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 jurisdictions.

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 borders. This dynamic is particularly evident in the European Union, where dollar-pegged stablecoins are facing significant regulatory challenges.

The European Central Bank is accelerating 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 pressure is part of a broader effort to reduce dependence on US dollar-denominated assets and promote financial sovereignty.

Markova also noted that the United Arab Emirates is 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 gives local businesses access to global liquidity and payments, fostering a more open and competitive financial ecosystem. 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. Additionally, Abu Dhabi institutions are collaborating on the launch of a regulated dirham-pegged stablecoin, further diversifying the stablecoin landscape.

Despite the dominance of dollar-pegged stablecoins in the market, with Tether’s USDT and Circle’s USDC combining for a significant portion of the total market cap, the shift towards non-dollar stablecoins is gaining momentum. This trend reflects a broader movement towards financial sovereignty and the diversification of digital currencies, as governments seek to reduce their reliance on the US dollar and promote their own digital currencies.