The growing demand for dollars in the global economy is increasingly being met by direct stablecoins, even though national policies and international initiatives, such as the currency issued by BRICS, can harm the global dominance of the American currency. The volatility of the global economic situation, converging with the growing trend of de-dollarization, opens the field for discussions about how stablecoins can support the strength of the dollar on the international stage.
Although the dollar is likely to remain the dominant global reserve currency in the near future, both domestic and foreign policy can gradually erode its position. In the context of these changes, American stablecoins, or cryptocurrencies secured by traditional currencies, can be a new tool to strengthen the global position of the dollar and mitigate the effects of de-dollarization.
The current landscape of the global economy is characterized by the growing trend of countries diversifying their reserves, which has led to a decrease in the share of the dollar in central banks’ reserves to 58% in the last quarter of 2022, compared to 71% in 2000. Meanwhile, the so-called. “Shadow economy,” or the sector of economic activities not included in official GDP statistics due to their illegal nature or desire to avoid taxes and regulations, still constitutes a significant part of many economies.
For example, in countries with high inflation, such as Turkey and Argentina, residents strive to convert their income and savings into dollars to protect their value. Meanwhile, they struggle with capital control restricting the possession of foreign currencies and the exchange rate set by the central bank, which can depreciate the value of their currency by up to 50% (for example, as was the case with the Argentine peso).
For these reasons, residents of these countries are increasingly turning to decentralized finance (DeFi), using stablecoins, which are digital representatives of fiat currencies, to bypass these restrictions.
In this complicated context, American stablecoins regulated by law could be a potential solution. These digital tokens are tied to the value of a fiat currency, usually the dollar, and are designed to maintain a stable value relative to the base asset. They can offer the stability of the dollar combined with the flexibility and technological advantages of cryptocurrencies, providing a new financial tool that can help consolidate the position of the dollar in the global economy.
With the evolution of stablecoin regulations in the US, it becomes clear that these digital assets can play a crucial role in mitigating the impact of de-dollarization on the global economy. Thus, they can counteract inflationary pressure and the increase in borrowing costs for the USA.
US-regulated stablecoins can play a significant role in countries where the dollar is currently widely used outside the official economy, i.e., in the shadow economy. By replacing the “shadow” dollars with blockchain-tracked tokens, these stablecoins can offer a more transparent and regulated alternative for transactions, thereby reducing the risk associated with the shadow economy.
US-regulated stablecoins could be a potential strategy to counteract de-dollarization efforts. By leveraging the stability of the dollar and the flexibility of cryptocurrencies, these tokens can provide an additional tool to maintain the global influence of the dollar.
