“From Latin American Retail Payments to Middle Eastern Asset Tokenization”: Stablecoins Emerge as America’s New Tool for Reinforcing Dollar Dominance

Issuance and reserve-asset rules established under the GENIUS Act
Stablecoin demand linked to U.S. Treasury purchases and the expansion of payment networks
Simultaneous strengthening of dollar liquidity, reserve-asset demand and financial control

The global monetary order is approaching a new inflection point as the United States brings dollar-backed stablecoins into the regulated payments system. Following their growing use in savings and remittance markets across Latin America and Southeast Asia, dollar stablecoins are rapidly expanding their footprint in Middle Eastern institutional capital and tokenized-asset settlement. Should the Middle East become a core market, the United States would bind Latin America’s day-to-day economy and the Middle East’s energy and institutional capital into a single digital dollar sphere. As the dollar’s liquidity, payment networks and demand for reserve assets strengthen simultaneously, it will become even more difficult for latecomer currencies to overcome these network effects, making the emergence of a viable dollar alternative increasingly unlikely.

Full Implementation of Treasury-Backed Stablecoins Nears Following Passage of the GENIUS Act

According to investment-banking industry sources on July 15, major global banks and fintech companies have recently moved to adopt stablecoins as the “default currency” for payment and remittance platforms. Conventional dollars require access to cash, bank-account opening procedures, currency exchange and foreign-remittance processes, whereas stablecoins can be held and transferred around the clock through digital wallets and cryptocurrency exchanges. Rather than relying on the complex and costly Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, this creates a real-time cross-border settlement ecosystem capable of processing payments within seconds.

The global stablecoin market capitalization stood at $315 billion as of early April this year, according to the Bank for International Settlements (BIS), with dollar-denominated assets accounting for 98% of the total. On-chain transaction volume reached $35 trillion last year, although payment-related flows tied to the real economy were estimated at $390 billion. This indicates that most transactions remain concentrated in cryptocurrency trading and internal settlement. Even so, in markets where stablecoin use is spreading into savings, remittances and retail payments, channels have emerged through which dollars circulate without passing through local banking networks. This is the core mechanism of “stealth dollarization,” in which legal tender and exchange-rate systems remain in place while stores of value and units of payment migrate to dollar tokens.

Markets initially expected that the proliferation of cryptocurrencies such as Tether’s dollar stablecoin, USDT, could weaken Washington’s control over financial markets by displacing the dollar. The U.S. government responded last July by enacting the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act. Amid falling U.S. Treasury prices caused by escalating U.S.-China tensions, Washington identified a way to support Treasury prices while preventing the dollar from leaking beyond its financial perimeter. The law is scheduled for full implementation after an 18-month grace period, potentially as early as the second half of this year and no later than January next year. The Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and National Credit Union Administration have released proposed implementing rules. The public-comment period for jointly drafted know-your-customer rules closes on August 21.

The new Treasury-backed stablecoin framework requires issuers to back tokens solely with U.S. Treasuries and cash-equivalent assets deposited at the Federal Reserve. In effect, the state guarantees their safety and credibility. Under the GENIUS Act, issuers must maintain qualifying reserve assets equal in value to their outstanding stablecoins and comply with anti-money-laundering, customer-identification, reserve-disclosure and prompt-redemption obligations. The framework echoes the way the SWIFT network has been deployed as an instrument of international politics. By excluding adversaries such as Iran, North Korea and Russia from the cross-border payment network connecting more than 200 countries, Western governments have used SWIFT as a tool capable of inflicting severe damage on national economies.

Dollar Stablecoins Expand Into Argentine Retail Transactions

Once the GENIUS Act takes effect, the dollar payment network overseen by the United States will extend through stablecoins into the digital wallets of individuals and businesses worldwide. The shift is likely to be especially pronounced in countries where confidence in the domestic currency is low, with Argentina serving as a prime example. Argentina’s legal tender is the Argentine peso, but years of hyperinflation have eroded trust in the currency to such an extent that citizens view holding pesos as a loss in itself. The country has consequently evolved into an “unofficial dollarization” regime in which dollars and pesos coexist in daily economic life.

Private dollar stablecoins, including USDT and USDC, have also rapidly emerged as substitutes for physical dollars. Dollar stablecoins already account for 60% to 70% of Argentina’s total cryptocurrency transactions. Many companies pay salaries in dollar stablecoins rather than pesos, while Argentina’s government has effectively tolerated the practice so long as taxes are accurately reported. Even workers paid in pesos commonly convert them immediately into dollar stablecoins before their value declines further.

In Argentina, stablecoins have penetrated retail payments at convenience stores, restaurants and supermarkets. According to March data from global payment platform Oobit, 72% of transactions made through Argentine cryptocurrency-payment apps were conducted in USDT, while 41% of grocery purchases were paid for with dollar stablecoins. Infrastructure has been established nationwide in which stablecoins held in personal wallets, including MetaMask, are linked to the payment networks of conventional card providers such as Visa and Mastercard for real-time settlement. Customers pay in dollar stablecoins while merchants receive settlement in pesos

Stablecoin use is also expanding across Southeast Asia, particularly in the remittance market. The Philippines provides a representative case: overseas workers send USDT or USDC, which their families receive through local e-wallets before converting it into pesos or retaining it as a dollar-linked asset. Philippine cryptocurrency operator Coins.ph has partnered with USDC issuer Circle to expand stablecoin-based remittances, while blockchain-based transfers have become a means of reducing the multiple intermediary banks and foreign-exchange costs involved in conventional remittance processes. If this trend spreads to savings and retail payments, the Philippine peso may remain legal tender, but households’ store of value and benchmark for international transactions will shift toward the dollar. This is also why the Trump administration has accelerated legislation for Treasury-backed stablecoins: it is a two-pronged strategy to reclaim government control over digital dollars dominated by private companies while channeling worldwide stablecoin demand into greater U.S. Treasury issuance and easing America’s fiscal-deficit burden..

The Middle East as the Next Battleground

Having secured early-mover advantages in Latin America and Southeast Asia, dollar stablecoins are now being identified as a major strategic play in the Middle East. Dollar stablecoins have already established a presence in the United Arab Emirates’ institutional-investment sector. MGX, an Abu Dhabi government-backed investment company, used the dollar-linked USD1 token as consideration when it invested $2 billion in Binance, the world’s largest cryptocurrency exchange, last year. The case illustrates a model in which dirham tokens are fostered for retail payment networks while dollar-token liquidity is utilized for large digital-asset transactions. Even when local currencies and dollars coexist according to use case, the concentration of institutional settlement demand in dollar tokens also increases demand for dollar-denominated reserve assets, including U.S. Treasuries.

Saudi Arabia is also entering a full-scale testing phase for real-world asset tokenization. Faisal Monai, who led the design of SADAD, Saudi Arabia’s national electronic billing and payment network, now heads real-world-asset tokenization company droppRWA. In a CoinDesk interview last May, Monai said the company had secured mandates to tokenize $12.5 billion in real estate and planned to move trillions of dollars in assets, including energy and manufacturing assets, on-chain by 2030. He also outlined plans to introduce stablecoin payments for Saudi real-estate transactions from the end of this year.

The Middle East’s monetary system itself offers conditions favorable to the dollar. The Saudi riyal and UAE dirham are respectively pegged to the dollar, meaning the dollar’s value benchmark is embedded even in locally denominated tokens. If dollar stablecoins subject to U.S. rules are adopted as settlement instruments for institutional transactions, demand for dollar-denominated reserve assets and Washington’s supervisory authority over issuers will become embedded in the Middle East’s digital payment network.

Should the Middle East choose dollar stablecoins as the principal settlement instrument for tokenized assets, Latin America’s household economy and the Middle East’s institutional capital will be connected through a single digital dollar network. The dollar’s reach would then expand from household savings and cross-border remittances into energy trade, real estate and real-world-asset settlement. In particular, if Middle Eastern institutional liquidity also converges on the dollar, the cost for latecomer currencies to overturn the network effect will rise sharply. As long as the current market-share and regulatory environment persists, the prospect of a currency capable of displacing the dollar emerging in the near term remains exceedingly slim.

Capital-Flight Concerns Over Stablecoins Spur Defenses of Monetary Sovereignty in Asia and Europe

However, as the influence of dollar stablecoins expands, concerns over infringements on monetary sovereignty are also intensifying across countries. The BIS has warned that foreign-currency stablecoins may weaken monetary-policy transmission and serve as channels for circumventing capital controls because they can be traded around the clock through personal wallets without intermediation by banks or foreign-exchange authorities. Such flows could amplify inflows of dollar-linked funds during economic booms while triggering large-scale capital flight during periods of financial stress, increasing volatility in local currencies.

The European Union has responded by using regulation to curb the penetration of dollar tokens into its internal market. Under the Markets in Crypto-Assets Regulation, stablecoins pegged to currencies other than the euro must halt new issuance and submit a reduction plan within 40 business days if their average daily payment volume exceeds both 1 million transactions and approximately $232 million in a quarter. The European Central Bank estimated in July last year that the market capitalization of euro-linked stablecoins remained below approximately $406 million. The policy reflects concern that if dollar tokens erode Europe’s payments market, demand for euro-denominated assets and the autonomy of monetary policy could weaken in tandem.

In South Korea, foreign-currency movements through dollar stablecoins have also emerged as a pressing issue for the foreign-exchange monitoring system. Shin Hyun-song, Governor of the Bank of Korea, warned in August last year, while serving at the BIS, that demand for dollar stablecoins could persist even if won stablecoins became widely available. If a market exchanging won tokens for dollar tokens operates around the clock, channels for capital flight could expand and existing foreign-exchange regulations could be circumvented, he argued. According to South Korea’s five largest won-based exchanges, stablecoin trading volume reached approximately $38.3 billion in the first quarter of last year. Dollar stablecoins accounted for approximately $180.3 million of the roughly $381.2 million in cryptocurrency transfers abroad during the same period. These figures represent total transfers between domestic and overseas wallets rather than net capital outflows, but they nevertheless demonstrate the extent to which Korea’s domestic cryptocurrency market relies on dollar liquidity.

China has moved to defend its monetary sovereignty by blocking private stablecoin issuance channels altogether. Eight government bodies, including the People’s Bank of China and the China Securities Regulatory Commission, prohibited the offshore issuance of yuan-linked stablecoins without regulatory approval in February. Authorities explained that if dollar stablecoins were used broadly in the market, they could perform the functions of legal tender through unconventional means and threaten China’s monetary sovereignty. China has placed particular emphasis on rolling out the state-led digital yuan, or e-CNY, under the firm principle that only the People’s Bank of China should possess monetary issuance authority. The goal is to prevent dollar stablecoins, moving borderlessly through blockchain networks, from undermining China’s foreign-exchange firewall at its source.