Stablecoins Reshape U.S. Finance as Dollar Dominance Meets Blockchain Innovation

Bank of America has identified two key forces shaping the U.S. Treasury market: the increasing demand for Treasuries by stablecoins and the tokenization of money market fund (MMF) assets. Analysts at the bank project that stablecoin demand for Treasury bills could grow by $25 billion to $75 billion over the next year, though they emphasize that this level of demand is unlikely to significantly alter broader Treasury bill market dynamics [1]. Instead, the more immediate threat posed by stablecoins is to MMFs, which traditionally attract similar yield-seeking flows. BofA analysts note that MMFs currently hold an edge because stablecoins are not allowed to pay interest, but this advantage could erode if regulatory changes or workarounds allow stablecoins to offer yield [2].

In response to the competitive pressure from stablecoins, some MMF providers are exploring tokenization as a defensive strategy. For example, in July 2025, BNY Mellon and Goldman Sachs launched blockchain-based technology to record ownership of select MMF shares. This initiative, part of a broader industry shift driven by the GENIUS Act, marked the first rollover of tokenized MMF shares [1]. The move aims to combine traditional yield opportunities with the efficiency of blockchain-based settlement, potentially offering a competitive edge in an evolving financial landscape [2].

Goldman Sachs and U.S. Treasury Secretary Scott Bessent have also highlighted the potential for a “stablecoin gold rush,” driven by regulatory clarity and the vast opportunity in global payments. The GENIUS Act, which provides a federal framework for stablecoin regulation, is seen as a critical milestone. It mandates that U.S. stablecoins be backed by high-quality assets like U.S. dollars or Treasuries, ensuring financial stability and legitimacy [3]. Goldman Sachs estimates that the stablecoin market could expand from $271 billion to a multitrillion-dollar industry, with USDC expected to see $77 billion in growth by 2027 [4].

The potential growth of the stablecoin market raises questions about its impact on U.S. Treasury demand. While some, like Bessent and Goldman Sachs, argue that stablecoins will increase demand for government bonds, others are more skeptical. Paul Donovan, Global Chief Economist at UBS, argues that stablecoins primarily redistribute existing demand rather than create new demand for U.S. debt instruments. He points out that the movement of funds from Treasuries to stablecoins does not fundamentally change the overall demand for government bonds [5]. This perspective underscores the complexity of assessing stablecoin-driven shifts in financial markets.

At the intersection of technology and global finance, stablecoins are reshaping monetary systems and reinforcing the dollar’s global dominance. Izabella Kaminska of The Blind Spot describes this as a process of “redollarization,” where stablecoins are reinvigorating the U.S. dollar's role in international finance. By requiring stablecoin issuers to hold Treasuries as reserves, stablecoins create a sustained and growing demand for U.S. government debt [6]. The GENIUS Act, by ensuring 100% reserve backing for onshore stablecoins, has further aligned private-sector innovation with national fiscal interests. This strategy supports the U.S. Treasury’s goal of maintaining the dollar’s status as the world’s reserve currency while offering a regulatory framework that fosters innovation and financial stability [3].

Source:

[1] Stablecoins, Tokenization Put Pressure on Money Market ... (https://www.coindesk.com/markets/2025/08/21/stablecoins-tokenization-put-pressure-on-money-market-funds-bank-of-america)

[2] Bank of America Highlights Stablecoins and Tokenization ... (https://cryptodnes.bg/en/bank-of-america-highlights-stablecoins-and-tokenization-as-new-forces-in-u-s-debt-markets/)

[3] Goldman Sachs says we're on the verge of a stablecoin gold ... (https://finance.yahoo.com/news/goldman-sachs-says-verge-stablecoin-104117655.html)

[4] US Treasury Secretary Expects Stablecoin Industry To ... (https://www.mitrade.com/insights/news/live-news/article-3-1057640-20250821)

[5] Goldman Sachs says we're on the verge of a stablecoin ... (https://fortune.com/2025/08/20/goldman-sachs-stablecoin-gold-rush/)

[6] Redollarization and Digital Statecraft: How Stablecoins Are ... (https://www.financialsense.com/blog/21379/redollarization-and-digital-statecraft-how-stablecoins-are-rewiring-global-power)