Stablecoins Strengthen The Dollar And Empower The Developing World
Dollar-backed stablecoins reinforce U.S. currency dominance while democratizing finance in developing nations, countering China's debt-trap diplomacy.
Opinion by: Christos A. Makridis, associate research professor at Arizona State University and visiting fellow at the Heritage Foundation
Stablecoins received a real boost when US President Donald Trump signed the GENIUS Act earlier this year — and now European banks are trying to get into the act by issuing stablecoins of their own.
Their envy of the US dollar’s supremacy, a long-standing pillar of American economic strength, is understandable. In the wake of the GENIUS Act, dollar-backed, privately issued stablecoins are surging in popularity, presenting a strategic opportunity for the United States.
By creating an environment that enables stablecoins and operating under the umbrella of US banking infrastructure, the US can reinforce the dollar’s global dominance while democratizing access to finance abroad, particularly in developing countries.
These “digital dollars” have numerous benefits. They can cut fees, shorten settlement cycles, counter local inflation and widen access to trade and finance for smaller companies that struggle with correspondent banking.
Stablecoins have surged in market capitalization, with transactions exceeding $265 billion. Nearly all of that value rides on dollars. Safe assets back each dollar stablecoin, so stablecoin issuers must hold large reserves of US dollars and Treasury bills. Stablecoin reserve demand shifts Treasury bill ownership from bank deposits and money market funds to issuers; the larger ripple effects would arise if this infrastructure facilitates more commerce.
Federal Reserve Governor Christopher Waller noted that if regulators “allow these things to go out, this will only strengthen the dollar as a reserve currency,” since greater stablecoin use means higher demand for dollars and US debt. Secretary Scott Bessent has been even more blunt: “We are going to keep the US [dollar] the dominant reserve currency in the world, and we will use stablecoins to do that.”
For developing countries, integrating with the dollar via stablecoins can unlock sorely needed economic activity. Many of these nations suffer from volatile currencies, high inflation and patchy banking systems. Their citizens often seek refuge in dollars — a phenomenon economists call “dollarization” — but until now, that meant physical cash or costly wire transfers.
Stablecoins change the ga
Source: CoinTelegraph
