stablecoin that’s EU licensed but gets quietly drained by foreign demand.
This issue is handled with a concept called rebalancing. The number of tokens circulating under the EU entity vs the U.S. entity are tracked, and the EU entity must hold matching reserves in EU banks or approved custodians for its issued tokens. If a token issued by the U.S. entity gets redeemed through the EU entity (or vice versa), they need to adjust the internal ledger, move reserve funds between the two entities, or burn the redeemed token and issue a fresh one from the correct entity.
This isn’t a new concept. For decades, payment networks like VISA and SWIFT have treated rebalancing like the basic internal plumbing problem that it is: one asset, many pipes.
But with MiCA and the ECB’s model, it’s more like many assets pretending to be one. And it goes far beyond traditional rebalancing.
Under MiCA, reserves are not fungible and must be strictly segregated. In other words, each token must be fully backed 1:1 by reserves in the same currency and held in banks or other approved institutions within that jurisdiction. Similarly, jurisdictional segregation means that even if the token runs on the same smart contract across jurisdictions, the back-end ledgers, reserves, and redemption rights must be legally and operationally separate.
This tying of everything to the regulatory status of the issuer creates what’s known as compliance fragmentation—in what should be a single pool of liquidity.
Why create such a mess and treat stablecoins like regulated e-money instruments instead of the base-layer digital currencies that they are?
From the EU’s perspective, it has to in order to achieve monetary and jurisdictional sovereignty. A global, fungible private euro (or, worse, dollar) token would take the ECB’s public-sector CBDC out at the knees. Such a token can instantly move across borders and can be held, spent, and saved by EU citizens without ever touching EU banks.
Even if fully backed by regulated reserves, what we’re describing is money without a state. And to the ECB, that’s not just a stablecoin. It’s a Trojan horse for financial disintermediation and dollar dominance.
This is where a bit of history is necessary—and will serve to bring us back to the American model.
Understanding the ECB’s fear of future onchain U.S./dollar hegemony is best done by understanding past off-chain U.S./dollar hegemony—namely, the Eurodollar.
A Eurodollar isn’t a euro. It’s a dollar held in a bank outside the U.S., often in Europe. Though still denominated in USD, it’s outside the jurisdiction of the Fed, U.S. monetary policy, and U.S. regulators. Think of it like the OG offshore stablecoin.
In the aftermath of World War II, the United States implemented the Marshall Plan, officially known as the European Recovery Program, to aid in the reconstruction of war-torn European nations. Launched in 1948, the initiative provided over $13 billion at the time (equivalent to several hundred billion today) in economic assistance to 16 Western European countries. The primary objectives were to rebuild devastated infrastructures, stimulate economic growth, and prevent the spread of communism by fostering political stability through economic recovery.
As part of that effort, the U.S. promoted the reduction of trade barriers and tariffs among European nations to encourage economic integration and cooperation. Here at home, the U.S. similarly lowered its tariffs on imports from these recovering European countries. This policy provided European exporters with better access to American markets, generating much-needed revenue for their economies. The U.S. intentionally facilitated a flow of external goods into America that supported European economic stability and growth, aligning with the broader goals of the Marshall Plan to rejuvenate Europe’s economic landscape and promote the newly-established post-WWII institutions.
As these dollars flooded the world, foreign banks needed dollars to transact, lend, and store value—ideally, all without being subjected to U.S. controls and reporting obligations. So they took in dollar deposits, lent dollars out, and, most critically, created book-entry dollars (think claims on USD outside U.S. soil). By the 1970s, the Eurodollar market was larger than the U.S. domestic banking system.
Enter de facto global dollarization. Sovereign lending, trade finance, corporate debt—all moved into dollar settlement. It wasn’t mandated. It’s simply where the liquidity was.
Just like Circle/USDC and Tether/USDT today.
And this massive Eurodollar liquidity pool created the shadow banking system—systemically important, if mostly unseen by regulators.
Just like today’s DeFi and stablecoins.
The ECB’s seen this movie before. They know all-too-well what happens when a foreign unit of account becomes everyone’s preferred unit of account. When liquidity pools so deep that none can (or want to) avoid it. When sovereign currency becomes a stateless protocol.
And from the U.S. perspective?
Well, it wasn’t all fun and games. This was not a market that America explicitly controlled. But she allowed the Eurodollar system because it ensured global dollar dominance. It wouldn’t have been difficult to crack down on offshore dollar creation, but the U.S. didn’t because the Eurodollar system exported demand for U.S. dollars and U.S. debt—all without forcing the U.S. to absorb the associated liabilities.
So, the Fed wasn’t in charge. Okay.
The dollar was entrenched as the unit of global trade, demand for U.S. Treasuries increased, foreign central banks were kept dependent on America, and U.S. politicians were allowed to run fiscal and trade deficits without the natural consequences.
At some point, formal reserve currency status became symbolic. The power didn’t come from Bretton Woods, it came from Eurodollar-based financial rails: dollar-denominated pricing, deep liquidity, and private infrastructure.
This is why today’s debates about de-dollarization often miss the deeper point: if stablecoins remain dominant onchain and backed by Treasuries, dollar dominance isn’t going anywhere. It’s all about infrastructure, and Europe knows it.
For the U.S., central bank control is optional. Dominance? Not so much.
And that, my friends, brings us to the twist—and to exactly how Donald Trump plans to move beyond Bretton Woods and shape the coming century with America firmly at the helm: in his hands, both the European and the American model ultimately land in the same place—Basel.
Why? Because in Scott Bessent the president has a fiscal architect who’s a step ahead of the Europeans (and the rest of the world). He understands that the goal is dollar dominance and that to ensure it, you need to export our model—not just to other nations, but to the only truly supranational entity: BIS. The Bank of International Settlements. The central bank of central banks.
Founded in 1930 in connection with the Young Plan for implementing German reparations payments for WWI, BIS was set up from day one to sit above both national and international law—a privilege it enjoys to this day. It’s the only truly sovereign supranational financial entity.
It seems an absurdity, and when Montagu Norman, all-powerful governor of the Bank of England, asked Walter Layton, editor of The Economist to draft the secret bank’s founding charter in 1929, Layton “struggled hopelessly” before ultimately admitting defeat. He couldn’t think of a legal way to enshrine its absolute independence from interfering politicians and governments, “Because it’s the right of every democratic government to reserve its freedom of action.”
Apparently, not.
One of the many committees set up to establish the BIS had no such qualms, and eventually drafted the charter. Think absolute control behind a veneer of neutrality. It was signed in 1930, and The Hague Convention guaranteed that BIS would remain legally protected. The bank was born. And the sleepy town of Basel would never be the same.
BIS is a place where national sovereignty is outwardly respected, while internal coordination happens behind closed doors. The bank’s DNA is one of maximum sovereignty for itself via adaptation—shifting and expanding its role quietly but decisively in response to systemic threats. This is how the “Tower of Basel” went from managing German reparations post-WWI to coordinating the Bretton Woods collapse in the 1970s to stabilizing the global financial order post-2008 through Basel frameworks.
Ideological rigidity is an anathema. It’s about survival and supremacy.
And that’s exactly how secretary Bessent intends to sell them on the plan: it’s consistent with their historically pragmatic approach to maintaining absolute control.
BIS is about to get some new members: Circle. Tether.
By turning challengers into partners, BIS resolves the profound threat that private stablecoins pose to central bank monetary control and can seamlessly integrate vast swaths of global transaction data and unmatched financial intelligence—enhancing global monetary governance and entrenching control for the coming era.
CBDCs checked all of the desired control boxes for the central banks. But with the world on fire and citizens everywhere evidencing a willingness to rise up, they’re simply too risky to implement. Better to allow the illusion of victory to the masses. Masses who didn’t understand just how centralized and controlling private stablecoins were on their own, and will never realize that this plan turns them into outright CBDCs.
No, there’s little risk that folks will catch on and zero risk that they could do anything about it if they did. That’s the beauty of BIS.
There won’t be any public debate. That would be too crass. Just a quiet notification, which the news cycle will quickly move past.
This is why in the backroom discussions it’s quietly referred to as a refactoring. Think the application of a developer’s mindset to the political-economic codebase: keep the visible interface familiar while re-writing the underlying logic to consolidate control.
Use the language of reclaiming liberty and independence, while further centralizing entrenched power. This isn’t distributed, individual sovereignty. And it isn’t even national sovereignty. It’s the sovereignty of the coming era. Technocratic and supranational institutions.
A refactoring doesn’t change output. It changes authority, clarity, and the control flow. On the surface, nothing looks different. Your bank account is the same. So are your cards. Your ATM works. Your money is “yours.” Even the stock markets march onward uninterrupted. But underneath, you don’t own what you think you own. The global monetary rails have been compiled anew. And if that means trampling individual freedom under the boot of technocratic control, well, that’s just the price of empire.
It’s monetary regime via refactor. And it’s why refactorings are so seductive—and so dangerous to those not in the know. You wake up in a new world with the same wallpaper.
Of course, the administration’s plan doesn’t solve the debt crisis. That’s systemic. American citizens, led by their politicians, will continue to spend like drunken sailors. But it does solve the Treasury market crisis. And it buys time—for the AI as productivity savior narrative to play out. Or not.
It’s telling that Elon Musk, a titan of tech innovation, doesn’t buy that narrative. But enough others do, and that’s what matters. Productivity is the promised miracle, and AI the god that makes it possible.
The techno-optimist view being sold is that AI isn’t just a cost-saver, it’s an economic accelerator. One that will supercharge GDP. Given enough time, even with systemic debt like ours, the debt-to-GDP ratio (debt relative to economic output) could stabilize, easing Treasury market pressures. The numbers might just pencil out.
Right.
The refactoring doesn’t need to fix the old system. It needs time to bury it alive under a new one, so that the game may continue.
The quiet genius of this plan is its export of a uniquely American sleight of hand: privatized monetary sovereignty—America’s Fed model. And the irony is Trump’s open disdain for it.
But he has bigger goals, and this achieves them.
We’re not abandoning the existing system. We’re institutionalizing it in the one place that sits above nation-states: BIS.
Privatized money. Centralized control. Global dominance.
Europe doesn’t get to win. It gets to survive.