The Trump administration is considering a plan involving joint ventures with private companies to promote the use of dollar-backed stablecoins overseas, according to Bloomberg. The initiative aims to boost the U.S. dollar's global dominance and generate demand for U.S. Treasury notes.
The Treasury and State Departments could play key roles in promoting U.S. dollar stablecoins globally, alongside the U.S. International Development Finance Corporation.
Stablecoins are blockchain-based digital tokens whose values are pegged to an external reference, such as the U.S. dollar. They are widely seen as tokenized versions of fiat currencies and are commonly used to fund crypto trading and cross-border payments. USDT and USDC, the world's top two stablecoins, are pegged 1:1 to the U.S. dollar and together account for almost 90% of the total stablecoin market value of $292.49 billion.
Investor confidence in stablecoins depends on the issuer's ability to redeem them for fiat currency at any time. To ensure that, stablecoin companies hold backup funds, including actual U.S. dollars at a 1:1 ratio, alongside safe investments like U.S. government debt that earns interest. Under the U.S. Genius Act law, stablecoin issuers are required to hold reserves including dollars and short-term Treasuries.
