At first glance, both value-added tax (VAT) systems and blockchain-based stablecoins are models of transparency. But a closer look reveals a foundational conflict: one empowers the (extractive capacity of the) state, the other could empower (the extractive capacity of) private actors. This tension is, in my opinion, coming out across many ongoing tensions between the U.S. and the EU, and the very architecture of modern tax and monetary systems.
VAT: More Than a Tax – A Source of Economic Intelligence
Value-added tax is often praised for its efficiency and resistance to evasion. But its true power lies in the informational trace it creates. Every invoice in a VAT system documents a transaction between legal entities, enabling governments to track economic activity in real time.
As more jurisdictions adopt invoice-level VAT reporting – from HMRC’s efforts to Making Tax Digital to Poland’s KSeF – this tax becomes not just a revenue tool, but can also serve as a statistical backbone for national accounts, economic surveillance, and even crisis response. During COVID-19, for instance, the UK’s Treasury leaned on firm-to-firm payment data to inform emergency policies like Eat Out to Help Out. Subsidizing social consumption, and brining the commuting-centered UK economic model back to life was necessary to prevent a sharp adjustment in commercial property values and trigger financial instability.
VAT in the digital age, as envisioned by the European Commission’s VIDA initiative, brings us closer to real-time national accounting, where tax compliance and economic measurement are seamlessly integrated. More accurate and timely national accounts may be seen as a direct threat to the trillion dollar business around information intermediation, which easily can account for almost one third of the S&P market capitalisation. As such, digital and publicly accountable transaction level data may be perceived as a major threat to economic models that revolve around financialisation. It is this tension that I feel is playing out in the geopolitical sphere.
Enter Stablecoins: Programmable Money with Different Priorities
Stablecoins – crypto tokens pegged to fiat currencies, typically the US dollar – run on decentralized ledger technology (DLT) and promise near-instant global settlement. But they can also bypass traditional tax infrastructure. Unlike VAT-linked transactions, stablecoin transfers are pseudonymous; they may lack embedded invoice metadata, and presently still exist outside national reporting systems.
This isn’t a bug. It’s a feature – one that appeals strongly to advocates of limited government. As the Bank for International Settlements warned, stablecoins may pose systemic risks if adopted at scale without regulatory safeguards. In the end, as I argued elsewhere, ultimately, the fundamental challenge and question is: what are the informational boundaries of the state and conversely, where do the informational boundaries of the firm start.
The Crux: Who Controls Transparency?
Here’s the paradox: VAT could enable transparency for the state; stablecoins enable traceability for private actors. The former builds fiscal capacity; the latter builds programmable privacy and selectivity.
This explains a core contradiction in American political rhetoric. Many U.S. conservatives, especially in the orbit of Donald Trump, fiercely oppose VAT, viewing it as a step toward bureaucratic overreach. Yet they embrace stablecoins, which rely on similar traceability mechanics but can exclude the state and maintain a role for information intermediaries (an area that the US in particular has significantly invested in).
What we’re seeing is not opposition to traceability per se—but opposition to state-enabled traceability. The merits of the former over the latter are subject to debate. The mere possibility of running a trace through the transactions in an economy can facilitate a shift towards much lower transaction costs and ultimately, (legal) norm compliant behavior. In between countries, fora like the European Union, the OECD, the United Nations or even new initiatives such as the Digital Cooperation Organization (DCO), may facilitate data enabled diplomacy that facilitates trusted sharing of knowledge without sharing the underlying sensitive data. What is more: countries could audit each others systems, building up trust, by sending transactions that serve as data traces.
Stablecoins and the Quiet Rewiring of U.S. Dollar Power
There’s another reason Trump-aligned actors support stablecoins: they quietly prop up U.S. fiscal power. Major stablecoin issuers like Circle (USDC) and Tether (USDT) invest the reserves backing their tokens in short-term U.S. Treasuries. This creates structural demand for U.S. debt, even as traditional foreign buyers (China, Saudi Arabia) diversify away. In particular at a time when the US is doing its level best to erode its own soft power, which, together with control of (digital) identity may be key to supporting its informational role. So what we are seeing may be a stealthy form of financial nationalism and fiscal repression: privatizing dollar dominance while outsourcing its architecture to crypto platforms.
As the Financial Times recently noted, this tech-driven, short-duration support system is becoming a shadow infrastructure for Treasury funding—dollar hegemony by other means. It is for this reason that U.S. Secretary of the Treasury Bessent see U.S. dollar dominance as not just a feature of the past but something that may long project into the future.
The U.S.–EU Divide: Ideology Meets Infrastructure
The EU’s digital VAT reforms rest on a belief in state-led infrastructure and shared economic rules. The U.S. model, increasingly, is one of privatized rails governed by tech giants and an alleged market logic. This extends beyond payments: as Forbes outlines, digital identity – essential to linking financial flows to people – is largely controlled by U.S. platforms like Google and Apple.
Deep control of the plumbing of the global system requires control over digital identity. And the U.S. is well positioned in this regard due to the nationally fragmented approaches to roll out digital identity, which, in Europe, may be driven by the fact that elements of European statecraft may rely on an absence of a European fiscal capacity.
The EU imagines digital public infrastructure; the U.S. builds platform empires that resemble public utilities, but answer to shareholders, not voters.
What’s at Stake
If stablecoins go mainstream without invoice-level integration through meta-data, VAT systems – especially in the Global South – may face growing revenue leaks. Digitisation and the shift from offline to online commerce was already a major enabler of structural VAT evasion, with direct sales falling under the de-minimis exemption from China to Europe and the US being a feature. Yet, what is worse, governments could lose ability to efficiently audit the fundamental flows that define their economies.
Yet if regulators act wisely, stablecoins could evolve into infrastructure-neutral carriers of tax metadata, enabling automation of VAT compliance and even real-time fiscal governance. Of course, this will blur the division of monetary and fiscal policy increasingly. The traditional division of labor here may well have been for monetary policy to do the dirty work that fiscal policy could not get itself around to doing for political reasons.
The revolution of artificial intellgience can technically enable this. Yet, concerns abound that many licensed services occupations may throw up stiff opposition, as the bulk of their revenues revolve around creating the digital information layer around economic activity. The end result could well be that nationalism prevails, with deeper integration in the (digital) services domain, being sacrificed to appease domestic political audiences that often have outsized political representation. The stakes are geopolitical. The growing divide between open financial systems and national enforcement regimes will define the next phase of globalization.
I argue that the classical trilemma of the global economy (you can only have two out of the three: sovereignty, democracy and economic integration) that was popularized by Dani Rodrik, in a digitally globalized world, which renders the imposition of capital controls (or the full on exclusion of a node) through a switch of a button, can allow a Globalisation 2.0 to emerge, in which the trilemma will be much less pronounced.
The fight over traceability isn’t just about tax or crypto — it’s about who gets to see, score, and shape the economy. And what type of infrastructure we want underneath it: public, with privacy protection, and shared stewardship that fosters accountability or, private, with “privacy” supporting information rentierism and sharp market concentration.
The jury is out.