As the U.S. dollar loses its dominant role as the global reserve currency, stablecoins may see their usage diminish. According to data from the International Monetary Fund, the U.S. dollar now accounts for just over 58% of global foreign exchange reserves, a significant decrease from the 71% share it had in 2001. De-dollarization, the process of reducing the use of the US dollar in a country’s economy, is taking place in Russia, China, and also in El Salvador, which became the first country in the world to use Bitcoin (BTC) as a legal tender in 2021. The CEO of Circle, the issuer of USD Coin (USDC), Jeremy Allaire, called for the U.S. to implement stablecoin legislation and digitize the U.S. dollar to remain competitive amid the de-dollarization trend. The Chinese yuan has overtaken the U.S. dollar as China’s most-used cross-border currency, increasing to a high of 48% of transactions after it made up nearly 0% in 2010. Stablecoins are pegged to the U.S. dollar, which makes sense given its dominant status. However, as the U.S. dollar continues to lose its dominance, these stablecoins may see their usage diminish. It is worth noting that stablecoins are “particularly beneficial for citizens in emerging markets who may face high levels of inflation and currency instability,” according to the issuer of the largest stablecoin by market capitalization, Tether. While stablecoins can be designed in different ways, the most frequently used ones are currently both fully/over-collateralized and exogenous (backed by external assets). Stablecoins can be improvised and experimented to cater to all scenarios.
About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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