stablecoins
Stablecoins (for example RLUSD and USDC) are a rising force in finance and they importantly boost the U.S. Dollar.
Stablecoins, a unique class of cryptocurrencies, are steadily climbing in significance within the global financial landscape. Unlike their volatile counterparts such as Bitcoin or Ethereum, stablecoins offer a stable value, typically anchored to fiat currencies like the U.S. dollar.
This stability merges the advantages of blockchain technology—speed, accessibility, and efficiency—with the reliability of traditional money, making them a vital tool for payments, cross-border transfers, and bridging crypto and conventional finance.
Theirgrowing prominence was a focal point at the White House Crypto Summit on March 7, 2025, where U.S. leaders and industry experts spotlighted their role in reinforcing the dollar’s global dominance.
The Growing Role of Stablecoins
Stablecoins have become indispensable in the crypto ecosystem, driving over two-thirds of worldwide cryptocurrency transactions. Their value, often pegged to the U.S. dollar, positions them as a practical "digital dollar" on blockchains, with transaction volumes surpassing $6 trillion annually a figure highlighted at the summit.
This utility shines in innovations like the "stablecoin sandwich" for international payments: converting fiat to a dollar-pegged stablecoin, transferring it globally, and reconverting it to local currency. This method promises to simplify and cut costs compared to traditional banking systems.
Beyond transactions, stablecoins are edging into everyday use. Retail payment systems and peer-to-peer platforms are beginning to adopt them, though broad acceptance may evolve slowly due to established habits.
In crypto markets, they act as a refuge, letting traders shift from risky assets to a predictable, low-volatility option—a role praised by Federal Reserve Governor Christopher Waller. This blend of practical application and market stability fuels their ascent, drawing keen interest from policymakers.
Strengthening the U.S. Dollar’s Global Standing
A central theme from the White House Crypto Summit was leveraging stablecoins to fortify the U.S. dollar’s preeminence. Treasury Secretary Scott Bessent captured this ambition, declaring, "We are going to keep the U.S. the dominant reserve currency in the world, and we will use stablecoins to do that." With roughly 98% of stablecoins linked to the dollar, their expansion amplifies the dollar’s influence in digital realms, countering challenges like China’s digital yuan and sustaining U.S. economic sway.
Stablecoins bolster the dollar through their reserves, often held in U.S. Treasury securities. Tether, the leading stablecoin, manages nearly $100 billion in Treasury bills, and regulatory growth could magnify this.
David Sacks, the White House AI and Crypto Czar, suggested in 2025 that stablecoins might generate "trillions of dollars of demand for U.S. Treasuries," potentially easing long-term borrowing costs. This connection ties their success to the dollar-based economy, a synergy President Trump endorsed at the summit by backing legislative clarity for dollar-tied stablecoins.
Key Takeaways from the White House Crypto Summit
The inaugural White House Crypto Summit marked a pivotal shift in U.S. crypto policy, with stablecoins emerging as a priority. Trump framed them as a way to "cement the U.S. dollar’s supremacy in a digital age," a stance echoed by Coinbase CEO Brian Armstrong, who urged swift stablecoin legislation.
Following Trump’s March 6, 2025, executive order creating a Strategic Bitcoin Reserve, the summit pivoted to stablecoins as the next frontier. Bessent vowed to ease restrictive rules with agencies like the IRS, signaling a supportive regulatory push.
Discussions revealed a legislative timeline: Trump aims to sign stablecoin laws before the August congressional recess, extending an initial 100-day target. Bipartisan efforts, like Senator Bill Hagerty’s "light-touch" bill, focus on ensuring dollar-pegged stablecoins maintain one-to-one reserves, aligning them with U.S. monetary goals. This clarity aims to harness stablecoins as a digital arm of American financial power.
More about Stablecoins
While stablecoins face hurdles—regulatory gaps, security concerns, and consumer safeguards—their potential to uphold dollar dominance while advancing innovation is undeniable. By linking digital assets to U.S. Treasuries and powering global transactions, they pave a practical path to blend blockchain with mainstream finance. The White House Crypto Summit crystallized this: stablecoins are not merely a crypto trend but a strategic lever for U.S. economic leadership in the digital era.
Overview of Stablecoin's Use Cases
Stablecoins play a critical role in the cryptocurrency ecosystem. Their importance stems from their unique ability to maintain a stable value. Typically, stablecoin has an associated smart contract which works to peg the stablecoin to a fiat currency.
Stablecoins can boost an ecosystems in several ways, for example, enabling smoother on-ramp and off-ramp, driving liquidity in DeFi, and offering traders a hedge against volatility. That's just a start. Here is a full list of ways stablecoins are able to drive the ecosystem:
Price Stability and Risk Mitigation
Hedge Against Volatility: Unlike most cryptocurrencies (e.g., Bitcoin, Ethereum) that experience large price swings, stablecoins maintain a fixed or relatively stable value. This stability allows traders and investors to protect their holdings during market downturns.
Safe Haven Asset: When the crypto market becomes highly volatile, users often convert their holdings into stablecoins as a way to "park" value without converting back to fiat.
On-Ramp/Off-Ramp for Fiat
Bridge to Fiat: Stablecoins act as an intermediary between fiat currencies and cryptocurrencies, allowing users to easily move money into and out of the crypto space. For users in countries with limited access to traditional banking, stablecoins provide a pathway to financial services.
Reduced Reliance on Banks: Users can avoid delays, fees, and other complications associated with traditional banking by using stablecoins as a fiat-like substitute in the crypto world.
Medium of Exchange and Payments
Payments and Transfers: Stablecoins facilitate cross-border payments at a lower cost and faster speed compared to traditional banking systems like SWIFT. Because their value is stable, they are better suited for everyday payments than volatile tokens like Bitcoin.
Settlement Layer: DeFi protocols use stablecoins as the preferred currency for loans, payments, and collateral, making it easier for participants to understand the value of their transactions.
Key to DeFi
Liquidity in DeFi Protocols: Stablecoins power decentralized exchanges (DEXs), lending platforms, and liquidity pools. For instance, stablecoin pairs (like USDC/ETH) provide liquidity and reduce price risks in decentralized exchanges.
Collateral for Loans: DeFi platforms like MakerDAO allow users to borrow stablecoins (like DAI) against their crypto assets as collateral. This is a critical function of decentralized lending and borrowing.
Trading and Arbitrage
Stable Trading Pairs: On crypto exchanges, stablecoin pairs enable traders to exit volatile positions quickly without moving to fiat.
Arbitrage Opportunities: Traders use stablecoins to profit from price differences across different exchanges. Because stablecoins have predictable value, they simplify arbitrage strategies.
Supporting New Use Cases
Programmable Money: Smart contracts can use stablecoins to execute automated payments, subscriptions, and other recurring transactions.
Tokenized Real-World Assets: Stablecoins are foundational to tokenizing real-world assets (like tokenized stocks or commodities), as they provide a "stable" unit of account.