Dire Straits: Money for Nothing and Barrels in Yuan…

Good Morning & Happy Friday. Markets ended the week in a far different mood than the one many investors feared just days earlier. US equities staged a strong rebound, with the S&P 500 rising 2.63% week over week and the Nasdaq up 1.86%, while the 10 year Treasury yield eased to 4.30%. Gold climbed 5.44%, a reminder that even as risk appetite returned, investors are still hedging against a world shaped by geopolitical tension and macro uncertainty. In crypto, the picture was more mixed. Bitcoin slipped 2.83% to $66,971 and Ethereum edged down 0.39% to $2,061, showing that digital assets are still balancing long term optimism with short term caution. This week’s issue looks at a market that is being pulled in two directions at once. On one side, conflict in the Middle East and renewed attention on oil flows through the Strait of Hormuz are raising deeper questions about energy markets, sanctions, and whether stress at the margins could accelerate the use of yuan and stablecoins in global settlement. On the other, crypto continues to move closer to the financial mainstream. Coinbase’s conditional approval to operate as a trust bank points to a future where major crypto firms are not just trading venues, but part of the regulated infrastructure for payments, custody, and settlement. Enjoy. Coinbase has received conditional approval from the U.S. Office of the Comptroller of the Currency (OCC) to operate as a trust bank. If finalized, the charter would allow Coinbase to operate as a federally supervised trust bank, expanding beyond custody into payment infrastructure without becoming a traditional commercial bank. That distinction matters. Coinbase has made clear it does not plan to take retail deposits or engage in fractional reserve banking. Instead, the trust structure would give it greater legal authority, stronger regulatory credibility, and more direct access to the plumbing needed to move, hold, and settle money. In practice, that could make it easier for Coinbase to build payment products that compete more directly with firms like PayPal and Block, while deepening its push to make USDC a more widely used payment rail. The broader significance is regulatory. A federal charter would allow Coinbase to operate under one national framework rather than navigating a patchwork of state by state rules. For a company focused on stablecoins, merchant checkout, and crypto payments, that is a meaningful advantage. The move suggests that U.S. regulators may be becoming more open to crypto firms building core financial infrastructure at home rather than forcing innovation offshore. Since February 28, when the United States and Israel began their bombing campaign in Iran, the price of oil and its impact on the global economy have become a daily focus. Crude has surged, governments have scrambled to respond, and the Strait of Hormuz has reemerged as one of the world’s most important pressure points. To understand the geopolitics of oil today, it helps to go back to the history of the petrodollar. For decades, oil’s place in the global financial system has rested on a simple foundation: it is priced in U.S. dollars. That convention emerged out of the 1970s energy shocks and the broader U.S.-Saudi relationship that followed, often described as the backbone of the petrodollar system. The arrangement was never just about invoicing crude in dollars. It also helped channel oil-export revenues back into dollar assets, including U.S. government debt, reinforcing both the dollar’s reserve status and America’s ability to finance large deficits at relatively favorable terms. Analysts still debate the exact legal and diplomatic contours of the original understanding, but the broader structure of dollar-priced oil and petrodollar recycling is well established. The logic made enormous sense at the time. Even after the United States abandoned the gold standard, the dollar retained an anchor because the world still needed it to buy energy. If every major economy had to hold dollars in order to buy oil, demand for the currency remained structurally strong. The fact that many of those oil-export revenues were then recycled into U.S. Treasuries only deepened the system. Oil helped support the dollar, and the dollar helped support U.S. fiscal flexibility. But the global oil map has changed. The Strait of Hormuz still matters enormously, with nearly 20 million barrels per day moving through it in 2025, or about one fifth of global oil trade. Yet the main customers for those barrels are no longer centered in the West. They are increasingly in Asia. China, India, Japan, and South Korea are among the economies most exposed to disruption in Gulf energy flows, while the United States, now a far larger producer than it was in the 1970s, is far less dependent on Middle Eastern crude than it once was. In other words, the old security and currency architecture remains in place even though the underlying trade flows have shifted east. That raises an obvious question. If the barrels are increasingly going to Asia, why are they still priced in dollars? The dollar still dominates trade finance, shipping insurance, commodity hedging, and benchmark pricing. It remains the easiest currency in which to structure large cross-border energy transactions. But ease and habit are not the same thing as inevitability. When geopolitical stress disrupts the traditional system, alternatives begin to look more attractive. That is exactly what may be happening now. Recent reporting suggests that Hormuz is operating far below normal levels. One report cited roughly 13 oil tankers carrying about 14 million barrels over the past seven days, which works out to about two oil tankers per day and an average cargo of just over 1 million barrels per tanker. At the same time, operators seeking safe passage are reportedly facing tolls that begin at around $1 per barrel. On that math, the owner of a tanker carrying 1 million barrels could be paying roughly $1 million simply to get through the strait. The striking part is not only the toll, but the currency. According to the reporting, these payments are being requested in yuan or stablecoins rather than in U.S. dollars. That makes immediate sense. If China is the natural buyer of much of the oil still moving through the region, yuan is a logical settlement currency. Stablecoins, meanwhile, offer a fast and flexible way to move funds outside the traditional banking channels where dollar clearing and sanctions enforcement are strongest. This matters because the United States has long used the dollar system as a geopolitical tool. Sanctions are powerful precisely because so much trade still touches the dollar at some stage. If a transaction clears through dollar-linked institutions, it becomes vulnerable to American legal reach. That has made sanctions one of Washington’s most effective instruments of pressure, but it has also encouraged countries outside the U.S. orbit to build alternatives. For Iran, that impulse is obvious. For China and some BRICS countries, the lesson is broader: dependence on the dollar creates strategic vulnerability. None of this means the petrodollar is about to disappear. The mainstream oil market is still overwhelmingly dollar-based, and the infrastructure supporting that system remains deep and difficult to replace. But Hormuz may be showing us something important at the margins. When the dollar-based order becomes politically unavailable, legally dangerous, or operationally inconvenient, trade does not simply stop. It looks for another rail. That is why this episode matters beyond the immediate war. We do not see this as proof that oil is abandoning the dollar. It is evidence that geopolitical conflict accelerates experimentation with non-dollar settlement. Yuan and stablecoins are not yet replacing the global system, but they are increasingly becoming the tools used when the global system cannot be trusted. The petrodollar may still define the ce…