Non-Dollar Stablecoins Gain Traction Amid Sovereignty Concerns

Global demand for non-dollar stablecoins is on the rise, according to Dea Markova, director of policy at Fireblocks. Markova highlighted that governments outside the US, including Singapore, are increasingly interested in stablecoins not tied to the US dollar, despite their currently limited liquidity. This trend is driven by concerns over sovereignty and the systemic impact of dollar-linked stablecoins within their respective regions.

Markova compared the current situation to earlier tensions between governments and US payment giants like Visa and Mastercard. She noted that stablecoins are emerging as a new arena for sovereign concerns, with governments seeking to assert control over digital currencies within their jurisdictions. This dynamic is particularly evident in the European Union, where dollar-pegged stablecoins are facing significant regulatory challenges.

The European Central Bank is increasing pressure to accelerate the development of a digital euro, citing concerns over the systemic impact of dollar-linked stablecoins within the eurozone. The Bank of Italy released a report on April 29, highlighting that the reliance of dollar-pegged stablecoins on US Treasury bonds could increase systemic risk vulnerabilities. This regulatory pushback is not limited to Europe; other regions are also exploring the potential of non-dollar stablecoins to reduce their dependence on the US dollar.

Markova emphasized that the United Arab Emirates is "definitely ahead in its regulatory thinking" on stablecoins. Abu Dhabi, in particular, has adopted a more flexible approach, allowing stablecoin issuers to operate without being domiciled or licensed locally. This approach contrasts with the more stringent regulatory environment in Europe, where stablecoin issuers face significant hurdles. Markova noted that Abu Dhabi's approach is to conduct due diligence on global stablecoins and decide whether local exchanges can offer them, providing local businesses with access to global liquidity and payments.

In December 2024, USDT was approved as a recognized virtual asset in Abu Dhabi, followed by Circle receiving regulatory approval for USDC on April 29. Meanwhile, Abu Dhabi institutions are collaborating on the launch of a regulated dirham-pegged stablecoin. This initiative underscores the region's commitment to developing a robust stablecoin ecosystem that is not reliant on the US dollar.

Markova's insights highlight the growing global interest in non-dollar stablecoins as a means of asserting financial sovereignty and reducing dependence on the US dollar. As governments around the world explore the potential of digital currencies, the competition between dollar-pegged and non-dollar stablecoins is likely to intensify, shaping the future of the global financial landscape.