Dollar-linked stablecoins are emerging as a strategic tool to defend the U.S. currency’s global role. While many governments are racing to develop central bank digital currencies (CBDCs), Washington seems to prefer a private-sector solution that could reshape the landscape of cross-border payments.
For decades, the dollar has enjoyed an “exorbitant privilege”—serving as the world’s primary reserve asset and the dominant currency for trade invoicing. This dual role has given the U.S. unmatched economic and geopolitical leverage. But cracks are beginning to show: the dollar’s share of central bank reserves is slipping, and new payment technologies are intensifying competition in global finance.
For Europe, the rise of dollar-backed stablecoins threatens its ambition to expand the euro’s role in international transactions. To hedge against this risk, the EU needs to accelerate the creation of euro-based stablecoins, issued and supported by banks and corporations. China, meanwhile, faces deeper constraints: capital controls and limited offshore liquidity make it harder for the renminbi to compete, even though Beijing has the most to lose if payments remain dominated by the dollar.
The bottom line: the contest for financial dominance is shifting into the digital era, with stablecoins becoming the new battleground. The U.S. is betting on the private sector, Europe must move faster to build its own ecosystem, and China faces a tough choice between loosening control or falling behind.
