Stablecoins
Stablecoins are cryptocurrencies pegged to the value of a fiat currency — typically the US dollar — maintained either by holding reserves of the underlying asset (asset-backed stablecoins) or through algorithmic mechanisms. Unlike volatile cryptocurrencies such as Bitcoin, stablecoins hold a steady value, making them practical for transactions. In 2025, the US Genius Act and STABLE Act proposed requiring dollar stablecoins to be backed 1:1 by US Treasury bills — effectively extending dollar hegemony into the global crypto ecosystem and creating a new mechanism for US debt monetization.
The stablecoin market grew from near zero to over $200 billion in market capitalization between 2019 and 2025. The dominant stablecoins — Tether (USDT) and USD Coin (USDC) — together account for the vast majority of this market. They function as the settlement currency of the crypto ecosystem: traders use stablecoins to park value between crypto trades, merchants use them for cross-border payments that bypass the traditional banking system, and users in countries with unstable currencies use them as a dollar substitute.
The geopolitical significance of stablecoins lies in their relationship to US Treasury demand. Asset-backed stablecoins must hold reserves of safe, liquid assets — and US Treasury bills are the preferred reserve asset. Tether alone held over $100 billion in US Treasuries by 2025, making it one of the largest holders of US government debt globally. As stablecoin adoption grows, so does demand for US Treasuries — providing a new mechanism for funding US government debt that operates outside the traditional foreign central bank purchase channel.
The Genius Act (Senate) and STABLE Act (House), proposed in 2025, would formalize this arrangement by requiring all dollar-denominated stablecoins to be backed 1:1 by US Treasury bills or cash equivalents. This transforms stablecoins from a private financial innovation into a semi-public instrument of US monetary policy: global crypto adoption effectively becomes a new form of dollarization, with demand for stablecoins driving demand for US debt.
Professor Jiang frames this as a key element of the Trump administration's financial strategy: using the global appetite for dollar-denominated digital assets to extend the petrodollar system into the 21st century. The petrodollar tied global energy trade to the dollar; stablecoins tie global digital commerce to the dollar. The geopolitical calculus is the same: whoever controls the settlement currency controls the global financial system.
Related articles
Related terms
Frequently asked questions
What are stablecoins? ＋
Stablecoins are cryptocurrencies pegged to a fiat currency — usually the US dollar — and designed to maintain a stable value. Unlike Bitcoin, which fluctuates wildly, stablecoins hold at $1 and are used for crypto transactions, cross-border payments, and as dollar substitutes in countries with unstable currencies. The dominant stablecoins (Tether and USD Coin) are backed by US Treasury bills. By 2025, the stablecoin market exceeded $200 billion, with Tether alone holding over $100 billion in US Treasuries — making it one of the largest holders of US government debt in the world.
Why do stablecoins matter geopolitically? ＋
Stablecoins extend dollar hegemony into the global crypto ecosystem. Asset-backed stablecoins must hold US Treasury bills as reserves, so global stablecoin adoption drives demand for US government debt — helping finance the US deficit outside traditional channels. The 2025 Genius Act proposed requiring all dollar stablecoins to be backed 1:1 by US Treasuries, formalizing this arrangement. Professor Jiang compares it to the petrodollar system: just as requiring oil to be priced in dollars created global demand for dollars, requiring stablecoins to be backed by Treasuries creates global demand for US debt through the back door of crypto adoption.