Original title: (Why is the US dollar stablecoin the new US dollar 3.0?) Original author: Ye Kai, China Digital Capital
Looking back at the course of history, we will find that the dollar's dominance in the global financial system did not come out of thin air. The dollar has undergone multiple stages of evolution to be widely used around the world. From the establishment of the Bretton Woods system to the rise of the petrodollar, and then to today's dollar stablecoin, the dollar's hegemony has been continuously consolidated and strengthened. Today, we are entering a new era - the dollar 3.0 era, and the representative feature of this era is the rise of the dollar stablecoin.
The emergence of US dollar stablecoins (such as USDT, USDC, etc.) is not only a product of technological innovation, but also represents a major transformation of the global financial system. Through stablecoins, the influence of the US dollar is no longer limited to the traditional banking system and payment network. It has begun to penetrate the digital currency market around the world through blockchain technology, thus forming a new global payment and financial mechanism.
So, why is the US dollar stablecoin called the "new 3.0 era" of the US dollar? What does its emergence mean for the global financial system, the US government, and emerging markets? Let's talk about this issue together.
1. The “dammed lake” of U.S. debt is forcing the U.S. government to “find money”
The debt problem of the United States is not new and has become the focus of global financial markets. Today, the total debt of the United States has soared to 36 trillion US dollars and is increasing rapidly every year. In order to maintain this huge debt, the US government relies on financial support from the global market, especially by issuing bonds to make up for the fiscal deficit. However, traditionally major buyers of US debt, such as China and Japan, are gradually reducing the pace of purchasing US Treasury bonds. This puts the US government under tremendous financing pressure.
To solve this problem, the US government passed the GENIUS Act, which changed the rules of the global stablecoin market. According to this act, the issuance reserves of all US dollar stablecoins must be linked to cash or short-term US Treasury bonds, that is, $1 of stablecoin must be equal to $1 of short-term Treasury bonds. This practice turns US Treasury bonds into the "legal base" of US dollar stablecoins, which also means that if an institution wants to issue US dollar stablecoins, they must first purchase short-term US Treasury bonds. This change is equivalent to "opening the floodgates" for the US government's fiscal crisis, and it also makes the connection between stablecoins and the US Treasury market closer.
2. How does the dollar on the chain "absorb water"?
As the global market demand for US dollar stablecoins continues to increase, issuers of stablecoins such as Tether have begun to switch most of their reserve assets to short-term US Treasury bonds. For example, Tether has transferred about 75% of its reserve assets to the short-term US Treasury bond market by 202. This means that the demand for stablecoins will become an important support force in the US Treasury bond market - in this way, global investors (especially users of stablecoins) provide low-interest funds to the US government, and in turn enjoy the convenience of fast payment and settlement through stablecoins.
This change is not just happening in developed countries. In some emerging markets, such as Nigeria, the Philippines, and Vietnam, USDT and other stablecoins have become the main payment tools, especially in remittance scenarios. For example, foreign workers in the Philippines use platforms such as PayPal to remit their salaries back home quickly and at low cost, bypassing the high fees in traditional remittance channels.
However, the impact of USD stablecoins is not limited to the payment sector. In these countries, the use of USD stablecoins has begun to affect their own monetary policies. For example, in Nigeria, due to the high premium of USDT (the premium relative to the naira was as high as 20%), the country's local currency, the naira, has been severely devalued, and monetary policy has lost some of its effectiveness. This "dollarization" phenomenon has brought pressure on financial sovereignty to many emerging markets, and has also made them begin to re-examine the challenges posed by USD stablecoins.
3. Stablecoins and U.S. Treasuries: Sweet Symbiosis or Dangerous Siamese Twins?
The relationship between the US dollar stablecoin and US Treasury bonds is very complex and can be seen as a dual symbiosis. They are interdependent and together constitute a new global financial ecology. During the minting stage, the demand for short-term US Treasury bonds by stablecoins continues to increase. By purchasing these bonds, stablecoins provide financial support for the US government. On the other hand, during the circulation stage, stablecoins automatically provide a "free sales" channel for the US Treasury market through global payment flows.
However, this relationship is not always risk-free. The dependence of stablecoins on U.S. Treasuries may lead to some potential risks. For example, if there is a large-scale redemption wave in the stablecoin market, the stablecoin issuer needs to sell an equal amount of U.S. Treasuries to redeem these stablecoins, which may cause violent fluctuations in the U.S. Treasury market and push up Treasury yields. If U.S. Treasury yields soar, the U.S. government's financing costs will also rise, which will increase the debt pressure of the United States.
In addition, the phenomenon of "dollarization" in emerging markets also brings risks. If these countries rely too much on the US dollar stablecoin, once exchange rate fluctuations or policy changes occur, their monetary policy may lose its independence and their economic sovereignty will be greatly threatened.
4. Dollar 3.0: From Bretton Woods to the On-chain Dollar
The dollar’s global dominance did not happen overnight. From the establishment of the Bretton Woods system, to the rise of the petrodollar, to today’s dollar stablecoins, we can see the gradual evolution of the dollar in the global financial system.
Dollar 1.0 era: Under the Bretton Woods system, the dollar became the core currency for global trade and payment by being linked to gold. This system ensured the dollar’s dominance through clearing monopoly.
Dollar 2.0 era: Entering the petrodollar era, the influence of the US dollar has further expanded, especially its dominant position in the global energy and debt markets. The US dollar is widely used in oil transactions and international debt settlement.
Dollar 3.0 Era: Today, with the rise of the US dollar stablecoin, the US dollar has begun to enter the field of digital assets through blockchain technology. These on-chain dollars have not only completely broken away from the constraints of the traditional banking system in terms of payment, but also through close integration with the US debt market, global investors can enjoy fast payment while also providing financial support for the US government's debt.
What does this change mean for the United States? The U.S. government has "outsourced" its debt crisis to individual and corporate investors around the world through the U.S. dollar stablecoin. This practice enables the United States to obtain a large amount of external funds without increasing domestic burdens, while also driving global demand for the U.S. dollar.
However, for emerging markets, the popularity of US dollar stablecoins is undermining the financial sovereignty of these countries. With the widespread use of "on-chain dollars", the monetary policies of many countries are beginning to lose their independence, and their economies are to some extent affected by the fluctuations of the US dollar.
Conclusion: Future Challenges of USD 3.0
The emergence of the US dollar stablecoin marks the transformation of the US dollar's global hegemony. The US dollar is no longer solely dependent on the traditional financial system. It has expanded to the digital world through blockchain technology and has taken a dominant position in the global payment and financial system. However, behind this "US dollar 3.0" are both huge opportunities and risks that cannot be ignored. In the future, whether the US dollar stablecoin can successfully maintain its global dominance will depend on whether it can find a perfect balance between stability, compliance, market demand and risk management.
China Digital Capital is a digital investment bank focusing on the RWA (tokenization of real-world assets) track. It is committed to RWA track market investment research and education, issuance and investment incubation, RWA asset management platform, digital financial innovation and other solutions, aiming to build a bridge between real-world assets and the value of the crypto world.
#ARAW Always RWA Always Win! In 2025, the RWA market will quickly find its place in the wild growth. Friends who are sensitive to the topic of RWA and stablecoins can join the WeChat YekaiMeta discussion group to exchange ideas.
This article is contributed by a contributor and does not necessarily represent the views of BlockBeats.
