Crypto is Good for the US

Circle’s decision to move its headquarters from Boston to One World Trade Centre ahead of its planned IPO represents yet another step in the broad acceptance of stablecoins in traditional financial markets. Without doubt, stables are one of crypto’s success stories.

In a recent survey titled “Stablecoins: The Emerging Market Story“, conducted by Visa, Brevan Howard and Castle Island Ventures, and Artimus. 2,500 participants were surveyed in each of the following countries: Brazil, Nigeria, Turkey, Indonesia, and India. A key takeaway from the survey is that over half of respondents saw an uptick in their stablecoin usage during the past year, with nearly three quarters expecting their usage to continue to increase next year.

So stablecoin use is strong and growing, which is good news for crypto. But with 99% of stablecoins globally backed by the US dollar, is there an emerging sense that this is also good for the US?

The US dollar remains the world’s reserve currency, though its dominance is facing challenges. International trade is increasingly being invoiced in other currencies, especially following sanctions on Russia and the growing Russia-Iran-China economic alignment. Major holders of US assets, like China and Japan, have also been divesting from dollar holdings.

In that context, stablecoins offer a notable counterbalance, representing around $170 billion of new net dollar exposure. A substantial amount of these coins are held by foreign entities, with each stablecoin backed by dollar assets such as short-term treasuries or overnight repos.

Stablecoins’ role in supporting dollar demand is crucial at a time when the US is running historically high deficit spending and a significant debt-to-GDP ratio. More buyers of US debt help lower borrowing costs, and stablecoins have become a dominant form of global digital money, cementing their role in dollar proliferation. Crypto markets, once dominated by Bitcoin and Ethereum, are now largely driven by stablecoins, which are the primary medium of exchange for margin, collateral, and transaction settlements across major exchanges. In fact, they account for 70-80% of all value settled on blockchain – in the first half of 2024, stablecoins settled over $2.6T worth of value.

We need to keep this in perspective, of course. Stablecoins represent only 48 bps of total US government debt ($35T). If stables were a sovereign in their own right, they would only be the 16th largest holder of Treasuries, behind a Top 15 list that starts with Japan ($1.15T) and ends with Singapore ($207bn).

But still, the growth of US-backed stablecoins turns a common crypto-native argument on its head. Rather than undermining the dollar’s global role, crypto – through stablecoins – is actually extending it into the digital economy. Crypto-dollarization is evident in countries like Venezuela, Argentina, Turkey, and Nigeria, where citizens are turning to stablecoins as a more credible alternative to local banks or physical US dollars. These instruments, free from intermediary control, offer direct access to dollar exposure and are easily available on centralized exchanges, money changers, or local over-the-counter networks. For people in the global south, stablecoins provide a reliable dollar liability that’s more accessible than bank deposits and more flexible than cash, while also reinforcing the US dollar’s role as the global reserve currency, even in regions where the dollar’s influence is weakening.

The increasing use of stablecoins reflects a shift in the broader financial landscape. While the dollar’s dominance is under pressure from geopolitical and economic shifts, the rise of stablecoins has created new demand for US assets, particularly short-term debt instruments. As the crypto economy continues to expand, stablecoins are likely to play an even more significant role in global finance, reinforcing the dollar’s position as the world’s preferred currency and, for the moment at least, giving the US a dominant role in an emerging financial sector. Establishing clear regulatory frameworks for stablecoins in the US would allow the country to shape this evolving market.

In the end, crypto’s success isn’t just about the US—it’s about all of us.