Macro Monday – Banks Run, Digital USDs Race Offshore: How do you stop a deposit run? Make sure the lines are long and that everyone leaving the bank gets their money. Eventually, the crowds will dissipate. That’s how it works in the movies at least. But lines are invisible in electronic bank runs, only evident when it’s too late. Investor demand for safety has led to a surge in demand for unleveraged assets whose supply isn’t controlled or cajoled by policy – gold and bitcoin are frenemies in this cycle. Still, the connection between banking and digital asset markets is definite. I need dollars to pay rent and taxes, and those checks clear through the banking system. So, my digital assets need to connect with banks eventually. This banking-crypto connection is strongest in stablecoin. Today, there are more than 100 stablecoin assets totaling $135 billion with the top four accounting for 94%, all tied to the US dollar. Even in US banking runs, the US dollar’s deflating value is the base currency choice. But the ground beneath stablecoin is shifting – Tether’s dominance is on the rise after being shredded for two years. Tether’s share has surged to 60% of the top four stablecoin, up from a low of 45% of last year. The regulatory resistance to crypto assets isn’t supporting their extinction – it is just offshoring the killer application of the ecosystem and the high-quality liquid assets that back it. It’s yet another unintended consequence of well-intended policy. The demand for those digital dollars isn’t going anywhere, just their domicile is. Integrating stablecoin into the US banking system would support the US dollar and digital financial technologies inside of the regulatory mainstream. It’s not too late.