Author: Erik Lowe, Content Director of Pantera Capital; Translated by AIMan@Golden Finance

In Pantera’s January 2024 blockchain investor letter, we discussed how cryptocurrency has become the “ironic answer to de-dollarization” (see Golden Finance’s previous report “Crypto’s ‘killer app’ is likely to be the dollar itself”). With the GENIUS Act gaining bipartisan support in the Senate and the new administration’s continued emphasis on dollar-backed stablecoins, we believe blockchain is increasingly being seen as a strategic tool to continue the dollar’s ​​dominance.

“As President Trump has directed, we will maintain America’s position as the world’s leading reserve currency, and we will use stablecoins to achieve that goal.”

– Treasury Secretary Scott Bessant, White House Crypto Summit, March 7, 2025

By establishing a comprehensive regulatory framework for stablecoins, the GENIUS Act should provide clarity and confidence to market participants that was missing during the stablecoin discovery phase, bringing further legitimacy to one of cryptocurrency’s “killer apps.”

Driving Demand for Dollars

Today, the most practical use of cryptocurrency is putting dollars on a blockchain. 98% of the $250 billion stablecoin market is backed by fiat, not cryptocurrencies or algorithmic stablecoins. As the world's reserve currency, it is not surprising that 98% of fiat stablecoins are backed by the US dollar.

Blockchain is enhancing the value of the dollar - making it accessible to 5 billion smartphone users around the world and enabling fast, low-cost, programmable value transfers. In emerging markets, people can invest in dollar-backed stablecoins for savings, thereby reducing the risk of local currency depreciation. In addition, blockchain provides a more affordable remittance channel for immigrants - traditional remittance companies may charge a fee equivalent to one month's salary to send money home.

At the same time, stablecoins are becoming a global distribution channel for US debt.

Stablecoins are driving demand for Treasuries as investor confidence in the nation’s fiscal health wanes amid heightened geopolitical tensions and macroeconomic uncertainty. Traditional buyers’ appetite for Treasuries has been declining — as evidenced by last week’s 20-year bond auction, where weak demand sent yields soaring and bond prices falling.

While stablecoins are still a drop in the bucket relative to total Treasuries holdings, stablecoins like Tether’s USDT and Circle’s USDC — which are backed by a combined $177 billion in Treasuries-linked instruments — are emerging as new sources of demand. If these stablecoins were to merge, they would become the world’s 17th-largest holder of Treasuries.

We believe their ranking will continue to rise.

This is a decades-long prediction, but banks are like landlines, we don't need them. Stablecoins will eventually replace the bank deposit functions we are accustomed to.

– Dan Morehead, TOKEN2049 Dubai, Keynote, May 1, 2025

Deep Alignment

The advancement of the GENIUS Act reinforces what is beginning to become clear to the market: stablecoins are one of the most powerful use cases for cryptocurrencies and a strategic asset that advances U.S. interests, from maintaining the dominance of the U.S. dollar to supporting the Treasury market.

The bill deepens the connection between cryptocurrencies and the U.S. dollar by encouraging responsible issuance and ensuring backing by U.S. Treasuries.