U.S. Turns to Stablecoins to Bolster Dollar’s Global Dominance: Sygnum

U.S. Turns to Stablecoins to Bolster Dollar’s Global Dominance

As the U.S. dollar experiences its most significant first-half decline since 1973, policymakers in Washington are increasingly looking to dollar-backed stablecoins as a means to reinforce the currency’s global preeminence. This development is detailed in a recent report by crypto bank Sygnum, which underscores the mounting challenges to the dollar’s long-term dominance despite its continued central role in international finance.

Decline of the Dollar and the Rise of Alternatives

The dollar has depreciated by 10.7% against major currencies through June 2025, driven by concerns over U.S. monetary policy, escalating national debt, and the impact of tariffs introduced during the Trump administration. This depreciation has prompted investors to diversify their holdings, with gold experiencing its strongest first-half rally since 1979 and cryptocurrencies such as Bitcoin—now valued at approximately $2.3 trillion—gaining increased attention as alternative safe havens.

This trend of “de-dollarization” is accelerating globally, as more countries opt to conduct trade in local currencies or digital assets. Sygnum’s analysis reveals that the dollar’s share of global reserves has declined from 70-75% in the early 2000s to roughly 55% today. Notably, this erosion has not been offset by significant gains in traditional reserve currencies like the euro, yen, or pound. Instead, non-traditional currencies such as the Chinese yuan, Australian dollar, Canadian dollar, Korean won, and Singapore dollar have seen increased prominence.

Stablecoins as a Strategic Response

In response to these shifts, the United States is turning to digital financial instruments—particularly stablecoins—to counteract the dollar’s diminishing share and to extend its influence in emerging markets. Stablecoins, which are typically pegged one-to-one with the U.S. dollar, have witnessed rapid adoption. They now account for nearly one-third of decentralized finance (DeFi) revenue, pushing the sector’s market capitalization beyond $258 billion. Tether’s USDT leads the market with a capitalization of $160 billion, representing 62% of the stablecoin sector, according to data from DeFiLlama.

Sygnum’s report highlights that the U.S. administration views dollar-denominated stablecoins as a tool to meet global demand for dollar liquidity and to reverse the dollar’s declining reserve currency status. The government is actively promoting the expansion of the stablecoin market and advocating for the swift enactment of relevant legislation.

Legislative Advances and Regulatory Challenges

Recent legislative progress reflects this strategic emphasis. The Senate’s passage of a comprehensive cryptocurrency and stablecoin regulatory bill marks a significant policy milestone. The GENIUS Act aims to establish a clear regulatory framework for stablecoins and their issuers, while the CLARITY Act seeks to provide more defined rules for the broader cryptocurrency ecosystem. These measures are expected to bolster demand for U.S. Treasury securities and reinforce the dollar’s global role.

Nonetheless, the U.S. approach faces notable challenges. Regulatory concerns have surfaced, with asset manager Amundi cautioning that U.S. stablecoin policies could introduce instability into the global payments system. Market confidence and broader economic conditions will also influence the effectiveness of this strategy. Meanwhile, international competitors are responding assertively; Chinese technology firms are lobbying for the development of offshore yuan-backed stablecoins to counterbalance the influence of U.S. dollar-linked digital currencies.

Outlook for Stablecoins and Dollar Dominance

Despite these obstacles, stablecoins are gaining traction among multinational corporations as U.S. regulatory frameworks take shape. Leading issuers such as Pax Dollar and USDT remain at the forefront of this digital currency evolution. As Washington seeks to leverage stablecoins to sustain the dollar’s dominance, the interplay of regulatory developments and geopolitical dynamics will be pivotal in shaping the future of this emerging financial frontier.