Unholy Trinity: Shadow Banks, AI Stocks, and Stablecoins

Systemic propagation in an age of unregulated finance

Further cracks in the West’s economic foundations are becoming visible — an AI stock bubble, an unregulated shadow banking system, and the risk of a run on stablecoins.

All are connected, and the failure of any one could trigger a critical cascade that crashes the economy. Yet there is little objective discussion in the mainstream media.

Stablecoins are an essential intermediary — part of the on and off-ramp of the crypto economy, alongside banks and exchanges — for buying and selling cryptocurrencies. They are digital units promised to be worth one dollar, backed by a basket of assets.

Their stability depends entirely on what’s in that basket. And if demand for stablecoins surges, so does demand for US Treasuries. The system’s strength — or weakness — will be revealed when the reverse is tested.

Washington’s new GENIUS Act enables issuers to back stablecoins with a wider — and far riskier — mix of assets. That looks like flexibility, but it’s building a house on sand. When confidence s…