Stablecoins now hold more U.S. Treasury bills than Germany, Japan, or China. What happens when digital dollars go mainstream? Our North America economist Marcos Carias explains what could go right, wrong, and everywhere in between.
“This groundbreaking technology will buttress the dollar’s status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for U.S. treasuries.”
—U.S. Treasury Secretary Scott Bessent.
The U.S. dollar’s dominance as a global reserve currency has been gradually but persistently eroding, from over 70% of global reserve assets in the early 2000’s to 56% as of end 2025. Meanwhile, the shift from near-zero interest rates before the Pandemic to the “higher-for-longer” world of the 2020s is putting significant strain on U.S. public finances, with government interest expenditure jumping to 3.2% of GDP in 2025 and expectations to near 4% by the end of the decade – a jump from 1.5% during the 2010s. In a bid to preserve the abnormally low sovereign rates allowed by the USD’s global dominance (i.e. the dollar’s “exorbitant privilege,” a term for the economic advantage the U.S. gains from the world’s reliance on the dollar), the White House is seeking to promote the development of USD stablecoins (SCs): digital currencies pegged to the U.S. dollar, issued by fintech firms known as issuers (Tether, Circle), and backed by USD liquid assets held in reserve. The logic is to give the USD a second wind by tying it at the hip of what will hopefully become a widely used global cryptocurrency.
What's a stablecoin (SC), exactly?
SCs are the first serious attempt at creating credible digital currencies. Unlike the volatile Bitcoin, SCs promise to maintain a 1:1 parity (i.e. a “peg”) and permanent convertibility with a regular currency, almost always the USD (Tether’s USDT, Circle’s USDC, a combined 90% of SC supply). Importantly, issuers achieve this by holding dollar liquid assets (short U.S. treasuries, bank deposits, etc.), and buying and selling the SC as needed. A SC is thus designed to be “as good as a dollar, but on a blockchain,” capable of performing the three defining functions of money (settling transactions, measuring how much things are worth, and accumulating liquid wealth) without the inefficiencies of “outdated” payment systems.
SCs hope to build on the USD-based financial system with one key innovation: modernizing the payments infrastructure. According to stablecoin advocates, the traditional payment system is complex and costly. Furthermore, national governments can intervene in the conventional financial system to obstruct international transactions through capital controls, interfere with the convertibility of the currency, and in extreme cases expropriate cash balances outright. One of SCs big perks is thus granting non-U.S. residents the ability to hold dollar-equivalents without the involvement of a non-U.S. financial intermediary. A SC-based global payment system would, in principle, allow 24/7/365 real-time transfer, and borderless payments with no bank involved or intermediary fees.
The US government wants to promote the development of USD-backed SCs to capture private savings from across the globe. In July 2025, congress passed the GENIUS Act (Guiding and Establishing National Innovation for US SCs) to regulate the U.S. SC market and promote their adoption. If their use becomes widespread, it should result in increased demand for U.S. treasuries. Insofar as that demand emanates from abroad the U.S., this entails capital inflows that lower interest rates and permit the continued funding of fiscal and current account deficits.
How big are Stablecoins?
As of today, SC issuers still represent a relatively small fraction of the treasury market, but their role in the funding of U.S. budget deficits is expected to become more meaningful. Estimates for the total market capitalization of SCs have grown from ~$60 billion USD in 2021 to ~$300 billion in early 2026 (Chart 1). Projections from sell-side research expect that number to rise to the range of $1-3 trillion USD by 2030. A September 2025 EY survey of 350 large, globally active companies showed 8% of corporates using SCs, with 54% of non-users expecting to adopt in the next 6-12 months. The most frequent use reported was overwhelmingly the settlement of cross-border payments. Holdings of treasury bills by SC issuers are estimated at $153 billion USD (2,3% of the overall T-bill market) but are expected to absorb a majority of treasury bills issued between now and 2028, according to Standard Chartered. As an investor class, SC issuers are the 8th largest holders of treasury bills outstanding, just behind private pension funds (~$450 bn USD) and ahead of several foreign holders such as Japan, Germany and China.
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What could go right if Stablecoins take off? What could go wrong?
Rising SC adoption should keep the dollar central to global trade and finance, structurally weighing on short-maturity Treasury yields and generally making U.S. debt rollover cheaper. But bringing SC issuers into the Treasury market’s plumbing could introduce wider liquidity risks. Episodes of volatility can flare up in the treasury market and broaden financial conditions, as flows into the SC market can unwind quickly when confidence in an issuer’s ability to meet redemptions and/or defend the peg deteriorates:
- To meet redemption requests, issuers must sell their reserves. As SC issuers’ market footprint grows, redemption waves could spark broader treasury selloffs. Issuers have a less-than-perfect track record in reserve transparency; a confidence crisis wouldn’t be off the cards.
- Stress can also transmit from the treasury market to SCs: Circle, USDC’s issuer, held uninsured deposits at Silicon Valley Bank, or SVB, (above the $250k limit). When SVB failed in 2023, fears over convertibility pushed USDC down to $0.87 despite its fully liquid reserves—showing GENIUS Act compliance can’t ensure an unbreakable peg or flawless liquidity.
All this would directly hurt firms reliant on bank lending: it would raise the cost of borrowing and debt service for both companies and their customers, dampening spending and making slower or falling household incomes more likely. The only potential beneficiaries are U.S. firms able to fund short-term needs in bond markets.
Meanwhile, emerging countries would benefit from stronger remittance flows and a superior currency for households and firms, but at the cost of endangering monetary sovereignty and losing national savings:
- If stablecoins start replacing a country’s currency, it amounts to gradual dollarization: For instance, Colombian households swapping pesos for USDT shrink local bank deposits and weaken monetary policy transmission, so rate hikes/cuts have less impact on credit and saving/investment. A central bank can only steer the economy to the extent the private sector uses the domestic currency
- SCs by design allow to circumvent capital controls. While this is beneficial to the individual user, capital controls are an essential tool for preventing and mitigating balance of payments distress (like when a country can’t finance its international obligations) in emerging economies. The country would lose private savings to finance the domestic economy.
- Ukraine leads the world in SC usage (chart 2), propelled by a surge in remittances and crowdfunding/ humanitarian efforts amid a banking infrastructure disrupted by war. Nigeria seems more like the textbook case of users divesting from a volatile domestic currency
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Beyond these macroeconomic risks, SC adoption carries with it important financial integrity risks. With little international coordination, stablecoin regulation risks a “race to the bottom,” undermining enforcement—especially Know Your Customer and Anti-Money Laundering protocols. The GENIUS Act’s phase in is very progressive: loopholes remain open while implementation details are ironed out, grace period until mid-2028. SCs are thus very popular in the criminal economy, including for money laundering and sanctions evasion (making it unclear that a transition to SCs would be a net positive for U.S. geopolitical leverage).
Marcos Carias is a Coface economist for the North America region. He has a PhD in Economics from the University of Bordeaux in France, and provides frequent country risk monitoring and macroeconomic forecasts for the U.S., Canada and Mexico. For more economic insights, follow Marcos on LinkedIn.
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