US considers deploying stablecoins to maintain dollar dominance

The US government is considering an initiative to promote dollar-backed stablecoins outside the United States. According to insiders, the Trump administration wants to strengthen the dollar’s position as the world’s reserve currency while at the same time increasing demand for US Treasury bonds. Several government agencies could be involved in the plan, with cooperation with private companies at its core.

In brief:

• The US is considering supporting stablecoin projects through partnerships with private companies.
• The aim is to strengthen dollar dominance and increase demand for US Treasury bonds.
• The Treasury Department, the State Department and the DFC could play a role.

Cooperation with the private sector

According to sources who wished to remain anonymous, the US government is considering supporting stablecoin projects by setting up joint ventures with companies from the private sector. That is reported by Bloomberg.

These are initiatives in which the US dollar serves as the basis for stablecoins circulating outside the US. By encouraging greater use of such coins, the government hopes to increase demand for US Treasury bonds, since many stablecoins are partly backed by this type of government paper.

Three government agencies possibly involved

Three US government bodies could be given a role in the plan: the Treasury Department, the State Department and the US Development Finance Corporation (DFC). The DFC is a government institution that finances private investment in developing countries and can act as a partner in this kind of international project.

The plans are still at an exploratory stage and no final decisions have been taken. Earlier, Galaxy Digital already bought $100 million worth of the sUSD stablecoin, which shows that the private sector too is taking ever larger positions in the stablecoin market.

Strengthening the dollar through digital means

The initiative fits within a broader strategy of the Trump administration to protect the position of the US dollar worldwide. The rise of alternative payment systems and currencies from other countries has been putting that position under pressure for some time.

By actively spreading dollar-backed stablecoins abroad, more transactions outside the US can still take place in dollars. That not only increases the dollar’s influence, but also structurally generates more demand for the Treasury bonds that serve as collateral for these stablecoins.