By Maria Shen & Sanjay Shah, Electric Capital
Compiled by: Shenchao TechFlow
*Note: In this article, "Ethereum" refers to the network and "ETH" refers to the asset that powers it.
Far from declining, global demand for USD is exploding. While headlines focus on “de-dollarization”, a more important trend is emerging: more than 4 billion people and millions of businesses are actively seeking access to USD through stablecoins, representing the largest expansion of the USD network effect in decades.
This creates an unprecedented opportunity for Ethereum. Stablecoins provide global individuals with access to USD - a 60x increase since 2020 to over $200 billion - and the millions of new USD holders need more than just digital cash. They need yield, investment opportunities and financial services. Traditional finance cannot serve this vast new market due to regulatory and infrastructure limitations.
Ethereum is uniquely positioned to provide the global financial infrastructure for this new digital USD economy, and ETH will directly benefit from this growth.
Millions of new USD holders enter via stablecoins
There is enormous latent demand for USD by individuals and businesses around the world.
People all over the world want to secure themselves in USD:
Over 4 billion people face significant monetary risk due to political instability, poor monetary policy, and structural inflation. (1)
It is estimated that 21% of the global population lives in countries with annual inflation rates above 6% (2), rapidly eroding savings and purchasing power.
For these populations, holding USD means financial security. The USD is seen as a store of value, a means of cross-border transactions, and a hedge against local currency fluctuations.
Businesses need USD to transact:
The USD remains the dominant currency for global trade, with the USD involved in at least one side of 88% of global foreign exchange transactions. (3)
Businesses in emerging markets rely on USD liquidity for international payments, imports, and supply chains, where local banks and FX markets are often limited or volatile.
Small and medium-sized enterprises and freelancers increasingly need digital USD to get paid and avoid currency mismatch risk.
For the first time in history, anyone in the world can hold USD through stablecoins:
Anyone with internet access can hold and transact in USD – no bank, no government permission, globally available 24/7.
As a result, the stablecoin market capitalization has increased by 60x since 2020. (4)
Peak adoption is concentrated in emerging markets previously excluded from USD-denominated finance. Nigeria has become the second-largest crypto market globally, while underground crypto use continues to persist in China despite bans. (5)
Stablecoins are creating a new class of USD holders among the largest populations globally – businesses pricing in USDT and families saving in USDC. They are driving a fundamental expansion of the USD financial services market.
These new USD holders seek yield, creating opportunities for new global financial infrastructure
Stablecoin holders want to put their money to work.
Today, millions of people can hold USD through stablecoins. But their desires go far beyond that. Individuals and businesses naturally want to use funds to earn returns, invest and grow wealth.
Traditional finance is unable to serve this new market:
The U.S. banking system requires regulatory compliance, excluding most global participants.
Cross-border financial services remain expensive, slow, and geographically restricted.
Traditional finance was built for institutions and high-net-worth individuals, not global retail.
Geographic and regulatory barriers prevent billions of dollars from participating in USD-denominated financing.
This creates a need for new financial infrastructure that can serve billions of stablecoin holders worldwide, enabling them to put new USD to work.
Only Ethereum meets all three requirements to serve global stablecoin holders
New financial infrastructure to serve stablecoin holders must meet three key requirements simultaneously:
Globally available – must be accessible anywhere with an internet connection, from New York to Nigeria to rural Nepal. Most of the world cannot access USD-based financing due to geographic or regulatory reasons.
Safe for institutions – must provide the security, reliability, regulatory clarity, and customizability needed for institutions to build multi-billion dollar financial products.
Resistant to government interference – must be free from the control of any single government, as many governments would prefer to restrict the circulation of USD to protect local currencies and control capital flows.
Ethereum Meets All Three Requirements:
Globally accessible: Anyone with an internet connection around the world can use Ethereum 24/7.
Safe for institutions:
Secure – The most economically secure and decentralized of all programmable blockchains. The most mature security infrastructure - with the largest number of open source developers, verified contracts, security auditors and tools.
Reliable – Maintained 100% uptime for 10 years, regardless of market crashes or geopolitical events.
Regulatory Compliant – US regulators have classified ETH as a commodity, providing a clear institutional framework.
Customizable – Ethereum's L1+L2 framework enables customizability, allowing institutions to optimize for specific use cases and meet regulatory requirements (e.g., Coinbase and Robinhood are both building L2 chains on Ethereum).
Superior Track Record – Has the world's largest digital finance economy: Over $140 billion in stablecoin market capitalization (6), over $60 billion invested in decentralized finance (DeFi) protocols (7) and over $7 billion in tokenized real-world assets. (8)
Resistant to government interference: Governments cannot occupy a single point of control to control or restrict the network.
Ethereum uniquely meets these requirements with its strong decentralization - its origin story is almost impossible to replicate today.
Strong decentralization makes Ethereum globally accessible, secure, reliable, and resistant to government interference.
This level of decentralization is rooted in Ethereum's origins and culture.
Ethereum initially was a community-funded, proof-of-work blockchain, which made its asset ownership very broad. Today's environment makes it no longer suitable to start in this way.
Its culture has always prioritized decentralization - maintaining costly customer diversity and resisting centralized shortcuts - a culture that is almost impossible to transform.
As a result, Ethereum has a decentralization advantage that other chains cannot easily replicate, which also provides Ethereum with a lasting moat.
Over 1 million validators (9) spread across 100+ countries (10)
Multiple independent development teams ensure resilience and the largest open source developer ecosystem (11)
Broad asset ownership due to community-funded launch and Proof-of-Work origins
No other alternative meets all three requirements at the same time:
*Bitcoin may become more programmable in the future, but only if the Bitcoin community agrees to change the opcodes to enable this functionality.
As ETH becomes the reserve asset for a new digital USD economy, demand for it could increase
What is a reserve asset?
In any financial system, the reserve asset is the credible foundational layer that underpins everything. It is the collateral, savings, or liquid assets held by institutions, protocols, and users for store of value, loan collateral, and transaction settlement.
In traditional systems, the USD, U.S. Treasury bonds, and gold are examples of reserve assets because they are trustworthy, liquid, and widely accepted.
Why ETH Naturally Plays This Role
With billions of dollars flowing through stablecoins on Ethereum, participants need a secure, permissionless, and efficient asset to support lending, staking, and yield generation. ETH is uniquely positioned to do this because:
Scarce and Trustworthy: ETH has a predictable supply, low inflation, and is not centrally controlled.
Productive: Unlike gold or static USD, ETH generates yield through staking - similar to how income is generated when holding real estate or treasury bonds.
Collateral Utility: ETH is already the largest on-chain collateral asset in the Ethereum ecosystem, supporting $19B of lending protocols (12). Institutions hold it because they need it to enter DeFi markets.
Seizure and censorship resistant: ETH cannot be frozen or seized by governments, making it more resilient than centrally issued assets.
Programmable and Liquid: ETH is deeply integrated into the entire on-chain financial system and has unmatched liquidity for large transactions.
Why This Makes ETH Valuable
As more users hold stablecoins and need financial services, they need a reserve asset to support those activities. ETH can earn yield, secure the network, and underpin DeFi lending - therefore, demand for ETH will naturally grow as the system evolves.
Simply put: More stablecoin adoption → more on-chain activity → more demand for ETH as collateral → more ETH held by institutions and users.
L2s Expand Demand for ETH
The growth of Ethereum Layer-2 further stimulates demand for ETH. By reducing transaction costs, accelerating transaction speeds, and enabling new use cases, Layer-2s open up more areas where ETH can be used as collateral. This expands ETH's reach and strengthens its position as the reserve asset for the digital USD economy.
As demand for ETH increases, it is also expected to become a global store of value
The increasing demand for ETH has also seen it capture a large share of the traditional store of value market.
Like Bitcoin, Ethereum has superior store of value (SoV) characteristics compared to traditional assets such as gold.
Rather than competing, ETH and BTC are likely to carve out a share of the $500 trillion traditional SoV assets (gold, treasury bonds, stocks, real estate) in the coming years.
In addition to Bitcoin's SoV attributes, ETH offers holders yield.
Yield creation is a major boon as investors overwhelmingly favor yield-generating assets. US households hold ~$32 trillion in dividend-paying stocks. (xiii), while they hold less than $1 trillion worth of gold.
ETH has superior properties compared to traditional SoV assets and is able to offer yield:
Conclusion: Holding ETH may be the best way to participate in the growing stablecoin economy
The growth of the stablecoin economy has created a strong flywheel for Ethereum and ETH.
As more stablecoins are deployed on Ethereum, the demand for ETH is also strengthened. Higher ETH value and a more secure network attract more institutions and services, which further drives stablecoin adoption.
Alternatives Face Significant Challenges in Replicating This Flywheel:
Traditional finance cannot serve the billions of people excluded by geographic and regulatory barriers.
Government-controlled systems remain subject to political influence and jurisdictional restrictions.
Bitcoin lacks the programmability for sophisticated financial services.
Other blockchains lack the security, reliability, and customizability institutions need, and also lack the decentralization to resist government interference.
The result is: Holding ETH may be the easiest and most efficient way to gain exposure to the growing stablecoin economy.
You can also choose to invest in specific DeFi protocols that benefit from stablecoin expansion. But this is riskier and requires expertise.
For most retail and institutional participants, ETH provides the simplest exposure to the entire digital USD ecosystem.
Appendix
Risks to Watch Out For
As with any emerging global system, Ethereum faces significant risks. Despite the many risks, the three greatest risks threaten the argument that 'Ethereum will build a permissionless, USD-based financial system with ETH as the reserve asset'.
The USD Becomes the Reserve Asset, Not ETH
If stablecoins like USDC or USDT were to dominate, being used for lending, collateralization, and settlement, the USD might replace ETH as the reserve asset of the system. In this scenario, ETH might be seen primarily as 'gas money' rather than a core store of value. However, given that ETH accounts for 44% of on-chain lending collateral on Ethereum mainnet and Layer2s, and generates a 3-5% staking yield, replacing ETH seems challenging. More importantly, ETH is the only truly decentralized asset on Ethereum - stablecoins like USDC and USDT are centralized and can be frozen or seized, fundamentally disqualifying them from fulfilling ETH's role as censorship-resistant collateral. More likely, ETH and USD will play complementary roles - USD committed to stability and transaction optimization, and ETH providing decentralized, seizure-resistant store of value and network ownership.
CBDC Competition to Replace USD Stablecoin Adoption
Central Bank Digital Currencies (CBDCs) can provide similar 24/7 digital dollar access and have full sovereign backing, which could crowd out private stablecoins and limit the permissionless USD system that Ethereum currently supports. CBDCs are inherently national and often lack true cross-border interoperability, and may limit open developer access due to compliance and identity requirements. In contrast, stablecoins have completed trillions of dollars in settlements annually, operate globally by default, and maintain greater flexibility in innovation, making it difficult for CBDCs to replace them.
Competing Chains Overtake Ethereum
A faster, lower-cost blockchain with less initial decentralization might attract users and developers who value low fees and a streamlined user experience, and create strong liquidity and network effects early on. Over time, this chain might mature its validator set enough to become “sufficiently decentralized”, thereby disrupting Ethereum’s dominance. However, given Ethereum’s level of decentralization and its decades of proven security, replacing it is no easy feat.
Appendix Data
Annual stablecoin settlement volume exceeds $6 trillion (10x growth from 2020): (14)
Ethereum accounts for over 55% of stablecoins: (15)
ETH could become the reserve asset of a new financial system. 44% of lending collateral in the Ethereum ecosystem is ETH, making it the largest collateral asset ($19 billion): (16)
