Dollar Dominance: Stablecoins and the Future of Finance

The convergence of finance, technology, and regulation is underway, but not everywhere in the same way.

In the US, regulators have opened the door to innovations such as generic listing standards for crypto ETFs, regulatory clarity for certain DeFi user interfaces, a framework for tokenised securities venues, and DTC's tokenisation of securities.

The SEC staff's recent FAQs suggest that promoting a network's utility, building functionality, and even announcing a token buyback do not necessarily constitute the essential managerial efforts that would make the token a security.

This marks a shift from asking how much crypto can fit inside the existing financial system to asking how much of the financial system can be put on crypto rails.

The dollar has gone on-chain, with US dollar-denominated stablecoins circulating around the world and providing access to dollar liquidity in markets where traditional dollar banking may be expensive, slow or unavailable.

On the other hand, Europe is focusing on building a tokenisation strategy around institutionally mediated infrastructure anchored to the existing central-bank settlement architecture, which may not solve the asymmetry between the dollar and euro systems over time.