The ongoing trend of de-dollarization sees nations and institutions increasingly seeking to reduce their reliance on the US dollar in global trade and finance. This has sparked concerns about the long-term dominance of the dollar. Surprisingly, blockchain technology and cryptocurrency, often seen as challengers to traditional finance, are playing a pivotal role in reinforcing the dollar's supremacy.
A common measure of dollar dominance—its share of global foreign exchange reserves—has declined by 13 percentage points since 2000. Yet, innovation in crypto is creating a powerful, digital form of the dollar that is more accessible and usable than ever before.
The Digitally Enhanced Dollar
Public blockchain technology has supercharged fiat currencies, delivering them directly to the fingertips of 5 billion smartphone users worldwide and enabling seamless cross-border movement of capital. The demand for tokenized fiat, like stablecoins, has already created a massive industry worth over $200 billion, with the US dollar holding a dominant position.
A report from Castle Island and Brevan Howard included a chart showing that the US dollar represents nearly 100% of the assets backing the stablecoin market, far surpassing all other currencies. Of the top 20 fiat-backed stablecoins, 16 include "USD" in their name.
While early Bitcoin supporters believed cryptocurrency could challenge the dollar's hegemony, Bitcoin is increasingly viewed as a store of value rather than a medium of exchange. This has reduced its perceived threat to the dollar. Instead, the rise of stablecoins and the tokenization of real-world assets (RWA) allow blockchain to fulfill Bitcoin's original promise of a decentralized currency—by providing a stable, yield-bearing medium of exchange. Rather than weakening the dollar, this amplifies its global influence.
Emerging Market Adoption
In emerging markets, dollar-backed stablecoins offer a practical alternative to holding physical cash or relying on fragile banking systems. In countries with unstable currencies, merchants and individuals increasingly prefer the stability of a digital dollar when given the choice.
A survey of existing crypto users in emerging markets by Castle Island and Brevan Howard found that the desire for dollar-denominated savings is a key driver of stablecoin adoption:
- 47% of respondents said their primary use of stablecoins was to store funds in US dollars (only slightly less than the 50% who primarily use them for trading crypto or NFTs).
- 69% had converted their local currency into stablecoins unrelated to any transaction.
- 72% expected to increase their stablecoin usage in the future.
Note: The survey covered Nigeria, Indonesia, Turkey, Brazil, and India.
From individual consumers to multinational corporations, when economic participants choose the safest, most liquid option, the dollar may gradually displace local currencies.
In the US National Interest: Stablecoin Legislation in 2025?
Momentum for stablecoin legislation is accelerating, with broad expectations that a regulatory bill will pass during a Trump administration. The stablecoin bill initially introduced in 2023 by Patrick McHenry was recently advanced to the House of Representatives by Maxine Waters and has bipartisan support. Stablecoin regulation is often seen as the first step toward broader regulatory clarity in the US. We anticipate significant progress in 2025, especially as policymakers grow more aware of the strategic role stablecoins play in extending the dollar's reach.
Stablecoins serve the best interests of the United States because they increase the proportion of transactions conducted in dollars and drive demand for US Treasuries as backing collateral. For a nation with $37 trillion in outstanding debt, the dispersion and circulation of capital are crucial—and crypto markets provide exactly that channel.
👉 Explore real-time stablecoin market data
Stablecoins vs. Central Bank Digital Currencies (CBDCs)
It's important to distinguish between fiat-backed stablecoins and central bank digital currencies (CBDCs). While they share some technical similarities, they are fundamentally different concepts.
A J.P. Morgan report on de-dollarization trends from October highlighted that emerging technologies seeking payment autonomy are a potential driver of de-dollarization. The report pointed to multi-country CBDC projects like mBridge as possible alternatives to dollar-based transactions.
However, although new payment systems like foreign CBDCs could increase de-dollarization pressures, we believe the rapid growth of the dollar-backed stablecoin market helps counter this trend. In our view, stablecoins issued on decentralized, permissionless blockchains will be the preferred choice for the market because they offer superior privacy, censorship resistance, and cross-platform interoperability.
Driving Demand for US Treasuries Through Tokenized Products
According to data from the U.S. Department of the Treasury, approximately $120 billion in stablecoin reserve assets are directly invested in US Treasuries, further boosting demand for short-term government debt.
Beyond stablecoins, the direct tokenization of US Treasuries is a rapidly growing trend. Companies like BlackRock (via Securitize), Franklin Templeton, Hashnote, and Ondo (a Pantera portfolio company) are leading this emerging market, which is worth around $4 billion.
Ondo's Two Core Products
- USDY (US Dollar Yield Token):
A tokenized note backed by short-term US Treasuries and bank deposits, providing non-US investors with stable, high-quality yield. - OUSG (Ondo Short-Term US Government Treasuries):
Offers a highly liquid investment channel into short-term US Treasuries, allowing eligible investors to mint (purchase) and redeem at any time.
Products like USDY make it easier for overseas investors to gain exposure to the US dollar and US Treasuries compared to traditional methods.
👉 Learn more about tokenized treasury strategies
A New Era of Dollar Dominance
Rather than undermining the dollar's hegemony, blockchain technology is building a digital infrastructure that amplifies the dollar's influence. Through asset tokenization and global liquidity, the dollar remains indispensable even amid geopolitical and technological shifts pushing de-dollarization. As J.P. Morgan noted in its report, the structural factors underpinning dollar dominance—deep capital markets, the rule of law, and institutional transparency—remain unmatched. Stablecoins extend these advantages into the digital, borderless realm.
The US dollar, once thought to be vulnerable to blockchain disruption, has instead emerged as the primary beneficiary of this technological revolution. The "killer app" for blockchain might just be the US dollar itself, demonstrating how technology can drive change while further entrenching existing power structures.
As regulatory frameworks become clearer and the demand for asset tokenization grows, the movement of dollars on-chain is poised to cement its role as the cornerstone of global finance. Whether US regulators and legislators are Democrats or Republicans, they can agree that any force driving demand for US Treasuries should be harnessed, not resisted. This makes substantive progress on stablecoin regulation all but certain.
Frequently Asked Questions
What is de-dollarization?
De-dollarization refers to the process where countries and institutions reduce their reliance on the US dollar for international trade and as a reserve currency. This is often motivated by geopolitical reasons or a desire for greater financial autonomy.
How do stablecoins strengthen the US dollar?
Stablecoins are primarily backed by US dollars or US Treasury bonds. Their global adoption creates constant demand for these underlying assets, increasing the use of dollars in digital transactions and reinforcing its status as the world's primary reserve currency.
What is the difference between a stablecoin and a CBDC?
A stablecoin is a digital asset issued by a private company and backed by traditional assets like fiat currency. A CBDC (Central Bank Digital Currency) is a digital form of a national currency issued and regulated directly by a country's central bank.
Why are stablecoins popular in emerging markets?
In countries with high inflation or unstable local currencies, stablecoins offer a way to save and transact in a stable dollar-denominated asset, providing protection from local economic volatility.
What does 'tokenization of US Treasuries' mean?
It means creating digital tokens on a blockchain that represent ownership in US Treasury bonds. This allows for fractional ownership, easier transfer, and broader global access to these traditionally exclusive investment instruments.
Is stablecoin regulation likely in the near future?
Yes, there is strong bipartisan momentum in the US Congress to pass stablecoin legislation, recognizing their strategic importance in maintaining dollar dominance and their growing role in the global financial system.