Bank of England Official: Stablecoins Could Strengthen US Dollar and Treasury Demand
Bank of England sees link between stablecoins and dollar power
Carolyn Wilkins, a member of the Bank of England’s Financial Policy Committee, said that the growth of US dollar stablecoins could reinforce the global dominance of the US currency. Wilkins explained that these digital assets could make it easier to settle transactions across borders. She also noted that they might allow people outside the US to access dollar-linked financial assets more easily.
Wilkins presented these views during a speech at Queen’s University Belfast. She highlighted that the expanding market for digital dollars could have significant consequences that extend beyond the crypto sector, affecting traditional financial markets and government debt.
How stablecoins impact US Treasury debt
- Major stablecoin issuers are already large buyers of US government debt.
- Tether’s USDT and Circle’s USDC held nearly $150 billion in US Treasury bills at the end of 2025.
- These issuers purchased approximately $33 billion in Treasury bills during that same year.
- Wilkins warned that if stablecoins reach a much larger scale, mass redemptions could force issuers to sell Treasury bills quickly.
Wilkins argued that this relationship works in both directions. While stablecoins currently drive demand for US debt, a sudden rush of users wanting to exchange their stablecoins for cash could force issuers to sell government bonds. This could potentially increase volatility in an already stressed financial market.
Dominance of the US dollar in stablecoin market
The US dollar remains the primary currency backing stablecoins. The dollar accounts for 98% of the total value in the stablecoin market. Wilkins described this as a "considerable first-mover advantage" for the US currency. Currently, more than $300 billion in stablecoins are in circulation, with the majority being linked to the US dollar.
In contrast, stablecoins backed by the British pound have had a much slower start. While UK regulators have taken steps to encourage their development, the pound-based assets have not gained the same traction as their dollar counterparts.
UK regulators adjust stablecoin approach
UK authorities have recently taken actions to support the growth of stablecoins in the region. The Financial Conduct Authority began testing prospective stablecoin issuers in a dedicated regulatory sandbox. The regulator also finalized rules for issuing stablecoins in the UK in June. The Bank of England has also been experimenting with digital money, including testing how stablecoins and a simulated digital pound could work together for international trade payments. This shift reflects a more accommodating regulatory approach following feedback from the crypto industry that previous rules could stifle innovation.
