Stablecoins: Reinforcing the U.S. Dollar While Reshaping Banking and Digital Infrastructure

Stablecoins are at the intersection of reinforcing the U.S. dollar's global dominance and disrupting traditional banking systems. While the dollar's share of global foreign exchange reserves has declined to 57.7%—the lowest in 30 years—dollar-backed stablecoins now account for over 99% of the $230 billion stablecoin marketNew Framework for Stablecoin Growth - Coinbase^[1]. This duality presents both opportunities and risks for investors, policymakers, and financial institutions.

Reinforcing the Dollar: A New Era of Global Liquidity

Stablecoins act as a bridge between the U.S. dollar and the digital economy. By enabling near-instant, low-cost cross-border transactions, they amplify the dollar's role in global commerce. For example, Coinbase projects that stablecoin demand could drive $5.3 billion in weekly U.S. Treasury bill purchases by 2028, potentially lowering front-end yields by 2–4 basis pointsNew Framework for Stablecoin Growth - Coinbase^[1]. This creates a feedback loop: stablecoins increase demand for Treasurys, which in turn strengthens the dollar's liquidity.

However, this dynamic is not without risks. A sudden redemption wave—such as a $3.5 billion outflow within five days—could trigger forced selling in Treasury markets, tightening liquidityNew Framework for Stablecoin Growth - Coinbase^[1]. Such scenarios underscore the need for robust regulatory frameworks like the GENIUS Act, which mandates one-to-one reserves and audits for stablecoin issuersWhy Stablecoins Are Gaining Momentum Right Now - Regulatory Tailwinds Included^[2].

Disruption in Banking: From Deposits to Derivatives

The rise of stablecoins threatens to disintermediate traditional banks. By offering a digital alternative to cash and deposits, stablecoins could reduce the need for intermediaries in payments and lending. Coinbase's Q2 2025 report highlights this shift: average USDC balances on its platform surged to $13.8 billion, driven by institutional and retail adoptionCoinbase Q2 2025 Earnings: Strong Stablecoin Revenue Supports Shift Toward All-Assets Exchange Strategy^[3]. This growth is not just a fintech trend—it's a structural shift.

For banks, the implications are twofold. First, stablecoins could crowd out traditional deposits, reducing banks' ability to fund loans and generate interest income. Second, they introduce new competition in credit markets. Coinbase's integration of USDC into loans and decentralized applications (DApps) has already facilitated $160 million in bitcoin-backed USDC loan originationsCoinbase Q2 2025 Earnings: Strong Stablecoin Revenue Supports Shift Toward All-Assets Exchange Strategy^[3]. As corporate adoption grows—81% of small and mid-sized businesses now express interest in stablecoins—the pressure on banks to innovate will intensifyCoinbase Q2 2025 Earnings: Strong Stablecoin Revenue Supports Shift Toward All-Assets Exchange Strategy^[3].

Coinbase's Strategic Play: Building the Digital Infrastructure

Coinbase is positioning itself as a central player in this new ecosystem. Its acquisition of Deribit, a leading crypto derivatives platform, for $2.9 billion in 2025Coinbase Wants Crypto Platforms to Be Financial Infrastructure^[4], signals a pivot toward becoming an “all-assets exchange.” This move, combined with tokenized stocks and prediction markets, reflects a broader vision of integrating stablecoins into a diversified financial infrastructure.

The company's stochastic models predict a stablecoin market cap of $1.2 trillion by 2028, driven by policy adoption and regulatory clarityNew Framework for Stablecoin Growth - Coinbase^[1]. Crucially, Coinbase's Q2 2025 stablecoin revenue hit $332.5 million—a 12% quarter-over-quarter increase—highlighting the sector's profitabilityCoinbase Q2 2025 Earnings: Strong Stablecoin Revenue Supports Shift Toward All-Assets Exchange Strategy^[3]. For investors, this underscores the importance of platforms that can scale infrastructure while navigating regulatory complexity.

Macroeconomic Implications: A Double-Edged Sword

While stablecoins bolster dollar demand, they also introduce systemic risks. The tokenization of real-world assets (RWAs), now valued at $21 billionCoinbase Q2 2025 Earnings: Strong Stablecoin Revenue Supports Shift Toward All-Assets Exchange Strategy^[3], could further fragment liquidity. If non-dollar stablecoins gain traction—particularly in emerging markets—the U.S. dollar's dominance could erode. Conversely, stablecoins could become a tool for central banks to experiment with digital currencies, potentially stabilizing rather than destabilizing the systemNew Framework for Stablecoin Growth - Coinbase^[1].

Conclusion: Balancing Opportunity and Risk

Stablecoins are reshaping finance by reinforcing the dollar's role while challenging traditional banking models. For investors, the key lies in identifying platforms like Coinbase that can navigate regulatory hurdles and scale infrastructure. However, the sector's long-term success depends on addressing risks such as redemption volatility, illicit use, and regulatory fragmentation. As the GENIUS Act and similar frameworks mature, the stablecoin ecosystem may evolve into a resilient pillar of global finance—or a catalyst for its next disruption.