Opinion by: Christos A. Makridis, associate research professor at Arizona State University and visiting fellow at the Heritage Foundation
Stablecoins received a real boost when US President Donald Trump signed the GENIUS Act earlier this year — and now European banks are trying to get into the act by issuing stablecoins of their own.
Their envy of the US dollar’s supremacy, a long-standing pillar of American economic strength, is understandable. In the wake of the GENIUS Act, dollar-backed, privately issued stablecoins are surging in popularity, presenting a strategic opportunity for the United States.
By creating an environment that enables stablecoins and operating under the umbrella of US banking infrastructure, the US can reinforce the dollar’s global dominance while democratizing access to finance abroad, particularly in developing countries.
These “digital dollars” have numerous benefits. They can cut fees, shorten settlement cycles, counter local inflation and widen access to trade and finance for smaller companies that struggle with correspondent banking.
The stablecoin surge
Stablecoins have surged in market capitalization, with transactions exceeding $265 billion. Nearly all of that value rides on dollars. Safe assets back each dollar stablecoin, so stablecoin issuers must hold large reserves of US dollars and Treasury bills. Stablecoin reserve demand shifts Treasury bill ownership from bank deposits and money market funds to issuers; the larger ripple effects would arise if this infrastructure facilitates more commerce.
Federal Reserve Governor Christopher Waller noted that if regulators “allow these things to go out, this will only strengthen the dollar as a reserve currency,” since greater stablecoin use means higher demand for dollars and US debt. Secretary Scott Bessent has been even more blunt: “We are going to keep the US [dollar] the dominant reserve currency in the world, and we will use stablecoins to do that.”
Stablecoins and the developing world
For developing countries, integrating with the dollar via stablecoins can unlock sorely needed economic activity. Many of these nations suffer from volatile currencies, high inflation and patchy banking systems. Their citizens often seek refuge in dollars — a phenomenon economists call “dollarization” — but until now, that meant physical cash or costly wire transfers.
Stablecoins change the game by making dollars accessible to anyone with a cell phone. Instead of waiting at a bank and paying high exchange fees, a farmer or shopkeeper can instantly hold digital dollars in a smartphone wallet. Stablecoins are making the world’s most in-demand asset – the US dollar – available on demand, globally.
This has profound implications for financial inclusion. Approximately 1.4 billion adults worldwide remain unbanked, with a substantial proportion residing in Africa and Asia. Stablecoins enable users to save in a stable currency and transact globally without a bank account, thereby bypassing traditional barriers such as ID checks and branch access.
Financial inclusion through stablecoins
In Sub-Saharan Africa, for instance, dollar stablecoins have become a vital tool for payments, savings and commerce amid currency instability. Over 40% of all cryptocurrency transaction volume in Africa is now in stablecoins. Users are even willing to pay a premium for stablecoins; businesses and individuals in emerging markets sometimes pay 5% or more above face value just to obtain digital dollars, which demonstrates their desperate need for a reliable store of value.
Crucially, stablecoins also facilitate commerce. Consider the example of remittances — the lifeblood of many developing economies. Africans abroad sent home $54 billion in remittances in 2023, but traditional channels charge senders an average of nearly 8% in fees. Stablecoins can slash these costs.
In one Kenyan pilot, using stablecoins for cross-border micropayments reduced fees from 28.8% to just 2%, allowing gig workers to keep more of their earnings. Global consultants estimate that over $12 billion a year could be saved in remittance fees if stablecoins replaced wire transfers — money that goes straight into local households and consumption.
Where local banks perceive too much risk or too little profit to lend, stablecoin-based financing and decentralized finance can help fill the credit gap, playing a vital role in facilitating entrepreneurship and growth for African small and medium-sized enterprises.
Stablecoins and their superpowers
Wider adoption of stablecoins in developing countries could also counter the influence of players like China, which has spent years extending loans to poorer nations under onerous terms. As part of the Belt and Road Initiative, Beijing’s overseas lending has left dozens of countries saddled with debts they struggle to repay. In extreme cases, defaulting nations have had to relinquish strategic assets, such as ports and power plants, to Chinese control.
This “debt-trap diplomacy” thrives when nations lack alternative financing options.
By embracing dollar stablecoins and digital finance more broadly, developing countries can raise capital in new ways and unshackle themselves from such predatory arrangements.
Another promising path is tokenizing sovereign debt. Rather than relying exclusively on large foreign creditors, governments can issue bonds in smaller denominations on blockchain platforms, making it easier for local citizens and diaspora investors to participate.
Related: Visa to start supporting stablecoins on four blockchains
Governments from Kenya to Brazil are already exploring tokenized bonds and Treasury bills that can be purchased and traded via digital wallets. Such decentralized fundraising could help countries refinance or buy back expensive foreign loans — effectively crowd-funding their way out of China’s shadow. Every dollar raised from a diaspora bond or global crypto investor is a dollar that doesn’t have to be borrowed from Beijing on tough terms.
CBDCs in the corner
Central banks have also spotted these opportunities. Dozens of central banks are developing central bank digital currencies (CBDCs) as state-controlled alternatives to private stablecoins. Proponents argue that a government-issued digital currency can increase financial inclusion and modernize payments, but the early evidence is underwhelming.
Nigeria’s eNaira, one of the first retail CBDCs, has flopped – 98% of Nigerians who opened eNaira wallets stopped using them by the end of 2023. Meanwhile, Nigerians continue to flock to dollar-backed stablecoins as a hedge against the plunging naira. This story repeats elsewhere: Enthusiasm for CBDCs often comes from the top down, while stablecoins gain adoption bottom up by meeting real user needs. Even China has had limited success getting other countries to use it, especially when dollar stablecoins already have a considerable head start globally.
Academic research suggests that when central bankers promote CBDC plans, stablecoin activity drops — evidence that rhetoric alone can siphon momentum from the private sector. That might please officials wary of competition, but it can deprive consumers of better services.
Moreover, research compares countries that have adopted CBDCs with those that have not, both before and after adoption, finding that there are no effects on macroeconomic outcomes, such as GDP per capita or inflation, and adverse effects on financial well-being. In short, CBDCs have yet to deliver breakthrough improvements in financial access or efficiency, whereas stablecoins are already doing so.
Encouraging developing countries to use dollar-backed stablecoins is a win-win proposition, functioning similarly to the printed dollar following the supremacy of gold. For the US, it means expanding the influence of the dollar — reinforcing its reserve currency status in the digital era and countering rivals who seek to promote alternative spheres of monetary control.
For developing nations, it means greater access to a stable currency, new pathways for investment, lower transaction costs, and escape hatches from heavy-handed creditors. In an increasingly tense geoeconomic landscape, digital dollars could become a linchpin of a more democratic and resilient global financial system.
The United States is embracing this opportunity: By championing dollar stablecoins and the open financial networks they run on, America can help unlock growth in emerging economies while buttressing its own economic might.
In the contest for hearts, minds and wallets around the world, a little stable currency could go a long way.
Opinion by: Christos A. Makridis, associate research professor at Arizona State University and visiting fellow at the Heritage Foundation.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Coinpectra.