Stablecoins: Reinforcing Dollar Dominance While Creating Fragile Networks

Dollar-pegged stablecoins like USDT and USDC are no longer niche tools for traders—they are becoming global financial infrastructure. With a combined market cap close to $280 billion and projections soaring toward $2 trillion in the next few years, stablecoins are reshaping the way money moves across borders.

But this rise is a double-edged sword. By being backed heavily by U.S. Treasuries, stablecoins indirectly reinforce the global supremacy of the U.S. dollar, a phenomenon often referred to as America’s “exorbitant privilege.” That dominance comes at a cost: it threatens demand for non-U.S. bonds, creates private payment networks outside sovereign oversight, and raises the risk of financial fragility if issuers falter.

Economists warn that what began as an anti-establishment tool is now paradoxically bolstering U.S. power. In practice, dollar stablecoins are building a parallel ecosystem where the U.S. financial system gains even more influence, while other countries’ monetary tools weaken.

Why this matters: Stablecoins are not just financial instruments—they are geopolitical levers. Their unchecked rise could entrench U.S. monetary dominance and redraw the balance of power in global finance.