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US government must embrace stablecoins to maintain dollar dominance

Connor Spelliscy is a blockchain researcher focused on policy and governance. He founded the DAO Research Collective and co-founded blockchain advocacy organizations in the U.S. and Canada.

The TechCrunch Global Affairs Project examines the increasingly intertwined relationship between the tech sector and global politics.

Skeptics of the flourishing web3 industry attack it for a number of reasons. One critique that resonates in Washington is that digital currency could undermine the country’s current monetary system, even the U.S. dollar itself.

But while digital assets have undeniably disrupted traditional financial services, they are far from being an enemy of the dollar. In fact, a type of digital asset, the stablecoin, has the potential to cement USD dominance worldwide. But if the U.S. is to capitalize on stablecoins’ potential, policymakers and regulators must take a measured approach to regulation.

Stablecoins are a class of digital asset designed to maintain a stable price over time. They differ from other digital assets in that their price is often pegged to fiat currencies, usually USD. They have also evolved substantially since Facebook’s attempt to launch its own “Libra” stablecoin two years ago (a project so unpopular Facebook subsequently rebranded it to “Diem”).

Facebook initially designed Libra as a new currency, pegging it to a basket of fiat currencies and securities rather than just one. Policymakers globally panned Libra and cited its potential to threaten global financial stability, abuse data privacy and undermine monetary policy. Former president Donald Trump said that Libra would have “little standing or dependability” and that the “only one real currency” in the U.S. is the dollar.

Fast-forward to today and stablecoins’ special connection to the dollar gives them the potential to expand dollar dominance rather than threaten it. However, that potential will only be realized if enou...

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