In the ever-evolving world of digital currencies, stablecoins have emerged as the latest focal point, capturing both excitement and apprehension among market watchers. With the sector ballooning to a staggering $280 billion over the past year, stablecoins have become intricately tied to U.S. Federal Reserve policy—more so than ever before. This connection raises intriguing questions about the future of financial stability.
Stablecoins: The New Dollar Demand Engine?
Gracie Lin, CEO of OKX Singapore, believes that while market participants are busy dissecting Federal Reserve Chair Jerome Powell’s recent rate signals, they might be missing the bigger picture. “A more consequential long-term shift is happening beyond the charts and headlines. It’s in the so-called ‘boring’ stablecoins that we’re seeing better long-term price signals,” Lin noted in a dispatch to CoinDesk.
The path forward, Lin suggests, lies in unification. “Stablecoins have built the rails,” she said. “Now they need a unified market that delivers liquidity, efficiency, and true utility for investors.” This sentiment is echoed by Coinbase analysts who project a mind-boggling expansion of the market to $1.2 trillion by 2028, a development that would necessitate purchasing $5.3 billion in Treasuries weekly. While such inflows might nudge yields downward, the potential for redemption surges could spell trouble, triggering forced sales of bills and siphoning off liquidity. As explored in our recent coverage of Hex Trust CEO’s insights on Bitcoin Treasury firms, the interplay between stablecoins and traditional financial instruments continues to evolve.
Echoes of 2008: Stability or Fragility?
The debate around stablecoins took center stage in a recent episode of Goldman Sachs’ Exchanges podcast. UC Berkeley’s Barry Eichengreen issued a cautionary note, drawing parallels to the 2008 money-market fund panic. “When a dollar money market share fell to 97 cents in 2008, chaos broke out,” Eichengreen warned. The specter of contagion looms large, especially if stablecoin redemptions mirror past frenzies.
Yet, not everyone shares this dystopian view. Brian Brooks, former U.S. Comptroller of the Currency, countered with a dose of optimism. He pointed to the GENIUS Act, which mandates one-to-one Treasury backing for stablecoins, as a safeguard. “Supervision equals safety,” Brooks asserted, noting that each new token issued requires a corresponding Treasury purchase. To him, stablecoins represent a burgeoning engine of global dollar demand.
This ongoing tug-of-war underscores a broader macroeconomic dilemma. Will stablecoins emerge as the steady hand guiding the financial system, or could they fracture into instruments that amplify shocks?
Broader Market Dynamics
Meanwhile, the broader cryptocurrency market is experiencing its own set of dynamics. Bitcoin (BTC) is trading above $111,300, maintaining a narrow range as investors bide their time amid macroeconomic uncertainty. Ethereum (ETH) has seen modest gains, trading at $4,320 with a 0.6% intraday uptick, buoyed by renewed interest in altcoins. Gold, too, has hit an all-time high, driven by expectations of a Fed rate cut and geopolitical tensions. This follows a pattern of institutional adoption, which we detailed in our analysis of record margin debt in Chinese stocks.
In the context of global equities, Japan’s Nikkei 225 reflects a cautious optimism, mirroring a broader “ninja stealth rally” in Japanese stocks spurred by foreign inflows and economic reforms.
What does this all mean for investors and the future of finance? The stablecoin debate is far from settled, and the implications of their rise—or potential fall—are profound. As the market continues to digest these developments, one thing is clear: stablecoins are no longer just the ‘boring’ corner of the crypto world. They’re a pivotal force, shaping the contours of global finance in ways that are both promising and perilous.
Source
This article is based on: Asia Morning Briefing: Are Stablecoins an ‘Engine of Global Dollar Demand’ or a 2008-Style ‘Liquidity Crunch’?
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
