A recent analysis by Citi experts suggests that while stablecoins are reinforcing the dominance of the US dollar, they are also challenging the idea that Bitcoin could eventually dethrone the dollar as the global reserve currency.
Citi’s report points out that cryptocurrencies like Bitcoin were initially seen as alternatives to central bank-issued money, with some even speculating that Bitcoin could end the US dollar’s reign. However, the rise of stablecoins, which now make up the majority of cryptocurrency trading, is challenging this assumption.
The majority of stablecoins are tied to the US dollar, with their issuers maintaining reserves in US dollars and US Treasury bonds. Citi argues that as stablecoins gain more regulatory clarity and legitimacy, they could further cement the dollar’s global standing rather than replacing it.
According to the analysts, as regulations surrounding stablecoins become clearer, the demand for US Treasury bonds by stablecoin issuers may increase significantly. In fact, they suggest that stablecoins could make the US dollar even more accessible internationally, enhancing its dominance in the global economy.
The report also notes that stablecoin usage is expected to hit unprecedented levels in early 2024, with a projected $5.5 trillion in transactions—surpassing Visa’s $3.9 trillion for the same period.
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