Introduction to Stablecoins and Their Impact on Global Finance
The US dollar has long been the cornerstone of global finance, but a new player has emerged to potentially reinforce its dominance: stablecoins. With the stablecoin market surpassing $300 billion, these digital assets are revolutionizing the way value is transferred across borders. The question on everyone’s mind is no longer whether stablecoins are important, but rather what kind of financial order they will create or influence. According to Chris Knight, Managing Director at LMAX Digital, stablecoins are not a threat to the dollar’s dominance, but rather a catalyst for efficiency and inclusion.
Chris Knight, an experienced financial market professional with 30 years of experience in capital markets and foreign exchange, believes that stablecoins will play a crucial role in shaping the future of global finance.
A New Engine Behind the USD’s Dominance
Stablecoins pegged to the US dollar are expanding the dollar’s global reach by providing 24/7 programmable, cross-border liquidity, strengthening rather than weakening US monetary dominance. Institutions are rapidly adopting and issuing stablecoins, resulting in trillions in annual on-chain settlements and quietly transitioning the global financial infrastructure to new platforms. As Europe and Asia develop regulated alternatives, U.S. dollar-backed stablecoins are poised to set the standards for the next phase of global finance due to U.S. regulatory clarity and economies of scale.
Regulatory developments such as the GENIUS Act have accelerated this trend. By requiring stablecoins to be backed by safe, liquid assets like Treasury bills, the US is ensuring that these “digital dollars” are just as credible as their traditional counterparts. Every stablecoin transaction increases demand for US assets and increases confidence in the dollar. This expansion of digital liquidity effectively extends the reach of the dollar and allows it to circulate beyond the traditional banking system.
Achieving an Institution-Ready, Borderless Financial System
The most transformative force behind this change is the acceleration of institutional participation. Banks, companies, and payment providers are no longer passive observers. Many are experimenting with issuing their own regulated stablecoins or tokenized deposits. The motivation is clear: to modernize financial infrastructure, reduce friction, and provide services that meet the demand for instant, borderless money movement. Institutional clients increasingly want to understand how traditional FX markets and digital assets can coexist within a unified liquidity framework.
Stablecoins are at the center of this development. They offer the familiarity of fiat with the speed and programmability of blockchain, connecting established markets and emerging digital ecosystems. In 2024, stablecoin transfer volume reached $27.6 trillion, surpassing the combined volume of Visa ($15.7 trillion) and Mastercard ($9.8 trillion) during the same period. Surpassing the world’s largest card networks in processing volume is no small feat.
The European Opportunity
For other currencies, particularly the euro, the path to adoption is now more tangible than ever. While regulation of crypto asset markets has provided a clear legal framework and oversight for Euro-backed stablecoins, we are only just witnessing the next step: institutional mobilization. Just earlier this year, nine major European banks, including ING, UniCredit, CaixaBank, and others, formed a consortium to launch a MiCA-compliant euro-denominated stablecoin, with issuance targeted in the second half of 2026.
This marks a significant shift: Europe’s largest financial institutions are no longer on the sidelines, but are actually building the rails for digital money. Nevertheless, the scale gap cannot be ignored. The Euro stablecoin market is currently worth less than $1 billion, compared to more than $300 billion for U.S. dollar-pegged tokens. Integration will be the real catalyst for growth. Euro-backed stablecoins cannot scale until they are fully embedded into banks’ core treasury, custody, and settlement processes, and that will take some time.
The Path Ahead
Ultimately, how jurisdictions design and regulate stablecoins will determine who sets the standards for the next phase of global finance. If the US continues to move quickly and institutionalize the issuance of stablecoins under clear federal oversight, it could cement the dollar’s leadership role for another generation, but this time via digital rails. However, competition is increasing. From the euro projects backed by European banks to Asia’s central bank-linked initiatives, competing digital currencies are emerging that seek to match the speed, scale, and trust of dollar-denominated tokens.
This new era of currency competition will not be characterized by one currency displacing another, but by the convergence of fiat and digital standards into a single, interoperable system. As the stablecoin market continues to grow and evolve, it will be interesting to see how different jurisdictions navigate this new landscape. For more information on stablecoins and their impact on global finance, visit https://crypto.news/stablecoins-and-the-battle-for-monetary-influence/.
