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Stablecoin Surge Bolsters US Dollar Demand
The surging popularity of stablecoins, particularly Tether (USDT), whose market capitalization reached $149 billion by May 2025, is bolstering demand for the US dollar amidst concerns over the US fiscal deficit, creating a countervailing force to concerns about its weakening global standing.
- How is the rise of stablecoins impacting the ongoing debate about the future strength of the US dollar?
- The rising popularity of stablecoins, like Tether (USDT), whose market cap surged from $67 billion in June 2022 to $149 billion by May 2025, is increasing demand for the USD. Daily stablecoin transactions exceeding $100 billion demonstrate their growing adoption in international commerce, with companies like Gucci, Tesla, and Microsoft exploring their use. This increased demand counters concerns about a weakening USD due to the US fiscal deficit.
- What are the main factors driving the increased adoption of stablecoins for international transactions, and what are the implications for traditional financial institutions?
- Stablecoins, pegged to the USD and increasingly used for international transactions, are creating a significant new demand for the dollar. This demand is driven by their use as a cheaper and faster alternative to traditional payment systems and is further supported by regulatory frameworks like the proposed GENIUS and STABLE Acts. The growing adoption by businesses and the massive holdings of US Treasuries by stablecoin issuers underscore this trend.
- What are the potential long-term consequences of the increasing reliance on stablecoins for global payments, and how might this influence the future of the US dollar in the global economy?
- The future role of stablecoins in supporting the USD is significant. As stablecoin issuers are increasingly required to hold short-term US Treasuries (GENIUS Act), this will boost demand for these assets, particularly at the short end of the yield curve. This increased demand, coupled with the growing use of stablecoins for global transactions, could mitigate concerns about the long-term strength of the dollar stemming from the US fiscal deficit and trade imbalances. Tether's US Treasury holdings increased from $0 in 2020 to approximately $98 billion in 2025, highlighting this effect.
Cognitive Concepts
Framing Bias
The article is framed to be overwhelmingly positive towards stablecoins and their impact on the USD. The headline (if there were one) would likely emphasize the unexpected alliance between the USD and stablecoins. The introduction sets a tone of presenting stablecoins as a solution to the potential weakness of the USD. Positive data points about stablecoin adoption are prominently featured while potential risks are downplayed.
Language Bias
The language used is largely positive when describing stablecoins, using terms like "unexpected ally", "innovative alternative", and "reinforce the supremacy of the dollar." In contrast, descriptions of potential USD weakness use more cautious language such as "possible weakness" and "growing debate." This choice of wording subtly steers the reader towards a more positive view of stablecoins.
Bias by Omission
The article focuses heavily on the potential benefits of stablecoins for the US dollar, while giving less attention to potential downsides or criticisms of stablecoins. Counterarguments to the bullish stablecoin narrative are briefly acknowledged but not thoroughly explored. For example, the article mentions concerns about the US fiscal deficit weakening the dollar, but doesn't delve into the potential risks associated with stablecoin regulation, market manipulation, or the environmental impact of cryptocurrency mining.
False Dichotomy
The article presents a somewhat false dichotomy by framing the debate as solely between the weakness of the USD and the strength of stablecoins. It simplifies a complex issue by suggesting these are the only two significant factors influencing the future of the USD, neglecting other global economic factors and potential technological disruptions.
Sustainable Development Goals
The rise of stablecoins creates new economic opportunities, facilitates international trade, and potentially boosts demand for US dollars, thus contributing to economic growth. The involvement of major players like Visa also signifies economic expansion in the fintech sector. However, potential impacts on traditional banking and financial systems need further observation.