The Evolution of the Dollar: Harnessing the Power of Stablecoins

The history of the dollar can be viewed as a three-part narrative. The first act began with the emergence of Eurodollars in 1950s London, where offshore bank deposits allowed the Soviet bloc, European exporters, and multinationals to hold dollars outside of US regulation, giving rise to a massive shadow banking system. The second act was marked by the introduction of the Petrodollar, which linked global energy demand to the US currency after 1974, providing Washington with a guaranteed market for its Treasury bills. John deVadoss will be speaking at the IEEE x Consensus Research Symposium: What's next in Agentic AI? at Consensus 2025 on May 16. The third act is currently unfolding, with the rise of USD-backed stablecoins, also known as Stabledollars, which have surpassed $230 billion in circulating supply and often settle more value than PayPal and Western Union combined. This has transformed the dollar into a monetary API, a permissionless and programmable unit that clears in seconds for a fraction of a cent. By following the incentives, the shape of the future becomes apparent. For instance, a merchant in Lagos can accept USDC on her phone, avoiding a 20% loss in naira, and restock inventory on the same day. A Singapore hedge fund can invest in tokenized T-bill vaults yielding 4.9% and route those dollars into a swap at 8 am New York time without a correspondent bank. A Colombian gig worker can convert weekend wages to digital dollars, bypass capital controls, and withdraw pesos at a neighborhood ATM without the Friday-to-Monday lag or 7% remit fee. Stablecoins have not replaced the banking system but have instead found a way around its slowest and most expensive bottlenecks. As the scale of stablecoins grows, so does their legitimacy. The proposed GENIUS Act in the US Senate would charter stablecoin issuers nationally and open a path to Fed master accounts for the first time. Treasury staff projects a $2 trillion stablecoin float by 2028, which is plausible given that Tether and Circle command over 90% of the market share with reserves lodged almost entirely in short-dated US debt. This means foreigners are effectively holding digitized T-bills that settle in 30 seconds. The dollar's network effect is shifting from SWIFT messages to smart contract calls, extending its dominance without printing new notes. However, the Stabledollar era is not without risks. Private tokens that wrap sovereign money raise difficult questions. Who conducts monetary policy when a third of the offshore float lives in smart contracts? What recourse does a Venezuelan family have if an issuer blacklists its wallet? Will Europe or the BRICS tolerate a dependence on a US-regulated asset? These are governance puzzles, but they can be solved if policymakers treat stablecoins as critical dollar infrastructure rather than speculative irritants. The playbook is straightforward: by doing so, the United States can create a digital-dollar moat wider than any rival's CBDC, including China's. If not, issuance will migrate offshore, leaving Washington to police a shadow system it no longer controls. Dollar hegemony has always advanced by linking itself to the dominant trade flow of the age: Eurodollars financed post-war reconstruction, petrodollars lubricated the fossil-fuel century, and Stabledollars are wiring the high-velocity, software-driven economy. In ten years, Stabledollars will be the norm, and you won't even notice them; they will simply be the underlying system. Your local café will quote prices in pesos or pounds but settle in tokenized dollars under the hood. Brokerages will sell notes that are really programmable bearer instruments for collateral calls. Payroll will arrive in a wallet that auto-routes savings, investments, and charitable gifts the instant it clears. The only question is whether the United States will steward the upgrade it accidentally created. Stablecoins are already the fastest-growing quasi-sovereign asset class. By harnessing them with serious rules, the dollar's third great reinvention can be secured. Ignoring them will still lead to that future, just without the US in the driver's seat.