Stablecoins are positioned at the center of a potential revolution linked to the US dollar, which could play a crucial role in maintaining the dollar's global dominance, argue Brian Brooks and Charles Calomiris in an opinion piece in The Wall Street Journal on August 9.
Brooks, the former CEO of Binance.US and a former chief legal officer of Coinbase, and Calomiris, the chair of the Department of Economics, Politics, and History at the University of Austin, call for Congress to establish a "robust and stable regulatory framework" for stablecoins. They point out that the introduced Payments Stablecoin Transparency Act faces challenges due to a lack of bipartisan consensus.
Amid concerns over de-dollarization, which entails a diminishing status of the US dollar as the world's reserve currency, the authors contend that stablecoins could potentially reestablish a similar global position that the dollar enjoyed after World War II as a dominant international trade currency. authors reference IMF data indicating a decrease in the share of dollar reserves held by foreign central banks, from almost 73% in 2000 to 59% today.
The authors underline that stablecoins could counteract continued dollar outflows, particularly from countries like Brazil and Argentina, which are forging trade settlement agreements with China using the yuan and their national currencies. They also stress the positive impact of stablecoins in offering accessibility to dollars for people living in economies facing hyperinflation.
By advocating for stablecoin regulation, the authors highlight the potential harm of de-dollarization to the US economy. They point out that the reserve status of the dollar has important implications for the country's borrowing costs, a crucial factor given the record government borrowing and spending . Furthermore, de-dollarization could affect the purchasing power of US consumers and raise the cost of foreign goods. The authors emphasize that "if stablecoins flourish, citizens of other countries will increase their demand for dollars, independent of (and possibly against) their governments' political decisions," highlighting the importance of global economic re-dollarization.
