Bank of England official: stablecoins deepen US dollar dominance
In brief
- Bank of England official warns stablecoins reinforce dollar dominance and Treasury demand
- Tether and Circle held $150 billion in Treasury bills at end of 2025
- Over $300 billion in stablecoins now circulate globally
- Mass redemptions could force issuers to liquidate Treasurys, amplifying market volatility
Stablecoins as Treasury buyers
Tether's USDt and Circle's USDC held nearly $150 billion in Treasury bills at the end of 2025 and bought roughly $33 billion during the year. More than $300 billion in stablecoins are now in circulation globally. The US dollar accounts for 98% of stablecoin value, making these digital assets a meaningful lever for Treasury demand.
Wilkins's comments highlight an emerging dynamic: stablecoin issuers function as institutional buyers of government debt. They need to hold high-quality collateral to back redemptions, and Treasury bills fit that profile. As the stablecoin market scales, so does this demand channel.
Cross-border settlement and risks
Dollar-denominated stablecoins could strengthen the greenback by making cross-border settlement easier and expanding access to dollar-linked assets outside the US. That deepens dollar hegemony. But Wilkins also flagged a tail risk: at sufficient scale, mass stablecoin redemptions could force issuers to sell Treasury bills, potentially amplifying volatility in an already stressed market.
The concern isn't theoretical. Treasury markets have faced episodic stress. Large forced selling by stablecoin issuers during a redemption spike could compound those pressures.
UK stablecoin framework
Britain's approach to stablecoins lags the dollar market. British pound-denominated stablecoins have been much slower to gain traction. The Financial Conduct Authority began testing prospective stablecoin issuers through a dedicated regulatory sandbox and finalized rules for UK stablecoin issuance in June.
The Bank of England has also been experimenting with digital money, including a recent test of whether stablecoins and a simulated digital pound could work together for cross-border trade payments. Those trials suggest central banks are taking the infrastructure seriously, even as they weigh systemic risks.
