Stablecoins are strengthening the dollar, economist Eswar Prasad says

Dollar-backed stablecoins are reinforcing the US dollar’s global role rather than threatening it, Cornell economist Eswar Prasad said in comments reported by Bloomberg.

Stablecoins pegged to the dollar account for about 98% of the global market by capitalization, effectively digitizing the US currency. Their reserves are increasingly held in US Treasury bills, creating another source of demand for government debt.

Treasury Secretary Scott Bessent has discussed stablecoin-market growth of $2 trillion to $3 trillion, with issuers potentially holding about $125 billion in Treasury bills as of late 2025.

Prasad’s analysis also highlights the risk of faster dollarization in emerging markets. Stablecoins can make it easier for residents of countries with unstable currencies to hold and transact in digital dollars, weakening demand for local currencies.

The economist said stablecoins could modernize payments, particularly cross-border transfers, but their growth raises questions for central banks. 

The Federal Reserve has said it will not serve as a safety net for crypto or stablecoin projects, while proposed legislation is expected to require reserve backing and greater transparency.