Stablecoins Exposed: Tool for Dollar Dominance or Double-Edged Sword?
The Bank of England's Financial Policy Committee has revealed a crucial insight into the true nature of stablecoins. According to Carolyn Wilkins, an external member of the committee, stablecoins are no longer just a curiosity in the crypto world but a tool for US dollar dominance.
Wilkins pointed out that stablecoins provide 24/7 cross-border settlement, enabling 'digital dollarisation' and creating structural demand for US safe assets. The largest stablecoin issuers hold nearly $150 billion in Treasury bills at the end of 2025, making them meaningful participants in the short-term Treasury market.
The mechanism is double-edged, Wilkins warned, as mass redemptions can trigger forced T-bill sales, amplifying yields and potentially causing broader market stress. The regulatory landscape remains fragmented, with the GENIUS Act requiring 1:1 reserve backing for payment stablecoins but its implementation stalled.
The geopolitical stakes are rising as China expands its own alternatives to the US dollar-centric system. Wilkins offered a historical cautionary tale in the decline of sterling, emphasizing that network effects can reinforce an international currency for a long time but ultimately rest on fundamentals such as fiscal capacity and credible institutions.