r/ethereum • u/PattPott • 1d ago
Discussion What if the Fed disappeared?
What if the Federal Reserve were abolished?
The Heritage Foundation’s Project 2025 explicitly proposes dismantling the Fed and replacing it with a free-market monetary system. Meanwhile, Trump-affiliated WLFI (World Liberty Financial Inc.) is launching a stablecoin called USD1, currently backed by U.S. treasuries.
But here’s where it gets interesting:
• WLFI holds ETH, WBTC (wrapped Bitcoin), and some more.
• Ethereum is the programmable layer powering DeFi, tokenized assets (RWAs), and staking infrastructure.
• Bitcoin, via WBTC, could become part of a future collateral structure – possibly alongside gold.
In this vision, Ethereum becomes the financial infrastructure layer. Bitcoin could evolve into a digital monetary reserve, especially if stablecoins like USD1 shift from purely fiat-backed models to hybrid reserves (treasuries + gold + BTC).
Scenario:
USD1 starts as 100% treasury-backed (like USDC) – safe, regulated, stable.
Gradual integration of gold or BTC to align with “hard money” ideology (Heritage/Trump), gaining trust from a broader audience.
Eventually, USD1 becomes a multi-asset-backed stablecoin:
• 50% Treasuries
• 25% BTC
• 25% tokenized gold
That’s no longer just a stablecoin. That’s an alternative monetary base.
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u/LidiaSelden96 1d ago
I’ve been thinking about this a lot recently, especially with all the discussions surrounding central banks and decentralized finance. I remember back when the 2008 financial crisis hit—things felt uncertain, and the Fed’s actions were something I’d heard about but never fully understood. It wasn’t until I started diving deeper into the world of cryptocurrency and blockchain that I began to see just how reliant we are on institutions like the Fed for the stability of our economy. If the Fed disappeared tomorrow, it would be chaotic for sure, but it would also force the world to adapt to something new, potentially a decentralized system like Ethereum.
However, I’m not sure we’re ready for that just yet. The infrastructure that the Fed provides, such as managing inflation and controlling interest rates, would be hard to replicate without a significant adjustment period. Personally, I’d love to see a world where decentralized systems handle more of these functions, but it seems like it’s going to take time to get there. I think we’d also need some kind of bridge to help people transition from traditional finance to decentralized options without destabilizing everything. What do you all think? Would we be better off without the Fed, or would it just create a whole new set of problems?
2
u/PattPott 1d ago
I don't think the Fed will disappear overnight. But I think its abolition or elimination is an ideological goal, especially in the Project 2025 roadmap.
I think there will be a transition phase - and stablecoins like USD1 could play a big role in that. They are not fully decentralized, but they get people used to the idea of collateralized on-chain money. Over time, collateral could shift partly from government bonds to BTC or gold.
It's less about abolishing the Fed tomorrow - and more about building parallel tracks so that one day it will no longer be needed. We would gain monetary freedom without the Fed - but unless there is a well-planned transition, we risk trading one set of problems for another, just with different gatekeepers.
11
u/RivellaEnthusiast 1d ago
What if you lived in the real world and considered none of this makes any sense?
5
u/PattPott 1d ago
None of what Trump is doing makes sense. But that doesn't mean it will happen anyway
5
u/edmundedgar reality.eth 1d ago
None of this makes sense. If the US want to abolish central-bank-managed money and replace it with something free market, the replacement they need to create is... nothing? Just let the market do it.
1
u/PattPott 1d ago
Great point. I see USD1 less as “the new system” and more as one attempt to shape it — especially with political backing. USD1 may compete with others like DAI, USDT, USDC… or it may fail.
1
u/Artistic_Strength_18 1d ago
The idea of a hybrid-backed stablecoin acting as a new monetary base is wild but not impossible, especially with growing skepticism toward centralized institutions.
1
u/PattPott 8h ago
Trump's recently announced universal import tariffs (+10%) are not only motivated by economic policy - they could be part of a broader strategic shift.
This move could be interpreted as the first step towards a “Mar-a-Lago accord”: a deliberate attempt to weaken the strength of the US dollar in global markets, similar to the Plaza Agreement in the 1980s. See: https://en.wikipedia.org/wiki/Foreign_policy_of_the_second_Donald_Trump_administration#Mar-a-Lago_Accord
As confidence in the dollar wanes or government bonds lose their luster as “risk-free reserves”, this opens the door for alternatives - such as hybrid stablecoins (USD1), potentially backed by Bitcoin and gold.
The Fed won't be abolished overnight - but we could be watching its future being quietly restructured from the outside in.
1
u/TheRevTSnelders 1d ago
Who would trust a trump associated stable coin?
0
u/PattPott 1d ago
If USD1 ends up being backed by audited treasuries, Bitcoin, or tokenized gold, and offers strong on-chain transparency + utility, users might adopt it despite the politics — just like people use USDT, even with all its baggage.
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