The true significance of stablecoins for the US, emerging markets, and the future of currency

Foreword

For the past few days, I've been thinking about a recent post by Sandeep (co-founder and COO of Polygon).

This prompted me to revisit my notes and delve deeper into some data, and the more carefully I examined the numbers, the more it seemed to make sense (far clearer than most people might realize).

By the end of 2024, Tethe had become the seventh-largest foreign buyer of U.S. Treasury bonds, surpassing countries like Canada and Mexico in annual purchases.

This argument is even more compelling today. Stablecoins have quietly emerged as one of the biggest drivers of global dollar demand, while also providing a financial lifeline for emerging markets struggling with inflation, currency devaluation, and capital controls. In this article, I will analyze recent data and trends that indicate the rise of "dollarization 2.0." The petrodollar era is over, and this shift is shaping a world that will benefit both the US and emerging economies, at least in the short to medium term. We will see how stablecoins rapidly become a "lifeline" of global financial markets, not only in the cryptocurrency space but also in emerging economies with fragile local currencies, where they serve as a hedge and store of value. Stablecoins have rapidly evolved from a niche trading tool into a pillar of global crypto finance. In 2024, on-chain stablecoin transactions reached $15.6 trillion, about 20% higher than Visa's annual payment volume. Currently, the total supply of cryptocurrencies exceeds $300 billion, representing a year-on-year growth of over 50%. These dollar-pegged tokens, led by Tether's USDT, power a wide range of applications, from cryptocurrency trading and DeFi protocols to remittances and everyday payments. Its appeal is simple and powerful: stablecoins combine the reliability of fiat currencies with the speed and borderlessness of cryptocurrencies, enabling near-instantaneous, low-cost settlements globally. More than $100 billion in stablecoin transactions occur daily on public blockchains, and their annual transaction volume rivals or surpasses that of major payment networks. A report by CEX.io indicates that stablecoin transfers will reach $27.6 trillion in 2024, approximately 8% higher than the combined transaction volume of Visa and Mastercard. This staggering usage underscores that stablecoins have achieved true product-market fit: users value the ability to transact in currencies pegged to the US dollar (or other fiat currencies) without the volatility of typical cryptocurrencies.

Chart: Comparison of on-chain stablecoin transaction volume (blue) with Visa (pink) and Mastercard (yellow) payment volume in Q4 2024. By Q4 2024, the value processed by stablecoin networks had significantly exceeded that of major card networks.

Stablecoins are popular and have grown so rapidly for several reasons:

• They combine stability and familiarity by being pegged 1:1 to fiat currencies (primarily the US dollar), avoiding the volatility of cryptocurrencies while retaining the advantages of blockchain.

  They enable 24/7 global trading, reducing settlement times from days to minutes (ideal for remittances and cross-border trade). They offer low fees, typically a fraction of a cent per transaction, making both small and large payments possible. They promote financial inclusion, making stable, accessible currencies available to anyone with internet access (especially in countries with inflation or weak banking systems). Furthermore, they are programmable and can be directly integrated with DeFi for lending, trading, and yield earning. Let's examine just how big this opportunity is. The US M2 money supply is a broad measure of economic liquidity, including cash, checking deposits, savings accounts, small time deposits, and retail money market funds. As of mid-2025, M2 is estimated at approximately $22 trillion, reflecting a large amount of US dollars circulating in the traditional financial system.

  

  Source: Article "Stablecoins May Become One of the US Government's Most Robust Financial Allies"

  In comparison, the global market capitalization of stablecoins is approximately $300 billion, representing only about 1% of the US M2 money supply. While the absolute value is still small, this contrast highlights the rapid growth of stablecoins and their enormous potential for expansion. Stablecoins are essentially digital dollars operating on the blockchain, and if they can capture a small fraction of the M2 money supply, their market size could reach trillions of dollars, reshaping payments, remittances, and the global distribution of the dollar.

  Importantly, stablecoins are becoming a complement to, rather than a threat to, traditional payment networks.

  Even Morgan Stanley sees stablecoins as an incremental investment opportunity. It's worth noting that the growth of these tokens could boost demand for short-term U.S. Treasury bonds, giving the Treasury greater flexibility in covering deficits and managing cash flow. These tokens enable large-scale settlements, such as interbank transfers or trade settlements, with near-instantaneous clearing, operating similarly to digital cash accounts. This utility has already attracted the attention of regulators. In the United States, the recently enacted National Stablecoin Innovation Guidance and Establishment Act (GENIUS Act) mandates that stablecoins be backed by a 1:1 reserve, with the reserves backed by liquid assets such as Treasury bonds or the US dollar; requires monthly disclosures; and prioritizes consumer protection, including safe resolution measures in the event of issuer bankruptcy. Across the Atlantic, the European Union's MiCA regulation, which came into effect in mid-2024, imposes licensing, transparency, and reserve standards on stablecoins to enhance their stability and market integrity. If properly regulated, stablecoins could trigger a generational revolution in how money flows, making it faster, cheaper, and more seamless, while enhancing rather than replacing traditional payment networks. (We've already seen this happening)

  

  From Petrodollars to Digital Dollars: How Stablecoins Expand US Dominance

  For a long time, the United States has used the dollar's reserve currency status to consolidate its global influence, most notably the petrodollar system. Under this system, dollar-denominated oil exports ensured continuous demand for the dollar and US Treasury bonds. Many believe that today, dollar-backed stablecoins seem to be repeating history. These crypto tokens, such as USDT and USDC, are pegged 1:1 to the value of the dollar and are primarily backed by US assets. By promoting dollar-backed stablecoins, the United States is effectively exporting dollars at internet speed, thereby consolidating the dollar's hegemonic position in the digital economy—a method strikingly similar to how the petrodollar supported the oil economy decades ago. US policymakers have clearly embraced this trend. Under the current administration, the US passed the landmark GENIUS Act, establishing a regulatory framework for stablecoin issuance. The act's intent is clear: to solidify the dollar's status as the global reserve currency and increase demand for US Treasury bonds, which are backed by stablecoins. In other words, the US government views dollar-backed stablecoins as a strategic digital dollar alliance, both consolidating the dollar's dominance and financing US debt. The GENIUS Act requires that dollar-denominated stablecoins be fully backed by safe, highly liquid assets such as cash and short-term Treasury bonds. This means that each new stablecoin issued is equivalent to creating a buyer for US Treasury bonds, similar to how oil dollar surpluses were reinvested in Treasury bonds in the 1970s, only in a modern version. Analysts have even described stablecoins as a "Trojan horse" for US debt, ensuring continued growth in global demand for US Treasury bonds. Data has confirmed this trend. As the largest issuer of dollar-denominated stablecoins, Tether now holds approximately $180 billion in US Treasury bonds as reserves. This places Tether among the world's largest holders of Treasury bonds, even surpassing the holdings of many countries. Each USDT token in circulation represents $1 that overseas investors are willing to hold. When these dollars are invested in US Treasury bonds, it effectively provides the US government with a (virtually) interest-free loan. Other issuers, such as Circle, which issues USDC, also invest heavily in US bonds. This trend is so significant that many analysts believe stablecoins could become one of the most important strategic assets for the US government in the next decade, filling the funding gap left by foreign central banks reducing their holdings of US Treasury bonds. Whenever overseas companies or individuals choose to hold dollar-denominated stablecoins, they are consolidating the global status of the dollar and indirectly financing the US fiscal deficit by creating demand for short-term US Treasury bonds. For these reasons, US leaders have publicly adopted stablecoins. President Trump stated when signing the Stablecoin Act in 2025, "It's good for the dollar, it's good for the country." The geopolitical logic is simple. Just as oil-exporting countries were once obligated to hold dollars, anyone transacting in the digital economy today can choose to use a US stablecoin. In doing so, they are fostering what many call the next generation of the petrodollar system. The US benefits from both seigniorage and debt financing, as dollars, though flowing out, ultimately return domestically as investment. In short, stablecoins extend US financial influence into cyberspace: they maintain the world's habit of using dollars for trade and savings while channeling global capital into US government bonds. The Importance of Stablecoins in Emerging Markets In emerging markets, stablecoins have become a financial lifeline, providing convenient, stable, and efficient payment channels when local financial systems often fail. When national currencies collapse due to inflation or capital controls, people turn to dollars. But they no longer use paper money, increasingly opting for digital dollars that can circulate seamlessly across borders. Stablecoins address three unmet needs in emerging markets. 1) Barrier-free USD transactions: In many countries, capital controls and weak banking systems make holding US dollars difficult. Stablecoins address this by allowing anyone with a smartphone to use digital dollars around the clock. In places like Nigeria and Ethiopia, businesses are already using stablecoins to pay suppliers when banks and foreign exchange markets fail. 2) Cheaper and faster payments: This trend is most pronounced in the most volatile regions. In Argentina, over 62% of cryptocurrency transactions involve stablecoins, compared to 45% last year. In Brazil, nearly 70% of exchange outflows are denominated in USDT or USDC, reflecting how stablecoins are driving trade, savings, and payroll. Turkey faces an inflation rate exceeding 55%, and stablecoin trading volume surpassed $38 billion last year, equivalent to 4.3% of its GDP, the highest proportion globally. Turkey's inflation rate also exceeds 60%, leading to unprecedented levels of stablecoin adoption. Between April 2023 and March 2024, stablecoin purchases in Turkey reached 4.3% of the country's GDP, the highest proportion globally. During this period, stablecoin trading volume was approximately $38 billion. Today, stablecoins account for more than half of cryptocurrency trading volume in many emerging markets, even surpassing major assets like Bitcoin. This year, Flutterwave, Africa's largest payment processor (with annual transaction volume exceeding $40 billion), selected Polygon as its default blockchain for cross-border stablecoin settlements in more than 30 countries. This collaboration represents one of the largest real-world stablecoin deployments in history, powering consumer and enterprise transaction processes for major clients such as Uber and Audiomack. This trend is even more pronounced globally. In Latin America, Africa, and Southeast Asia, Polygon powers over 50% to 70% of non-USD stablecoin transactions. In regions where traditional financial systems remain slow, costly, and fragmented, millions of users rely on Polygon's payment channels for instant remittances, everyday shopping, and gig economy income settlements. 3) Stable Unit of Account High inflation makes local pricing impossible. In Argentina, approximately 62% of cryptocurrency trading activity is concentrated on stablecoins, while USDT has consistently traded at a higher rate than the official USD exchange rate. In Asia, Polygon adoption is accelerating at both the fintech and government levels. Japan's JYPC launched the world's first yen-pegged stablecoin, deployed on Ethereum, Avalanche, and Polygon platforms, with Polygon leading in daily trading volume and active user addresses. Demand has been extremely strong despite market pressures, with people even willing to pay a premium over the face value of the dollar to acquire tokenized dollars. In Argentina, USDT has traded at 30% above the official exchange rate. This highlights a level of trust in digital currencies far exceeding trust in guarantees from local banks or governments. This momentum has now spread beyond the retail market. Polygon has become the platform of choice for institutional investors to access stablecoins and real-world assets (RWAs). BlackRock's BUIDL fund, the world's largest tokenized U.S. Treasury product with $3 billion in assets, has invested $500 million on Polygon, its largest investment outside of Ethereum. Franklin Templeton's FOBXX fund (worth over $300 million) also runs on Polygon, using it as the execution layer for its tokenized U.S. Treasury exposure. While Ethereum continues to maintain its position as an institutional-grade network for programmable money, Polygon is emerging as a leader in emerging markets and a preferred choice for scalable, low-cost infrastructure globally. Polygon's recent payment activity reflects this momentum. In October 2025, Polygon's on-chain transaction volume reached an all-time high, specifically as follows: Application transaction volume increased by 20% month-over-month; deposit and withdrawal activity increased by 35%; card payments increased by 30%; infrastructure utilization increased by 19%. The network processed a total of 1.288... With hundreds of millions of transactions involving 3.01 million active addresses and a stablecoin market capitalization of $3.1 billion, Polygon firmly holds its position as the world's third-largest stablecoin network, after Ethereum and Tron. Polygon's strength lies in its diversification. Stripe, the world's largest fintech payment processor, currently processes over $8 million in transactions monthly through Polygon integration. Coinbase, MoonPay, Rain, and Paxos all utilize Polygon's track for stablecoin and settlement flows.

  

  Conclusion

  The story of stablecoins is no longer just theory, but is unfolding in real time. Billions (and soon trillions) of stablecoins are circulating on networks like Ethereum and Polygon, reshaping how the world stores, transfers, and settles value. From US Treasury bonds to Lagos gig worker wages, the same track now serves vastly different economies, all based on the same digital standard: the US dollar.

  How this transformation will unfold in the medium to long term remains to be seen.

  However, it is evident that stablecoins have established themselves as a core component of the new financial internet, continuously connecting institutions, markets, and individuals in ways that traditional systems cannot achieve. As I have consistently stated, these figures are not arbitrary; they have real value and impact on millions of people in emerging economies who rely on these tracks.