The debate over whether Bitcoin will dethrone the U.S. dollar as the world’s dominant currency has intensified in recent years. However, a new report from Citi Wealth suggests a different narrative: rather than Bitcoin ending dollar supremacy, the rise of stablecoins may actually reinforce it.
While Bitcoin was initially seen as a potential challenger to central bank-issued currencies, real-world adoption patterns tell a different story. Today, the vast majority of cryptocurrency transactions—over 80%—involve dollar-pegged stablecoins like USDT and USDC. This trend, according to Citi’s analysts, doesn’t threaten the dollar; it extends its global reach.
“Initially, cryptocurrencies like Bitcoin were viewed as competitors to central bank-issued money. Some still believe Bitcoin could end dollar dominance. However, the fact that over four-fifths of crypto transactions now involve stablecoins is challenging that view.”
How Stablecoins Reinforce Dollar Hegemony
Stablecoins derive their value by being pegged to traditional assets—most commonly the U.S. dollar. To maintain this peg, issuers typically hold reserves in U.S. dollars and short-term U.S. Treasury securities. As demand for stablecoins grows, so does the demand for these underlying dollar-denominated assets.
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This creates a powerful feedback loop: more stablecoin usage → higher demand for U.S. Treasuries → stronger global reliance on the dollar → increased stability and appeal of dollar-backed digital assets.
Citi’s report highlights that if the U.S. government moves to formalize stablecoin regulation, it could further accelerate adoption and cement the dollar’s role in the digital economy.
“Clearer regulation could boost confidence in stablecoins, increasing their attractiveness. In turn, stablecoin issuers may significantly increase their holdings of U.S. Treasury bills—currently estimated at around 1% of total issuance—further strengthening dollar dominance.”
In essence, stablecoins aren’t replacing the dollar—they’re making it more accessible and widely used across borders, especially in regions with limited access to traditional banking.
Stablecoin Transaction Volume Surpasses Visa
The scale of stablecoin adoption is already staggering. According to Citi, **stablecoin transaction volume hit $5.5 trillion in Q1 2025**, outpacing Visa’s $3.9 trillion during the same period.
This surge has not gone unnoticed by legacy financial players. Companies like Visa and PayPal are now integrating stablecoins into their payment networks—either by issuing their own or settling transactions using existing stablecoins.
This shift reflects a broader trend: traditional finance isn’t resisting blockchain innovation; it’s adapting to it—and doing so using dollar-pegged digital assets.
“Rather than undermining the dollar, stablecoins are becoming a new vector for its global circulation.”
Political Support for Dollar-Centric Crypto Policy
Even political figures are aligning with this vision. Former U.S. President Donald Trump has advocated for making America a global leader in cryptocurrency innovation. His support includes opposition to a Fed-issued digital dollar (CBDC) and encouragement for private-sector stablecoins.
While Trump is also pro-Bitcoin, his stance suggests he doesn’t see crypto as a threat to dollar dominance. Instead, he views American leadership in digital assets as a way to extend financial influence—a strategy that aligns closely with Citi’s analysis.
Federal Reserve Governor Christopher Waller has echoed similar sentiments:
“Many assume Bitcoin could replace the dollar as a global reserve currency. But look at DeFi: nearly all transactions use stablecoins tied to the dollar. Growth in DeFi only strengthens dollar dominance.”
IMF Warns: Stablecoins Could Threaten Sovereign Currencies
Not everyone agrees with this optimistic outlook for the dollar. The International Monetary Fund (IMF) has repeatedly warned that widespread stablecoin adoption could undermine national monetary sovereignty, especially in emerging markets.
The IMF argues that without proper regulation, stablecoins could displace local currencies, destabilize financial systems, and reduce governments’ control over monetary policy.
To counter this, the IMF urges countries to develop their own central bank digital currencies (CBDCs) to preserve control over money supply and payment infrastructure.
Interestingly, while the IMF sees stablecoins as a serious threat, it views Bitcoin as less concerning. IMF Managing Director Kristalina Georgieva has stated that Bitcoin is better classified as an asset than a currency due to its volatility, making it unlikely to replace fiat money anytime soon.
“We are not particularly worried about Bitcoin challenging the U.S. dollar. It’s not money—it’s a speculative asset.”
The Contrarian View: Hyper-Bitcoinization Ahead?
Despite institutional skepticism, some crypto advocates believe we’re heading toward “hyper-bitcoinization”—a future where Bitcoin becomes the primary store of value and medium of exchange, rendering fiat currencies nearly obsolete.
Samson Mow, a key architect behind El Salvador’s Bitcoin legal tender policy, predicts that while stablecoins and fiat-backed tokens will coexist temporarily, a tipping point will eventually lead to Bitcoin dominance.
In a recent interview, Mow argued that long-term trust in fiat systems is eroding due to inflation and monetary mismanagement. As confidence shifts, he believes Bitcoin will emerge as the preferred alternative.
Still, even Mow acknowledges this transition would take time—and until then, dollar-pegged stablecoins remain critical infrastructure in the global crypto economy.
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Frequently Asked Questions (FAQ)
Q: Can stablecoins really strengthen the U.S. dollar?
Yes. Because most stablecoins are backed by U.S. dollars or U.S. Treasury securities, increased adoption drives demand for these assets—thereby reinforcing the dollar’s global role.
Q: Is Bitcoin a threat to the U.S. dollar?
Currently, no. Bitcoin’s high volatility makes it impractical as a daily transaction currency. While some view it as “digital gold,” its use as a widespread medium of exchange remains limited.
Q: Why are Visa and PayPal adopting stablecoins?
To stay competitive. With stablecoin transaction volumes surpassing traditional payment networks, integrating blockchain-based payments allows them to offer faster, cheaper cross-border transactions.
Q: Could stablecoins replace traditional banking?
Not fully—but they’re becoming an important layer in global finance. They enable faster settlements, lower fees, and greater financial inclusion, especially in underbanked regions.
Q: What happens if the U.S. regulates stablecoins?
Clear regulation could boost legitimacy and adoption. It might require stricter reserve requirements but would likely increase trust among institutional investors and mainstream users.
Q: Are stablecoins safe?
Most major stablecoins are relatively safe due to transparent reserve practices and audits. However, risks remain around regulatory changes, reserve asset quality, and market panic during crises.
Conclusion: The Dollar’s Digital Evolution
The rise of stablecoins marks not the decline of the U.S. dollar—but its digital transformation. By serving as programmable, borderless extensions of the dollar, stablecoins are expanding its reach into decentralized finance (DeFi), global remittances, and emerging markets.
While debates continue over Bitcoin’s long-term role and the risks posed by unregulated digital assets, one thing is clear: the dollar remains central to the future of money—both physical and digital.
As institutions like Citi and policymakers recognize this shift, expect increased efforts to harness blockchain technology while preserving dollar supremacy.
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Core Keywords:
- Stablecoins
- U.S. dollar dominance
- Bitcoin
- Digital currency
- DeFi
- Cryptocurrency regulation
- Dollar-pegged tokens
- Global payments