Eight decades of dollar history can be viewed through a three-act lens.
Act I introduced the Eurodollar: offshore bank deposits emerging from London in the 1950s, allowing various entities to hold dollars beyond U.S. oversight, creating a massive shadow banking system.
Act II was characterized by the Petrodollar. Following 1974, the OPEC decision to price oil in dollars anchored global energy demand to the U.S. currency, enhancing the appeal of Treasury bills.
Act III is currently unfolding. The USD-backed Stabledollars (or stablecoins)—digital tokens completely backed by T-bills and cash—surpassed a circulating supply of $230 billion, often transferring more value than platforms like PayPal and Western Union. Stabledollars are reshaping the dollar into a monetary API, enabling transactions in seconds for a negligible fee.
For instance, a merchant in Lagos can accept USDC on her smartphone, avoiding 20% depreciation in naira and restocking her inventory the same day. Similarly, a hedge fund in Singapore can park funds in tokenized T-bills with substantial yields, transferring dollars without traditional bank intermediaries. A Colombian freelance worker might convert earnings into digital dollars, dodging capital controls and withdrawing local currency almost instantly.
While stablecoins haven’t entirely replaced the banking infrastructure, they have effectively navigated its slowest and priciest aspects.
The forthcoming GENIUS Act in the U.S. Senate aims to license stablecoin issuers nationally, potentially paving the way for them to hold master accounts at the Federal Reserve. Forecasts suggest that a stablecoin float could hit $2 trillion by 2028, matching the Eurodollar’s stock from the early 1990s.
This estimation is realistic; Tether and Circle dominate the market, with reserves primarily held in short-term U.S. debt, meaning that foreign entities are essentially possessing digitized T-bills that transact within 30 seconds. The dollar’s network effect is transitioning from SWIFT communications to smart-contract interactions, extending its supremacy without introducing new physical currency.
However, the era of Stabledollars isn’t free from challenges. The private tokens that encapsulate government currency raise critical questions regarding monetary policy control when a significant portion of the offshore supply is held in smart contracts. What recourse does a family in Venezuela have if they are barred from accessing funds? Can Europe or the BRICS economies sustain reliance on an asset regulated by the U.S.? Addressing these governance dilemmas will require policymakers to view stablecoins as essential infrastructure rather than speculative nuisances.
The approach is clear:
- Enforce Basel-style capital and liquidity regulations on issuers.
- Ensure real-time attestations of reserves on-chain for default transparency.
- Mandate compatibility across various blockchains to avert monopolistic custodianship.
- Extend FDIC-like protection to tokenized deposits so users receive the same safety net as traditional bank accounts.
Executing these strategies would enable the United States to create a more robust digital dollar than any competing central bank digital currency (CBDC), including China’s. Failing to act may lead to offshore issuance, leaving the U.S. to oversee an uncontrollable shadow network.
Historically, dollar hegemony has evolved alongside prevailing trade dynamics: Eurodollars supported post-war recovery, petrodollars facilitated the fossil-fuel era, and Stabledollars are now linking the accelerated, software-driven economy.
A decade hence, these digital currencies will be seamlessly integrated into daily life—prices quoted at local shops in various currencies but settled in tokenized dollars behind the scenes. Financial institutions may offer notes, which are essentially programmable instruments for collateral calls. Payroll systems could automatically allocate savings, investments, and charitable contributions at the moment of transaction.
The central question remains: will the United States guide this transition it unintentionally initiated? As stablecoins emerge as the fastest-growing class of quasi-sovereign assets, structured regulations could solidify the dollar’s next evolutionary phase. Ignoring this trend ensures that the future will materialize—just without American leadership.
