CHAPTER 4 · PART C
The Dollar Question
If 99% of stablecoins are USD-pegged, the stablecoin revolution IS dollar proliferation. This
isn't a fintech story anymore. It's a world power story.
The Eurodollar Parallel
In the 1960s, US dollars started accumulating in European banks outside American regulation.
These "Eurodollars" were initially viewed with suspicion — unregulated dollars floating
around offshore, beyond the Fed's control. But they became integral to global finance. The US
eventually supported them because they entrenched dollar dominance without requiring
American institutions to be present in every market.
Stablecoins are Eurodollars on blockchain.
Every compliant stablecoin must be backed by reserves held in dollars. As stablecoins are
adopted globally, they become a continuous engine of demand for dollar-based assets. Every
Nigerian converting naira to USDT is, through a chain of transactions, financing US Treasury
bills. Wharton researchers called this "crypto's Bretton Woods for the dollar."
The difference: Eurodollars were institutional — accessible only to banks and large
corporations. Stablecoins started retail, accessible to anyone with a phone. The same dynamic
of offshore dollar proliferation, but democratized.
The US-China Digital Currency Arms Race
The United States is backing private stablecoins to extend dollar dominance. China is
countering with its central bank digital currency, the e-CNY, which has processed over 50
trillion yuan — roughly $7.3 trillion — by mid-2025, with about 260 million users.
The GENIUS Act projects $1.75 trillion in new stablecoin issuance over three years. Trump
vowed in 2025 to make America "the crypto capital of the world." David Sacks, appointed as
"crypto czar," said stablecoins let the US "maintain financial influence without overextension."
Chinese officials view USD stablecoins as a strategic threat. These tokens bypass capital
controls and leak funds out of China's closed financial system. Wang Yongli, former Vice
President of the Bank of China: "If China fails to keep up with dollar stablecoins in terms of
payment efficiency, progress toward the international use of the renminbi could be limited."
The Council on Foreign Relations put it bluntly in August 2025: "Bank-issued dollar stablecoins
present a powerful use case — a new channel for transacting in dollars that the Chinese state
cannot fully monitor, throttle, or shut down."
Meanwhile, 99% of global stablecoin value is USD-pegged, circulating worldwide via crypto
networks beyond any single government's full control. China Daily — state media —
acknowledges that stablecoins "secure the dollar's status as the world's reserve currency."
The irony: China bans crypto domestically but Chinese citizens are among the heaviest USDT
users in the world, using it for capital flight despite official prohibition.
BRICS and Alternative Settlement
The BRICS bloc — Brazil, Russia, India, China, South Africa and their expanding membership
— is actively pursuing non-dollar trade settlement. By late 2024, 90% of Russia's trade with
BRICS nations was conducted in local currencies, according to Putin.
China-Russia bilateral trade hit $218 billion, with a growing share settled in yuan and rubles.
China's CIPS payment system linked with Russia's SPFS to bypass SWIFT entirely. Russia and
Iran explored a gold-backed "Persian region" stablecoin for sanctions-proof trade.
In October 2025, the EU sanctioned a Russian state-backed stablecoin called A7A5 — the first
stablecoin sanctioned for geopolitical reasons. The EU Council stated: "Recent activity has
evidenced Russia's increasing use of crypto. The stablecoin A7A5, created with Russian state
support, has emerged as a prominent tool for financing the war."
But here's the paradox: USD stablecoins like USDT are widely used by private citizens WITHIN
BRICS member states. Governments pursue public de-dollarization while their citizens pursue
private re-dollarization. The governments try to leave the dollar. Their people run toward it
digitally.
A BRICS common currency remains aspirational at best — stalled amid diverging economic
conditions and mutual distrust. The yuan accounts for only about 2.3% of global reserves.
Dollar Weaponization vs Stablecoin Neutrality
The freezing of over $300 billion in Russian reserves in 2022 was a turning point. Many
nations now view the dollar less as a neutral medium of exchange and more as a tool of
geopolitical coercion.
Stablecoins offer a strange middle ground: the "neutral dollar." In politically or financially
repressed environments, stablecoins can reintroduce a dollar-denominated store of value into
local markets outside official oversight. The dollar's purchasing power without the political
strings.
Some call this "America's Trojan horse" — presented as neutral technology, but cementing the
US unit of account even in adversaries' economies.
But stablecoins aren't fully beyond US reach. Roughly 75% of reserve assets are held in US
Treasuries. Issuers like Circle and Tether have complied with sanctions, freezing blacklisted
addresses. Under the GENIUS Act, the US could weaponize stablecoins too. The "neutrality" is
conditional.
The European Counter-Move
The EU's MiCA regulation caps non-euro stablecoins at 200 million euros per day or 1 million
transactions per day. Exceed these thresholds and regulatory intervention triggers. Euro-
denominated stablecoins face no such cap. The message is clear: this is a sovereignty play.
Christine Lagarde, ECB President: stablecoins could "lead to the privatization of money." She
warned they "pose risks for monetary policy and financial stability because they could lure
deposits away from banks." She's pushing the digital euro as "key to Europe's financial
autonomy."
Circle's euro stablecoin EUROC is gaining traction under the supportive regime. Some EU
exchanges delisted Tether until compliance was assured.
Europe's position: "If you can't beat them, regulate them — and build your own."
The Emerging Market Sovereignty Crisis
The IMF reported in 2025 that "the lion's share of cross-border stablecoin transactions now
flow from advanced economies into emerging nations." Dollar stablecoin use has surged in
countries with high inflation — the exact countries that can least afford to lose monetary
sovereignty.
Turkey: $38 billion in stablecoin purchases = 4.3% of GDP. Nigeria: $60 billion in crypto
volume in one year. Argentina: stablecoin trading spikes above $10 million per month
whenever the peso crashes.
Standard Chartered estimates stablecoins could draw "$1 trillion in deposits from banks in
emerging markets over the next three years."
Central bank seigniorage erosion is real: Tether made $13.7 billion in profit in 2024 from T-bill
reserves. That interest — earned on dollars backing stablecoins held by Nigerian and Turkish
and Argentine citizens — flows to a private company in the British Virgin Islands instead of to
those countries' governments.
Stablecoin issuers are now the third-largest buyer of US Treasury bills — roughly $40 billion
in 2024, after JPMorgan and China, according to the Atlantic Council. An Argentine converting
pesos to USDT is essentially lending to the US government, via Tether buying a T-bill with her
dollars.
Countries are shifting from prohibition to participation. Nigeria formed a task force. India
eased its ban rhetoric. Brazil is regulating. The genie can't be put back.
Is This a Feature or a Bug?
For a Venezuelan family, access to digital dollars is liberation.
For the Venezuelan central bank, it's loss of control.
For the US, it extends influence.
For China, it threatens the renminbi's rise.
For Europe, it demands a defensive response.
For the IMF, it's a "risk to monetary sovereignty" that must be managed.
For the 1.4 billion unbanked, it might be the first real financial product they've ever been able
to access.
The stablecoin revolution is not neutral. It has winners and losers. The question isn't whether
to have an opinion — it's whether the gains for billions of people outweigh the costs to the
institutions that currently control money.
That question doesn't have a clean answer. But it has to be asked honestly. And the honest
reckoning — the failures, the risks, the uncomfortable truths — that comes in Chapter 5.
First: what does the next decade actually look like?