Abstract Do private stablecoins expand or erode sovereign fiscal capacity? We develop a continuous-time general equilibrium model in which global investors demand dollar-denominated safe assets for liquidity services and stablecoins partially substitute for Treasury bills. Two results follow. First, stablecoin supply expands the sovereign's fiscal space in proportion to its liquidity gap relative to public debt — a digital exorbitant privilege. Second, as stablecoin efficiency improves toward perfect substitutability, this fiscal benefit vanishes entirely: the Efficiency Paradox. Whether driven by market forces or regulatory design, any improvement in stablecoin efficiency imposes a fiscal cost proportional to the outstanding stock.