Photograph by Nathaniel St. Clair.
When Circle, the world’s second-largest dollar stablecoin company, floated its shares at the start of June, the reaction was euphoric. By June 27, Circle’s stock had briefly touched $299 before settling near $183 – a staggering sixfold rise that left even some of its underwriters questioning the valuation. Although bullish investors hailed it as validation of a maturing crypto-financial ecosystem—stablecoins are a cryptocurrency pegged to a currency like the dollar or a commodity like gold—skeptics warned of speculative froth reminiscent of past fintech bubbles.
This surge, however, is more than just a triumph of corporate ambition. It crystallizes a deeper paradox: in an era when the supremacy of the U.S. dollar is increasingly scrutinized, could dollar-backed stablecoins be the digital scaffolding that fortifies its global reign, or the spark that accelerates its decline? Stablecoins, far from fringe techno-utopian tools, are becoming the infrastructure for a new era of soft power projection.
For now, the numbers tell a story of consolidation rather than retreat. Dollar-pegged stablecoins—digital tokens designed to hold a one-to-one value with the U.S. dollar—command over 95 percent of the global stablecoin market. This is not merely a technical curiosity. It is an echo of the dollar’s broader monetary hegemony, propped up by a regulatory climate in Washington that has historically chosen leniency over strict policing.
In June, the Senate passed the so-called GENIUS Act, the first federal framework designed to shepherd the unruly stablecoin herd into a fenced pasture. Treasury Secretary Scott Bessent, armed with sweeping powers under this legislation, did not mince words: the U.S. stablecoin market could balloon nearly eightfold to more than $2 trillion within a few years. At a Senate hearing last month, Bessent insisted that the proliferation of stablecoins would “anchor demand for U.S. Treasuries” and “entrench the dollar’s role as the world’s primary reserve currency.” Although the Senate’s overwhelming support on June 17 marked a milestone, the bill still awaits final passage in the House, where debates over federal-versus-state oversight may yet complicate its trajectory.
Adding to the regulatory momentum, Circle filed an application with the U.S. Office of the Comptroller of the Currency in late June to become a federally chartered trust bank — a move that, if approved, would cement its role as a custodian of digital dollars, with direct access to the Fed’s clearing infrastructure.
The short-term metrics appear to vindicate that optimism. The market capitalization of stablecoins has crossed $260 billion, with more than 240 million active stablecoin-holding addresses recorded in the past year. This quiet, rapid embedding of stablecoins in the global payments bloodstream is unmistakable. Unlike Bitcoin or other cryptocurrencies whose value can pirouette wildly, stablecoins, by design, promise constancy. That makes them appealing not just to crypto traders, but to businesses dabbling in cross-border trade, employees in search of reliable salaries, and citizens in fragile economies trying to hedge against currency depreciation.
Consider this: the World Bank still pegs the average cost of cross-border remittances at 6.35 percent, with settlement times dragging on for up to five days. Stablecoins, riding on blockchain rails like Solana, settle transactions in real-time, 24/7, often for less than a dollar. It’s little wonder that what began as a niche tool for crypto settlements is now seeping into mainstream finance, from trade invoices to remittances and digital payrolls.
Beneath this surge lies a critical fact often glossed over in the celebratory headlines. Over 90 percent of the assets backing these stablecoins are short-term U.S. Treasury bonds. When one buys a dollar stablecoin, one is effectively underwriting both the greenback and the sprawling American debt machine, a symbiotic relationship that has so far suited Washington’s appetite for cheap borrowing. Recent projections from AInvest suggest that stablecoins could channel $1.4-$3.7 trillion into U.S. Treasury markets by 2030, potentially reducing federal borrowing costs by over $100 billion annually. Far from fringe finance, these digital tokens are fast becoming pillars of macroeconomic relevance.
And yet, as always, a coin has two sides. The same week Circle’s shares roared ahead, the International Monetary Fund quietly released figures that cast a longer shadow. As of the third quarter of 2024, the dollar’s share in global official reserves dropped to 57.4 percent—its lowest level since 1995. The dollar index dipped below 97 on June 30, marking its weakest point since March 2022. Bank of America, hardly a bastion of radical dissent, noted that this was the dollar’s worst first half since the dawn of free-floating exchange rates in 1973. In plain speak: investors are increasingly wary of parking unhedged capital in U.S. assets.
Moody’s decision on May 17 to downgrade U.S. sovereign credit, citing “deteriorating fiscal indicators,” merely reinforced that unease. The U.S. national debt crossed $36 trillion this year, yet the political appetite for meaningful fiscal repair remains as elusive as ever. Meanwhile, the governance environment has rarely looked shakier. From erratic trade wars to partisan gridlock that periodically threatens to shut down the federal government, the gap between the promise of “American exceptionalism” and the reality of domestic dysfunction keeps widening.
Against this backdrop, it is easy to see why some observers see stablecoins not just as dollar stabilizers but as potential accelerants of its decline. They lubricate capital flows but also create loopholes that may erode traditional levers of control. For decades, the brute power of the dollar rested not just on trade or Treasury bonds but on the muscle of sanctions, their ability to weaponize the greenback as a cudgel in geopolitical tussles. Stablecoins—borderless, fast, and increasingly unregulated in some corners—chip away at this coercive edge.
Already, nations like China, India, and Brazil are diversifying their reserves, snapping up gold, settling bilateral trade in local currencies, and building payment channels that bypass the dollar altogether. If the United States continues to abuse financial sanctions, the logic goes, the incentives to devise workarounds will only grow. And while stablecoins today remain dollar-dominated, the technology underpinning them can just as easily anchor a basket of currencies—or none at all.
Moreover, stablecoins are not immune to the speculative froth that afflicts so much of the crypto sphere. History offers cautionary tales. From the 2008 subprime fiasco to the 2022 collapse of TerraUSD, the line between innovation and implosion is perilously thin. If a future stablecoin bubble were to burst, the fallout would reverberate far beyond crypto exchanges and potentially boomerang back to the very U.S. Treasury market they were supposed to bolster.
For now, the dollar’s supremacy endures because alternatives remain fragmented. But complacency would be folly. A financial ecosystem that relies on minting ever more digital tokens to prop up the dollar may find itself building castles on sand if deeper structural weaknesses—ballooning debt, polarized politics, the erosion of institutional guardrails—go unaddressed.
Stablecoins are, in many ways, the latest avatar of American financial ingenuity. They are nimble and disruptive, but also prone to overreach. They highlight the enduring gravitational pull of the dollar, but they also expose its vulnerabilities. Like the coin they echo, they remind us that every story of stability hides its own seeds of disorder.
Circle’s IPO has minted new billionaires and inspired fresh headlines about America’s capacity to reinvent its financial plumbing. But whether that plumbing can contain the pressures building within the walls of Fortress Dollar is an open question and, in the final reckoning, perhaps the more important one.
This first appeared on FPIF.
The post How Stablecoins Are Reinventing Financial Hegemony appeared first on CounterPunch.org.