Citi: Stablecoins Could Strengthen the Dollar's Dominance

A report published by Citi (C) analysts highlights that stablecoins account for more than three-quarters of the cryptocurrency trading volume and are largely pegged to the US dollar. This situation illustrates that stablecoins may reinforce the global dominance of the US dollar while also challenging the narrative of Bitcoin ending the dollar's hegemony.

The report emphasizes that most stablecoin issuers predominantly hold reserves in US dollars and US Treasury bonds. It is suggested that if the US government continues to legitimize stablecoins further, this could strengthen the dollar's dominance even more. Citi notes that as regulatory clarity increases, the appeal of stablecoins may grow, and the demand for US Treasury bonds among issuers could significantly increase.

Stablecoin volume at record levels
Currently, Tether's USDT stands out as the most preferred stablecoin globally, followed by Circle's USDC. Meanwhile, Ripple has announced that it is preparing to launch its stable asset RLUSD after receiving approval from the New York State Department of Financial Services.

According to Citi's data, the use of stablecoins reached a record value of $5.5 trillion in the first quarter of 2024, surpassing Visa's $3.9 trillion transaction volume for the same period. In response to this challenge, Visa (V), PayPal (PYPL), and other traditional providers have begun to either offer their own stablecoins or conduct transactions with other firms' crypto assets.