The US dollar is facing a stress test not from a rival sovereign currency, but from a private-sector digital wrapper denominated in greenbacks. Carolyn Wilkins, an external member of the Bank of England’s Financial Policy Committee, has finally said the quiet part out loud: stablecoins are no longer just a crypto-native curiosity; they are a geopolitical instrument for US dollar dominance.
In her September 15, 2026, address at Queen’s University Belfast, titled ‘Money and power: lessons from history for stablecoins and US dollar dominance’, Wilkins became the first senior central banker to explicitly frame the technology as a tool of economic statecraft. The timing was pointed, landing on the same day the CLARITY Act failed a cloture vote in the US Senate, 50-49, highlighting a persistent regulatory gap in the world’s largest economy.
Wilkins identifies three channels through which stablecoins reinforce the dollar’s hegemony. They provide 24/7 cross-border settlement, bypassing the friction of traditional correspondent banking. They enable what she calls ‘digital dollarisation,’ allowing users to hold a dollar-linked asset on a smartphone without a US bank account. And they create structural demand for US safe assets. With issuers like those behind USDT and USDC holding nearly $150 billion in Treasury bills at the end of 2025, stablecoins act as a synthetic demand engine for US debt. Net purchases in 2025 alone ran to roughly $33 billion, making the largest stablecoin issuers meaningful participants in the short-term Treasury market.
This creates a potent positive feedback loop: increased stablecoin adoption drives demand for T-bills, which deepens dollar markets, further incentivizing stablecoin use. Treasury Secretary Scott Bessent has argued explicitly that dollar stablecoins can reinforce the dollar’s international role. The stablecoin market has grown from less than $5 billion at the start of 2020 to roughly $300 billion by mid-2026, with 98 percent of that value denominated in US dollars.
Yet the mechanism is double-edged. Wilkins warns of a negative feedback loop where mass redemptions trigger forced T-bill sales, amplifying yields and potentially causing broader market stress. She draws a direct comparison to the 2022 UK LDI gilt crisis, where liquidity mismatches turned a manageable market event into a systemic threat. ‘If several large issuers had to sell Treasury bills at the same time, particularly into an already stressed market, they could amplify moves in yields and market liquidity,’ she said.
The regulatory landscape remains fragmented. While the GENIUS Act, signed in July 2025, mandates 1:1 reserve backing for payment stablecoins, its implementation has stalled; seven agencies missed their one-year rulemaking deadline, pushing the effective date to January 18, 2027. The Bank of England’s own framework for systemic sterling stablecoins — requiring 70 percent short-term UK government debt and 30 percent unremunerated BoE deposits — is notably more restrictive than the US approach. Meanwhile, the White House Council of Economic Advisers released a modeling tool just 30 minutes before the CLARITY Act vote, concluding there was ‘no meaningful relationship between stablecoin growth and community-bank deposit flight’ — a finding that did little to sway the legislative outcome.
The geopolitical stakes are rising as China expands its own alternatives, including the Cross-Border Interbank Payment System (CIPS), which now reaches roughly 1,700 participants across 190 countries, and mBridge, a wholesale central-bank digital currency platform for cross-border settlement. These rails are designed to offer a path around the dollar-centric system. While the dollar remains dominant — accounting for 89.2 percent of OTC foreign-exchange trades as of April 2025 — its share of disclosed foreign-exchange reserves has slipped from roughly 70 percent in 2000 to about 57 percent in early 2026.
Wilkins offers a historical cautionary tale in the decline of sterling. Network effects prolonged the pound’s dominance for decades after Britain’s relative economic position had begun to weaken. But ultimately, those effects rested on fundamentals: fiscal capacity, credible institutions, and the rule of law. ‘Network effects can reinforce an international currency for a very long time,’ she said. ‘But, ultimately, they sit on top of fundamentals.’
Technology can extend the reach of the dollar, but it cannot substitute for the underlying economic strength that keeps a currency at the center of the global order. Stablecoins may be the new infrastructure of economic statecraft, but they are merely the rails, not the engine.