Points of Focus

• A Confluence Investment Management report says the GENIUS Act turns stablecoins into a tool of US economic power.
• It estimates that stablecoins could drive trillions in demand for US Treasuries.
• It further stresses that stablecoins could accelerate digital dollarization in unstable economies.

From Q1-2024 to Q1-2025, USD stablecoin issuers ranked as the third-largest net buyers of US Treasuries globally. Washington is now building policy to make that position permanent. 

A recent report by Confluence Investment Management argues that the GENIUS Act functions less as crypto regulation and more as a geopolitical instrument – extending dollar dominance across a nearly $15 trillion offshore dollar ecosystem that traditional financial infrastructure has never fully captured.

Nick van Eck maps the path to a $15 trillion stablecoin market.

Current growth is crypto trading. Future growth?

"EM dollar demand for people in jurisdictions with limited financial infrastructure. Institutional assets onchain. FX. Cross-border payments. Credit via stables."… pic.twitter.com/LzsQ3lOpCy

— The Rollup (@therollupco) February 5, 2026

That ecosystem is vast, including:

• $10 – $13 trillion in Eurodollar deposits.
• $1.5 trillion in physical US dollars held overseas.
• $1 – $1.5 trillion in cross-border payment flows. 

USD stablecoins, despite their rapid growth, currently represent only about 1.5% to 1.9% penetration within this system, according to Brookings Institution estimates.

Treasury demand by design

On July 18, 2025, President Trump signed the GENIUS Act into law, establishing the first federal regulatory framework for US payment stablecoins. As per the Confluence report, the law intentionally links stablecoin growth to demand for US government debt. 

Under the legislation, compliant issuers must maintain 1:1 reserves backed by short-term US Treasuries, cash, or bank deposits. Issuers must also undergo monthly audits by registered accounting firms, and cannot pay interest to stablecoin holders. State-regulated issuers face a $10 billion cap.

“Treasury secretary Scott Bessent is betting the crypto industry will become a crucial buyer of Treasuries in coming years as Washington seeks to shore up demand for a deluge of new US government debt.” according to the Financial Times.

Stablecoin issuers and tokenized U.S.… pic.twitter.com/aThA3VKArT

— Ondo Finance (@OndoFinance) September 15, 2025

These reserve requirements effectively turn every new stablecoin into a buyer of Treasury securities. Treasury Secretary Scott Bessent said in November 2025 that the stablecoin market could expand tenfold, to around $3 trillion by the end of the decade. Brookings projects at least $2 trillion in stablecoin demand for US Treasuries by 2030. Confluence estimates the figure could reach about $3 trillion under stable penetration rates and up to $4.8 trillion if the market grows 10% annually. Expanding stablecoin issuance could therefore reduce the Treasury’s need to issue longer-duration debt.

A new threat to foreign monetary sovereignty

The Confluence report places this shift within a broader trend of declining dollar dominance in reserves. While the dollar anchors about 88% of global foreign-exchange transactions, it represents only around 57%-58% of disclosed foreign-exchange reserves, a gap that widened as central banks increased gold holdings after the G7 froze Russia’s foreign reserves following its February 2022 invasion of Ukraine. 

When the U.S. and Europe froze $300B of Russia’s reserves in 2022, a clear message was sent: cash and bonds abroad aren’t always safe.

Gold can’t be frozen.

That’s why emerging market central banks China, India, Brazil have been buying gold at a record pace.

This chart shows… pic.twitter.com/n9j8HF3yfV

— StockMarket.News (@_Investinq) September 15, 2025

USD stablecoins offer a new structural channel to close that gap. Unlike traditional reserves, they operate outside official central-bank frameworks and can circulate globally without direct state mediation.

The effects may be strongest in economies with unstable currencies. In countries like Argentina and Venezuela, dollarization has historically been a privilege of wealthy households with foreign banking access. Stablecoins lower that barrier, allowing anyone with a smartphone and a digital wallet to hold dollar-denominated assets. A 2022 academic study found that cryptocurrency adoption rises alongside higher corruption levels and stricter capital controls. 

IMF study finds that cryptocurrency is more commonly used in countries with high corruption, inflation, and capital controls.

Somehow they conclude this means cryptocurrency is bad… not that people in bad situations use cryptocurrency https://t.co/bqsn9tUGtk pic.twitter.com/pZNmpL8nBT

— Neeraj K. Agrawal (@NeerajKA) April 10, 2022

For governments, this accessibility can weaken financial repression policies such as forced domestic debt purchases, interest-rate caps, or capital controls sometimes used to manage fiscal pressures.

China may possess the digital surveillance infrastructure needed to limit stablecoin adoption domestically. Most governments do not.

In that sense, the GENIUS Act effectively creates a private-sector dollar network capable of extending US monetary influence into economies that formal dollarization policies could never easily reach.