Dollar Stablecoins: Connecting the Dollar, U.S. Treasuries, and Digital Finance

If digital currencies were discussed a few years ago, it was easy to see them as a technology race. Who would launch a central bank digital currency first, whose blockchain was more advanced, whose payment speed was faster, and who could bypass the traditional banking system for cross-border settlement. But by 2026, after digital yuan, dollar stablecoins, tokenized deposits, and tokenized treasuries have all passed their first round of experiments, a question increasingly worth re-examining is: In the digital currency competition, is the real contest about "digital" or about "currency"? I will write two articles to introduce the different development paths of China and the United States in currency digitalization.

If digital currencies were discussed a few years ago, it was easy to see them as a technology race. Who would launch a central bank digital currency first, whose blockchain was more advanced, whose payment speed was faster, and who could bypass the traditional banking system for cross-border settlement.

But by 2026, after digital yuan, dollar stablecoins, tokenized deposits, and tokenized treasuries have all passed their first round of experiments, a question increasingly worth re-examining is: In the digital currency competition, is the real contest about "digital" or about "currency"? I will write two articles to introduce the different development paths of China and the United States in currency digitalization.

My conclusion is:

Digital technology itself cannot create a strong currency, but it can very efficiently amplify the network effects that a strong currency already possesses

The development paths of digital currencies in China and the United States have been asymmetric from the start. China has chosen a relatively typical central bank digital currency route, with the People's Bank of China promoting the digital yuan system.

The United States has so far not launched a retail digital dollar from the Federal Reserve for the public. What is truly developing at high speed are private dollar stablecoins such as USDT and USDC, as well as bank deposit tokens, tokenized treasuries, and on-chain settlement systems.

As of April 2026, the total market capitalization of global stablecoins is approximately $315 billion. More importantly, the BIS estimates that about 98% of them are denominated in U.S. dollars. This set of data is very important; it shows that the blockchain era has not naturally brought about so-called "de-dollarization." On the contrary, stablecoins are becoming a new channel for the dollar to enter the internet economy.

To understand why stablecoins are almost monopolized by the dollar, we can set aside digital technology for a moment and look only at the traditional monetary system. According to IMF COFER data, in the first quarter of 2026, the U.S. dollar accounted for 57.13% of global allocated official foreign exchange reserves, while the Chinese yuan accounted for 1.99%.

If we look at foreign exchange trading, the gap is even more pronounced. The BIS (Bank for International Settlements) 2025 Triennial Survey shows that the U.S. dollar appears on one side of 89.2% of global foreign exchange transactions, while the Chinese yuan has risen to 8.5%, making it the world's fifth most traded currency. It should be noted here that because a foreign exchange transaction involves two currencies, the sum of the shares of all currencies is 200%, so it cannot be simply understood as "89.2% of transactions use only the dollar."

In July 2026, the U.S. dollar accounted for approximately 50.99% of global SWIFT payment value, while the Chinese yuan accounted for about 3.10%, ranking fifth. The SWIFT official Global Currency Tracker released this monthly data in August 2026.

One reality is hard to avoid: USDT and USDC first inherit not the credit of blockchain, but the existing credit and usage network of the dollar. An overseas enterprise is willing to accept USDC not primarily because it believes Circle has the world's most advanced blockchain technology. It is willing to accept it because what it ultimately receives is a financial instrument pegged 1:1 to the dollar, redeemable for dollars, and capable of purchasing dollar assets.

It is not that stablecoins created the dollar's international status, but that the dollar's international status created the most fertile soil for dollar stablecoins

Although the traditional dollar is already very powerful, it is not a truly "internet-native asset." International dollar flows still rely heavily on bank accounts, correspondent banks, compliance reviews, business hours, and traditional financial market infrastructure.

What stablecoins and tokenized bank deposits change is precisely this layer.

They can operate 24/7, enter smart contracts, conduct automated delivery with on-chain financial assets, and place previously separated "asset legs" and "cash legs" into the same program.

This is not just theoretical. In May 2025, J.P. Morgan, Chainlink, and Ondo completed a cross-chain test: tokenized U.S. Treasuries and J.P. Morgan dollar deposits achieved real-time Delivery versus Payment, or DvP.

It is particularly important to note that the cash leg used here was not USDT or USDC, but dollar deposits within the J.P. Morgan system.

DTCC's experiment is even more intuitive. In summarizing its Great Collateral Experiment, DTCC stated that assets could move directly on-chain, rules were automatically executed, and some collateral settlement processes were compressed from hours to seconds.

Therefore, saying "digital technology is just a gimmick" is clearly not valid. The truly accurate judgment should be: digital technology has not created the dollar's credit, but it is reducing the friction in the operation of the dollar system. And for a currency that already has enormous network effects, once its operational friction is further reduced, its original advantages may be further amplified.

Let us look at the point that Wall Street is embracing tokenization.

What is currently receiving high attention from large financial institutions is not just USDT or USDC. There are also tokenized bank deposits, tokenized central bank reserves, tokenized money market funds, tokenized treasuries, and new settlement infrastructure.

Project Agorá, led by the BIS, is very representative.

This project brings together multiple central banks and more than 40 financial institutions to test placing tokenized commercial bank deposits and tokenized central bank reserves in a programmable system for cross-border settlement, rather than simply using stablecoins to replace bank money.

In a real-value test conducted in July 2026, 28 financial institutions and central banks completed 17 types of transaction scenarios involving currencies such as the U.S. dollar, euro, Japanese yen, British pound, Korean won, and Swiss franc. The average time from payment initiation to settlement was about 80 seconds.

This provides a very important insight:

The "digital currency" that Wall Street will truly use in the future may not be the USDT or USDC we are familiar with today. The final form may well be a coexistence of stablecoins, bank deposit tokens, central bank money, and tokenized financial assets. So the real revolution should not be called the "stablecoin revolution," but rather: the tokenization revolution of financial assets.

Stablecoin transaction volumes are astonishing, but not all on-chain traffic can be called "payments"

This is another area where it is particularly easy to misjudge the scale of stablecoins. In 2025, global on-chain stablecoin transaction volume reached approximately $35 trillion. $35 trillion is an extremely large number. But the Bank for International Settlements further estimates that the stablecoin flows truly belonging to "payment-related" activities are only about $390 billion.

Why is there such a large gap between the two?

Because on-chain stablecoin flows come in large part from: cryptocurrency trading, exchange deposits and withdrawals, arbitrage, high-frequency bots, DeFi operations, smart contract calls, and internal institutional fund transfers. After applying filtering algorithms, Visa, along with Artemis, Allium Labs, and other institutions, estimated the "adjusted" stablecoin transaction volume over the past 12 months to be approximately $10.2 trillion, still far below the unadjusted total flow; and about 36% of adjusted flows in 2025 were still related to centralized exchange deposits and withdrawals.

On the other hand, stablecoins entering real commercial payments is indeed happening. Artemis surveyed 22 stablecoin payment companies and supplemented estimates for another 11 companies, finding that between 2023 and August 2025, clearly categorized stablecoin payments totaled approximately $136 billion. Among them, the annualized scale of B2B stablecoin payments in August 2025 reached approximately $76 billion.

Therefore, a more objective conclusion is: stablecoin payments are growing rapidly, but the claim that "stablecoins have taken over global payments and Wall Street settlement" is clearly exaggerated at present.

The technology trend is real. The scale revolution has not fully happened yet.

If I were to look for the most noteworthy thing about the digital dollar, I think it is not "whether you can buy coffee with USDC." It is U.S. Treasuries

Currently, the reserves of major dollar stablecoin issuers are increasingly composed of short-term U.S. Treasuries, repos, and cash. Taking Tether as an example, according to Tether's Q4 2025 reserve report published by Tether and attested by BDO, as of the end of 2025: Tether directly held more than $122 billion in U.S. Treasuries; if indirect exposures such as overnight reverse repos are included, total U.S. Treasury exposure exceeded $141 billion. Tether also disclosed that the circulating supply of USDT at the end of 2025 was approximately $186 billion. (It must be noted here: this is data disclosed by Tether and its attestation firm, not a government audit of Tether's balance sheet by the U.S. Treasury.)

Circle's situation is similar. Circle disclosed that USDC reserves include bank deposits, overnight U.S. Treasury repos, and U.S. Treasuries with maturities of three months or less; among them, the Circle Reserve Fund is managed by BlackRock.

What truly changes the game is the U.S. regulatory system. The GENIUS Act, signed on July 18, 2025, stipulates that compliant payment stablecoins must in principle be backed 1:1 by reserves, and permitted reserve assets include cash, bank deposits, repos, and high-liquidity assets such as U.S. Treasuries with remaining maturities not exceeding 93 days.

Thus, a financial cycle that did not previously exist is forming:

Global users purchase dollar stablecoins

→ Stablecoin issuers receive dollars

→ Large amounts of reserves enter the short-term U.S. Treasury and repo markets

→ U.S. Treasuries provide reserve assets for stablecoins

→ Stablecoins further distribute dollars to the global internet

→ More stablecoin demand may generate new demand for U.S. Treasuries.

This is no longer just a payment innovation; it is evolving into a new connector between the dollar's global network and the U.S. Treasury market.

Therefore, the rise of dollar stablecoins today cannot be simply attributed to blockchain technology, nor can it be simply explained as "because the dollar is already strong."

What is really happening is something else:

The dollar's monetary advantage, the asset advantage of U.S. Treasuries, and the liquidity advantage of U.S. financial markets are being combined with new digital financial infrastructure.

This is what truly deserves attention about the digital dollar.