Stablecoin growth could bolster US dollar dominance and Treasury demand, says BoE official
Carolyn Wilkins, member of the Bank of England's Financial Policy Committee, stated that the expansion of dollar-denominated stablecoins could reinforce the US dollar's global dominance and boost demand for US Treasury securities. Speaking at Queen's University Belfast, she emphasized how digital dollars can facilitate cross-border settlements, broaden access to dollar-linked assets internationally, and have implications far beyond the cryptocurrency sector.
Impact of Stablecoins on the Dollar and Treasury Market
Carolyn Wilkins highlighted that major stablecoin issuers like Tether (USDT) and Circle (USDC) are already significant holders of US Treasury bills, with holdings nearing $150 billion at the end of 2025 and purchases totaling around $33 billion throughout the year.
She pointed out that the growing stablecoin market has a dual effect on Treasurys: while demand for government debt rises, large-scale stablecoin redemptions could compel issuers to sell these securities, potentially increasing volatility in an already stressed market.
Global Presence of Stablecoins and Dollar's First-Mover Advantage
With over $300 billion in stablecoins circulating, the market remains overwhelmingly tied to the US dollar, representing 98% of stablecoin value.
This dominance grants the dollar a significant first-mover advantage as a global digital currency, reinforcing its role in international settlements and investment accessibility through digital means.
Development of Stablecoin Market in the UK
In contrast, pound-denominated stablecoins have gained much less traction, but UK regulators have intensified efforts to foster development of this sector.
The UK's Financial Conduct Authority launched a dedicated regulatory sandbox for stablecoin issuers and finalized issuance rules in June.
The Bank of England has also conducted experiments with digital currency, including tests integrating stablecoins with a simulated digital pound for cross-border trade payments.
These steps respond to previous industry criticisms that Bank of England proposals might hinder innovation, signaling a more accommodating regulatory stance moving forward.
Why it matters
The growing prominence of stablecoins, particularly those pegged to the US dollar, may significantly reinforce the dollar's position in the global financial ecosystem. This development is likely to expand the dollar's role in cross-border transactions and elevate demand for US Treasury securities, influencing international capital flows and market stability. At the same time, risks arising from mass stablecoin redemptions could heighten volatility in the government debt market. Meanwhile, the UK's regulatory initiatives and digital currency experiments reflect an ambition to keep pace with global trends and establish its own digital payment infrastructure for the future.
Prepared from the source material with AI-assisted editing and checked against the supplied facts.
Open original source ↗