Stablecoin Boom Could Boost Dollar Dominance and Treasury Demand: BoE Official

A Bank of England policymaker has warned that the rapid growth of dollar-pegged stablecoins could reinforce US dollar dominance while transforming stablecoin issuers into major buyers of government debt. Speaking at Queen's University Belfast on Tuesday, Carolyn Wilkins, a member of the BoE's Financial Policy Committee, said digital dollars could strengthen the greenback by streamlining cross-border settlement, expanding access to dollar-linked assets outside the United States, and increasing demand for US Treasurys held as reserves.

Tether's USDt and Circle's USDC already held nearly $150 billion in Treasury bills at the end of 2025, purchasing roughly $33 billion worth during the year, according to data cited by Wilkins. With more than $300 billion in stablecoins now in circulation and the US dollar accounting for 98% of that value, the currency enjoys what Wilkins described as a 'considerable first-mover advantage.' However, she cautioned that the relationship carries systemic risk: mass redemptions at sufficient scale could force issuers to liquidate Treasury holdings, potentially amplifying volatility in already stressed debt markets.

Meanwhile, the UK is stepping up its own stablecoin push after industry criticism that proposed BoE rules could stifle innovation. The Financial Conduct Authority has begun testing prospective issuers through a regulatory sandbox and finalized rules for UK stablecoin issuance in June. The Bank of England has also been experimenting with a simulated digital pound alongside stablecoins for cross-border trade payments. Despite these efforts, pound-denominated stablecoins have struggled to gain meaningful traction against their dollar-backed counterparts.