Stablecoins are doing something few crypto assets ever manage: making the U.S. dollar more useful online while also turning token issuers into major buyers of short-term Treasury bills. That’s a win for dollar reach in normal times, and a liquidity problem if confidence ever cracks hard enough.
- Dollar stablecoins still dominate the market.
- Reserve assets are heavily concentrated in Treasury bills.
- That supports demand in calm markets, but can magnify stress in a redemption rush.
- The U.S. and UK are writing rules, but they are not making the same policy bet.
That was the core message from Carolyn Wilkins, an external member of the Bank of England’s Financial Policy Committee, in a Sep. 15 speech at Queen’s University Belfast. Her view is not anti-stablecoin. It is more like: yes, these things may help the dollar and improve payments, but don’t get drunk on the upside and ignore the plumbing.
The scale is now hard to hand-wave away. Reap Global’s market snapshot, last updated on 13 August 2026, puts the stablecoin market at $308.0 billion, with about 99.5% of value denominated in dollars. That is a long way from the sector’s rough beginnings less than five years ago, when stablecoins were still a niche crypto utility and not a piece of market plumbing with real macro implications.
Wilkins said dollar stablecoins already have a “considerable first-mover advantage”. That sounds academic, but it is just the usual winner-takes-liquidity dynamic. The biggest tokens become the default place to park value, settle trades, post collateral, and move money quickly across venues. Once a market standard forms, it tends to stick like dried resin.
The interesting part is what sits behind that standard. Stablecoins are usually backed by reserve assets, the cash and liquid instruments meant to keep each token near $1. In practice, that reserve mix increasingly points toward short-term U.S. government debt, especially Treasury bills. According to figures cited in the briefing, USDT issuer Tether and USDC issuer Circle held almost $150 billion in Treasury bills at the end of 2025, and their net Treasury bill purchases reached about $33 billion during the year.
That does create a real channel from crypto rails into sovereign debt markets. It is fair to say stablecoins could boost US dollar and Treasury demand: BoE. It is also fair, and more honest, to ask how much of that demand is truly new. Some of it may simply be money shifting out of other safe assets, including Treasury money market funds, rather than fresh capital appearing out of thin air like a magic money printer with a compliance department.
Still, the policy significance is obvious. Wilkins said stablecoins could “reinforce the US dollar’s international role” by making dollar-linked assets and settlement systems easier to access outside the United States. In plain English: if someone in a country with weak banking rails wants dollar exposure or a cheap way to move value abroad, a stablecoin can be a much simpler route than the traditional correspondent-banking maze.
That matters most in cross-border settlement and remittances. Research cited by Wilkins found average remittance costs of 6.4% worldwide in 2024, rising to about 8.5% in Sub-Saharan Africa. Those are ugly fees for a service that should be basic financial plumbing, not a toll road with cartel pricing. If stablecoins can cut even part of that friction, they have a serious use case beyond crypto trading and speculative churn.
And that’s the necessary reality check: most stablecoin use is still crypto-native. The biggest buckets remain trading, lending, collateral, and market liquidity. That does not make them useless. It just means the industry’s favorite habit, declaring victory before the checkout counter has even been built, should be treated with caution.
Reap Global’s Five perspectives on stablecoins research also shows why the dollar’s dominance is still the main story. USDT and USDC together account for roughly 82% of supply, and the market remains overwhelmingly dollar-denominated. Circle’s euro-backed token did cross €400 million in August, and the whole euro stablecoin market stood at about €650 million in June, but those numbers are tiny next to the dollar complex. The euro is present. It is not threatening hegemony. Not even close.
The uncomfortable part of the stablecoin model is that the same reserve structure that gives these tokens credibility can also turn them into a problem during a panic. If holders rush to redeem all at once, issuers may need to liquidate reserves quickly. If those reserves are concentrated in Treasury bills, a mass redemption wave could force selling into an already stressed market.
That is the real concern behind Wilkins’ warning. This is the “dash for cash” problem in new clothes. Even very liquid assets can seize up when everyone tries to sell the same thing at the same time. The March 2020 Treasury market stress episode is the obvious comparison. Back then, the Federal Reserve had to step in because the deepest government bond market in the world was still vulnerable when investors all stampeded for cash.
Stablecoins could, in theory, transmit that kind of stress back into Treasury markets if the sector grows large enough and redemptions hit at scale. That is not a prediction that catastrophe is imminent. It is a warning that “fully backed” is not the same thing as “immune to runs.” A clean reserve sheet does not stop a crowd from running for the door.
USDC offers a real-world reminder of how quickly confidence can wobble. Circle had about $3.3 billion at Silicon Valley Bank when it failed in March 2023, and USDC lost its dollar peg during the episode. US authorities later guaranteed Silicon Valley Bank deposits, which helped restore confidence and bring the token back toward normal trading. The lesson was blunt: if a reserve setup has a weak point, the market will find it faster than any polished explainer ever will.
That is why regulation is suddenly moving at speed. In the U.S., the GENIUS Act was enacted in July 2025 to create a federal framework for payment stablecoins. The Office of the Comptroller of the Currency is expected to finalize stablecoin rules by November 2026, with an effective date possibly around March 2027. The framework includes annual audits for issuers with more than $50 billion outstanding, plus weekly reporting to the main regulator and monthly public disclosures for regulated issuers.
The UK is taking a different approach. The Financial Conduct Authority finalized its stablecoin issuance rules in June, while the Bank of England says its final framework for sterling-denominated systemic stablecoins should be completed by the end of 2026. The Bank’s direction of travel puts more explicit weight on liquidity and contingency planning.
That difference matters. The U.S. looks more focused on bringing stablecoins into the mainstream financial system and giving the dollar a stronger on-chain distribution channel. The UK looks more interested in asking what happens when the music stops and everybody wants out at once. Both instincts make sense. One is about market capture. The other is about not getting blindsided by a redemption fire drill.
There is also a bigger point here about what stablecoins actually are. They are not just a crypto convenience layer anymore. They are becoming a bridge between blockchain-based settlement and traditional sovereign debt markets. That bridge can be genuinely useful, especially for cross-border transfers, dollar access, and faster settlement. It can also carry stress in the opposite direction if reserve assets have to be sold into a panic.
So yes, stablecoins may help extend the dollar’s reach. Yes, they may deepen demand for Treasury bills. And yes, they may make payments cheaper in places where the old system still behaves like a toll booth with a banking license.
But the hard truth is that the same structure that makes stablecoins efficient also makes them vulnerable. If disclosures are weak, reserves are sloppy, or redemption planning is a joke, the market will not care about the marketing copy. It will care about getting its money back.
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Key takeaways
- Why do stablecoins matter to the U.S. dollar?
They give dollar-linked assets a global digital distribution channel. That can reinforce dollar usage outside the U.S., especially where traditional banking rails are slow or expensive. - Do stablecoins create new demand for Treasury bills?
They do create demand, but not all of it is necessarily new demand. Some inflows may simply move money from other safe assets, such as Treasury money market funds. - What is the main risk in the stablecoin model?
A redemption run. If users rush to cash out, issuers may have to sell reserve assets quickly, which could intensify stress in Treasury markets. - Are stablecoins already mainstream payments infrastructure?
Not yet. They are growing fast and have real cross-border use cases, but most activity still sits in trading, lending, collateral, and liquidity management. - Why is the UK focusing so heavily on liquidity?
Because the Bank of England sees potential systemic risk if sterling stablecoins become large enough to matter. Its framework is trying to reduce redemption risk before it becomes a problem. - Is the market still mostly dollar-denominated?
Yes. The latest snapshot puts it at about 99.5% dollar-denominated, which shows just how dominant the dollar remains in crypto rails.
