European banks are following the US lead by launching their own stablecoins. Stablecoins, backed by US dollars, have surged in market capitalization, reaching over $265 billion. Federal Reserve officials believe that stablecoins will strengthen the dollar as a reserve currency, increasing demand for US debt. Stablecoins are revolutionizing financial inclusion, especially in developing countries, where they provide access to stable currencies and lower fees for transactions and remittances. Enthusiasm for central bank digital currencies (CBDCs) comes from the top down, while stablecoins gain adoption bottom up. China struggles to get other countries to use its CBDC, as dollar stablecoins have a global advantage. Research shows that when central bankers promote CBDCs, stablecoin activity drops, affecting consumer services.
Studies comparing countries with and without CBDCs show no significant effects on GDP per capita or inflation. CBDCs have not yet delivered significant financial improvements, while stablecoins are already increasing financial access and efficiency globally. Encouraging developing nations to adopt dollar-backed stablecoins could benefit both the US and these countries.
The US has the opportunity to expand its influence by promoting dollar stablecoins and open financial networks. This could unlock economic growth in emerging economies and strengthen the US economy. In the global competition for financial dominance, stable currencies could play a crucial role in shaping a more democratic and resilient financial system.
Opinion by: Christos A. Makridis, associate research professor at Arizona State University and visiting fellow at the Heritage Foundation. This article provides general information and does not constitute legal or investment advice. Views expressed are the author’s own and may not reflect those of Cointelegraph.
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