Stablecoins were once a minor appendage of crypto markets, a functional parking spot for traders moving between Bitcoin and Ethereum. However, the framing is no longer appropriate.
With a circulating supply exceeding $300 billion and annual trading volumes surpassing $23 trillion in 2024, stablecoins have become a parallel dollar infrastructure. They extend U.S. monetary power into markets where financial systems are fragile or inefficient, while exposing the fault lines of the countries that depend on them most.
In the meantime, the headline figures require some nuance. Much of this $23 trillion volume still reflects high-frequency trading loops on centralized exchanges.
However, the composition of flows is changing. Cross-border transfers of stablecoins, which are a closer indicator of usage in the real economy, reached record levels in 2025, surpassing Bitcoin and Ethereum for the first time.
According to the International Monetary Fund (IMF), Asia accounts for the largest share of volume, while Africa, Latin America and the Middle East show the fastest growth relative to GDP.
As a result, the IMF, which once viewed these tokens as niche tools for crypto settlement, now describes them as “the digital advantage of the dollar system.” This expression reflects both their usefulness and the extent to which they circumvent traditional channels of monetary control.
A safety valve for liquidity
For households and small businesses in Nigeria, Argentina or Turkey, stablecoins are rarely speculative assets. They are instruments of economic survival.
In Nigeria, where multiple exchange rates and currency shortages distort access to the dollar, USDT volumes in informal peer-to-peer markets often exceed official channels. In inflation-ravaged Argentina, local fintech studies show that stablecoins are now a favored savings tool, especially among younger workers.
The appeal is simple: stablecoins preserve purchasing power, settle instantly, and require no interaction with domestic banks.
Unlike traditional dollarization, which relies on physical cash or slow corridors of correspondent banking, digital dollarization moves at the speed of the Internet. A saver can exit the local currency in seconds, bypassing exchange controls, deposit insurance structures and bank balance sheets.
This change is visible in emerging market liquidity data.
Banking giant Standard Chartered estimates that emerging market banks could lose up to $1 trillion in deposits as savers migrate from low-yielding domestic accounts to dollar-denominated stablecoins backed by U.S. Treasuries.
For regulators, this looks like a slow but persistent race, leading to a reallocation of liquidity to offshore dollar instruments that fall outside their supervisory scope.
The dominant issuer in these regions is not a regulated US entity but Tether, whose offshore structure places it outside of immediate US prudential oversight. Tether is the leading issuer of stablecoins, with its USDT stablecoin having a circulating supply of nearly $190 billion.
However, its liquidity, familiarity and availability give it a structural advantage in markets with low banking penetration and high capital controls.
A new buyer on the Treasury market
Stablecoins are also reshaping demand for short-term U.S. government debt. Since most large issuers, like Tether, back their tokens with Treasuries and repos, their expansion makes them significant marginal buyers in money markets.
The IMF notes that, under certain conditions, a $3.5 billion increase in stablecoin issuance could compress short-term Treasury yields by about two basis points. This may seem small, but in one of the world’s deepest markets, such sensitivity indicates that stablecoins are becoming a significant player.
Forecasts vary, but several analysts predict that the stablecoin industry could reach between $2 trillion and $3.7 trillion by 2030, depending on regulatory clarity and institutional adoption. At the high end, stablecoins would contain enough Treasuries to influence liquidity conditions at the short end of the curve.
Yet stablecoin issuers operate without the liquidity guarantees available to money market funds. Their business model is rigid: the return on reserves goes to the issuer, while the liquidity and counterparty risk falls to the users.
In the event of a redemption shock triggered by regulatory action, market stress or loss of confidence, issuers could be forced to liquidate Treasuries amid deteriorating conditions.
A fragmented regulatory map
Until recently, the regulatory landscape for stablecoins was defined by fragmentation.
The EU’s Regulatory Regime for Crypto-Asset Markets (MiCA) requires a significant portion of reserves to be held in liquid deposits and prohibits interest payments to users. On the other hand, Japan has opted for a “banked” model, limiting issues to banks and trust companies.
The UK is designing a dual system in which the Bank of England oversees systemic issuers that are primarily backed by central bank deposits, thereby transforming them into synthetic CBDCs.
At the same time, the United States has played a central role in introducing a framework, the National Innovation Guidance and Establishment for American Stablecoins (GENIUS) Act, which is changing the global map.
The GENIUS Act is the first coherent federal proposal for dollar-backed stablecoins.
The regulations allow banks and licensed non-bank institutions to issue fully collateralized tokens backed by cash, treasury bills and repos. It establishes clear redemption rights, mandates reserve segregation, and places issuers under a federal licensing structure independent of securities regulation.
As a result, the GENIUS Act made the United States the most scalable and user-friendly stablecoin regime in the world:
- less restrictive than Europe,
- more flexible than Japan,
- and more market-oriented than the UK approach to synthetic CBDCs.
Essentially, the framework solidified the United States as the primary jurisdiction for domestic emissions.
However, this could also intensify pressures on emerging markets. By legitimizing and institutionalizing digital dollars, GENIUS has accelerated overseas adoption, increased deposit flight from emerging banks, and increased demand for U.S. debt, while leaving non-U.S. regulators with limited tools to slow change.
For context, Artemis data shows that the US stablecoin for payments has grown by more than 70% since the US regulatory efforts.
Meanwhile, other financial centers, including Singapore, Hong Kong and the United Arab Emirates, are developing schemes to attract institutional issuers. Yet none achieve the potential global reach of a federally sanctioned U.S. stablecoin model.
A geopolitical amplifier
Stablecoins integrate the dollar deeper and faster into the transactional life of developing economies than the old Eurodollar system ever did.
Expansion is occurring through private companies rather than state institutions, complicating traditional surveillance and diplomatic channels.
As a result, even large economies are reacting defensively. The European Central Bank (ECB) has cited the rise of US stablecoins as one of the catalysts for accelerating digital euro projects, amid concerns they could dominate cross-border payments within the eurozone.
For small economies, the stakes are higher. Stablecoins weaken national currencies, challenge the authority of central banks, and create a smooth channel for capital outflows.
But they also reduce remittance costs, expand access to stable savings products, and highlight inefficiencies in existing financial infrastructure.
This is both a financial upgrade and a systemic vulnerability.
As a result, the IMF’s concern is less with the technology itself and more with the speed of its adoption relative to the pace of regulatory coordination.
Stablecoins are growing faster than global frameworks can adjust, and their deepest penetration is occurring in economies least equipped to absorb the resulting shocks.
Stablecoins may have emerged from the crypto markets, but they are now at the forefront of global monetary change.
By strengthening the reach of the dollar, formalized by legislation like GENIUS, they are reshaping capital flows, challenging the stability of emerging markets and redefining the distribution of monetary power.
Whether they become a stable component of international finance or remain an ungoverned force will depend on the next wave of global policy decisions and how quickly the world adapts to the digital dollar era.
