The dominant narrative today claims the U.S. dollar is under threat from rivals such as the euro, the Chinese yuan, or central bank digital currencies. Yet another powerful parallel trend is quietly underway. Global demand for digital dollars issued as stablecoins is expanding fast. These tokens are...
The dominant narrative today claims the U.S. dollar is under threat from rivals such as the euro, the Chinese yuan, or central bank digital currencies. Yet another powerful parallel trend is quietly underway. Global demand for digital dollars issued as stablecoins is expanding fast. These tokens are creating new pathways for ordinary users to hold, transfer, and spend in USD without needing a U.S. bank account. Instead of undermining the dollar the digital dollar may entrench its dominance even further.
USD has lost ground against most major global currencies so far in 2025, for example reaching a low of 0.73 against Sterling in July 2025. Predictions for GBP/USD by SendAbroad suggest that this trend could continue, putting US hegemony under scrutiny.
Stablecoins as the dollar’s digital trojan horseStablecoins are cryptocurrencies pegged to a reference asset, often the U.S. dollar. As of mid‑2025 more than 99 percent of all stablecoins in circulation are dollar‑denominated and the total market now exceeds USD 230 billion. In 2024 alone stablecoin transactions topped $27.6 trillion, surpassing volume processed by Visa and Mastercard combined.
Tether (USDT) and USD Coin (USDC) dominate the field. Tether alone has more than $114–118 billion in market capitalisation and over 350 million users globally. USDC held roughly $41 billion in reserves as of late 2024 and is widely used on Ethereum and other blockchains including Solana and Polygon. These tokens are turning into a global digital dollar infrastructure without need for traditional banks or formal accounts.
Fintech wallets and spending in USDFintech platforms and payment apps now allow users worldwide to hold and spend USD or USD‑pegged stablecoins directly. Corporations such as Visa and merchants on Shopify and Worldpay have supported USDC settlement pilots via blockchain rails. Visa’s crypto lead recently noted that stablecoins are especially transformative in emerging markets – not necessarily within the U.S. consumer payments system.
Consumers in high‑inflation or unstable local currency environments increasingly use USD‑backed stablecoins for savings and ecommerce. In effect people earn local currency but store value in digital dollars. This is informal dollarisation amplified across digital wallets.
The decline of local currency utilityIn countries such as Argentina, Nigeria, Lebanon and Turkey, traditional local currencies have lost public trust due to inflation and currency devaluation. Dollar pegged stablecoins reduce friction for users converting into USD and make it easier to spend it across global platforms. A recent Economist letter argued that stablecoin adoption could accelerate informal dollarisation, limiting governments’ ability to use monetary tools independently.
This represents a profound shift. As local currency use declines those economies effectively operate in USD even without legal dollar adoption. Stablecoins make that shift faster and more seamless.
U.S. regulatory moves that strengthen dollar dominanceIn mid‑2025 U.S. legislation advanced two bills aimed at creating a federal consumer‑payment stablecoin framework. The STABLE Act and the GENIUS Act would require licensed issuers to fully back tokens with high‑quality liquid assets such as Treasury bills and to undergo regular audits.
The GENIUS Act sets the first standalone legislation for dollar‑pegged stablecoins. It exempts stablecoins from being treated as securities or bank liabilities while ensuring anti‑money laundering compliance. The effect may be to legitimise and scale stablecoin use globally reinforcing dollar liquidity and demand for U.S. Treasury debt. Some analysts see this as a form of dollar‑stablecoin mercantilism in effect exporting the currency through private channels.
The European Central Bank has raised concerns that U.S. dollar stablecoins could erode euro area monetary autonomy by siphoning off deposits and weakening control over interest rates.
Stablecoins and U.S. treasury demandAcademic research shows that stablecoin issuers are major buyers of U.S. Treasurys. Tether’s holdings alone represent over 1.6 percent of outstanding Treasury bills, enough to lower yields noticeably and act as a sizable non‑state actor in the debt market. Another study proposes a hybrid monetary ecosystem where private stablecoins are backed by central bank reserves to maximise stability while enhancing financial inclusivity.
As stablecoin scale grows so will demand for the dollar and its underlying assets. It is possible that stablecoin expansion could compensate for traditional investors retreating from Treasurys under geopolitical uncertainty.
A multi‑format USD futureContrary to expectations of de‑dollarisation the digital era may bring “re‑dollarisation”. Rather than multi‑currency systems overtaking the USD platform, dominance of digital dollars may reinforce it. Users globally may hold actual local currencies for income and everyday use but hold USD in stablecoins for savings, transfers and ecommerce.
Private stablecoins function as the new rails for the dollar ecosystem especially once regulated under acts like GENIUS and STABLE. They create a multi‑format dollar across fiat bank deposits blockchain tokens and real‑time wallets.
Risks and counter‑forcesThis shift raises financial stability concerns. Stablecoins now account for a rising share of illicit crypto transaction volume – around 63 percent of all crypto illicit flows according to Chainalysis 2025 report, though total crypto‑based illicit usage remains under 1 percent of all illicit financial activity.
Regulators worry that fiat bank deposits might flee into interest‑bearing stablecoins undermining traditional banking liquidity. There is also risk of financial fragmentation if stablecoin runs occur or if core issuers fail to maintain full reserves.
Emerging currencies and CBDCs may also challenge digital dollar dominance. Chinese tech giants are now lobbying for issuance of offshore yuan‑pegged stablecoins and Hong Kong agencies are preparing to launch yuan‑based tokens to compete. The euro area continues pushing a digital euro to counter dollar erosion in payments.
What next Instead of being displaced, digital dollars issued via stablecoins could deepen U.S. dollar dominance across borders. The rise of stablecoins may accelerate dollarisation in emerging markets while expanding global demand for U.S. Treasury debt. Regulators in the U.S. appear to support this transformation through new licensing frameworks. Platforms involved in FX and remittance must now consider stablecoin infrastructure and USD routing as part of their core service.
The result may not be a post‑dollar world but a multi‑format accidental empire built on USD coins code and wallets rather than central banks alone.
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