Stablecoins Are Eating The Dollar's Lunch—Or Are They?

Until recently, stablecoins were the plumbing of crypto markets—useful, technical, and largely invisible to most of the financial world. Now, in 2025, they are stepping onto the global stage, reshaping how money moves and who controls it. These digital assets, typically pegged 1:1 to the U.S. dollar, are processing more than $650 billion in transactions monthly and have grown to a circulating supply of over $240 billion. And with Wall Street heavyweights like Citigroup, Morgan Stanley, and Bank of America making direct moves into the space, the stablecoin boom has become impossible to ignore.

Last week, Citi's global head of Future of Finance, Ronit Ghose, described this moment as blockchain's "ChatGPT moment," a reference to the breakout year of generative AI. He wasn't exaggerating. A recent Citi report projected that stablecoin issuance could grow to $1.6 trillion by 2030 in a base case, and as much as $3.7 trillion under a bullish scenario, as reported by Reuters.

Wall Street Finds Its Use Case

The clearest sign that stablecoins are going mainstream came on July 15, when Citigroup CEO Jane Fraser confirmed the bank is actively exploring the launch of a Citi-branded stablecoin. Speaking at an investor conference, she said Citi is also investigating tokenized deposits and blockchain-based payment infrastructure, as reported by Reuters.

The response was swift. Within 24 hours, Bank of America announced that it expects to launch a U.S. dollar stablecoin in the coming quarters. Morgan Stanley, meanwhile, said it is weighing stablecoin usage for settlement and custody operations, according to Reuters. Mastercard is also building stablecoin compatibility into its cross-border payment rails, a clear sign that traditional finance is no longer waiting on the sidelines.

This institutional embrace comes on the back of new regulatory clarity. The GENIUS Act—passed with broad bipartisan support in the U.S. Senate and likely to clear the House later this month—establishes a legal framework for fiat-backed stablecoins. It mandates full reserve backing, regular audits, and licensing through federal or state banking regulators, as covered by Reuters.

Digital Dollars, Real Power

Far from undermining the U.S. dollar, stablecoins are—at least for now—reinforcing its global dominance. Over 99% of all stablecoins in circulation are dollar-backed. Their reserves, typically held in short-term U.S. Treasuries, are deepening demand for U.S. government debt and, in some cases, lowering borrowing costs. Tether, the largest stablecoin issuer, holds $98 billion in Treasuries, which researchers say has helped suppress yields on short-term bills by as much as 24 basis points. That data point comes from a peer-reviewed academic study on stablecoin reserves, as highlighted by Reuters.

Federal Reserve Governor Christopher Waller, who has previously been cautious about the digital asset space, acknowledged earlier this month that stablecoins could reduce costs in payment systems without compromising financial stability. He added that the dollar remains strong and demand for it "is only increasing in tokenized form," as reported by Reuters.

Yet cracks remain. The Bank for International Settlements recently issued a warning that stablecoins, if allowed to scale unchecked in countries with weaker currencies, could erode monetary sovereignty and trigger destabilizing capital outflows. This concern is particularly acute in parts of Africa, Latin America and Southeast Asia, where dollar-backed stablecoins are increasingly used as shadow currencies. The BIS position was reported in detail by Reuters.

The New Currency Battlefield

The geopolitical implications of stablecoins are now being openly discussed in central bank meetings from Brussels to Beijing. Ant Group is preparing to issue a stablecoin in Hong Kong backed by a basket of Asian currencies including the Chinese yuan, the Singapore dollar, and the Hong Kong dollar. While this signals a challenge to dollar-backed coins, it's worth noting that many of these projects still rely on dollar-denominated reserves for trust and liquidity. Details of Ant Group's plans were first reported by Reuters.

Stablecoins may therefore be less of a competitor to the dollar and more of an amplifier—digitizing dollar access globally without traditional banking rails. That may benefit U.S. financial influence, but it also opens the door to harder questions around compliance, capital controls, and the risk of U.S. monetary policy becoming "too global to contain."

A Dollar Reinvented, Not Replaced

Stablecoins are giving the dollar a new lease on life. As programmable, borderless assets that can operate 24/7 across blockchain networks, they're expanding the dollar's reach into markets traditional banks can't or won't serve. Some analysts now argue that stablecoins are doing more to globalize the dollar than SWIFT ever did.

But with great reach comes great responsibility. The U.S. must ensure that stablecoin issuers are transparent, accountable, and properly integrated into the broader financial system. That includes rigorous audits, robust liquidity protections, and seamless integration with banking regulation.

In the end, stablecoins aren't replacing the dollar. They're reformatting it for the digital age. Whether that strengthens U.S. economic power—or hands it to new actors—depends on how well policymakers manage this transition.