Dollar-backed stablecoins could extend the reach of the U.S. dollar across global digital payments and strengthen demand for U.S. government debt, but their rapid growth could also create new financial-stability risks, Bank of England policymaker Carolyn Wilkins has said.

Speaking at Queen's University Belfast in remarks on the future of digital money, Wilkins said stablecoins — digital tokens designed to hold a stable value against fiat currencies — had moved beyond a crypto-market experiment, with roughly $300 billion in stablecoins now in circulation, up from less than $5 billion at the start of 2020, a more-than-sixtyfold expansion that has pushed the question from crypto circles into central-bank policy. The bigger question, she argued, is no longer simply whether stablecoins can function as digital money, but how their adoption could reshape the global monetary system.

"Private digital money can work at scale, but the historical record is clear about the conditions required to make that possible," Wilkins said.

Pointing to the history of privately issued banknotes in Britain and the United States, she argued that stablecoins face familiar challenges around maintaining convertibility at par, ensuring high-quality reserves, providing liquidity during crises, and establishing clear rules for failure. Those risks were illustrated by the 2023 collapse of Silicon Valley Bank, when Circle's USDC stablecoin briefly lost its dollar peg after about $3.3 billion of its reserves were held at the failed bank.

The strategic implications could be larger if dollar stablecoins move into mainstream payments. About 98% of stablecoin value is currently denominated in U.S. dollars, giving the currency a significant first-mover advantage as stablecoins expand beyond crypto trading. At that composition, growth in the stablecoin market is, in effect, growth in dollar-denominated digital money.

Wilkins identified three potential channels. Stablecoins could make cross-border settlement faster and cheaper; extend access to dollar-linked assets in countries with unstable currencies or restricted access to dollar banking; and increase demand for U.S. Treasury securities, because issuers must hold reserves against their outstanding tokens.

USDT and USDC together held almost $150 billion in Treasury bills at the end of 2025, with their purchases during the year reaching about $33 billion, according to data cited by Wilkins. That could reinforce a feedback loop: wider use of dollar stablecoins increases demand for dollar settlement, issuers buy more Treasury securities, deeper dollar markets make the stablecoins more attractive.

"Inflows mean reserve purchases; redemptions mean asset sales," Wilkins said, warning that the same mechanism could operate in reverse during a crisis, as simultaneous redemptions force large stablecoin issuers to sell Treasury bills into stressed markets — a run-like dynamic familiar from the history of private money she invoked. She said the sector is not yet large enough to pose a major threat to the Treasury market or UK financial stability, but that could change if stablecoins become substantially larger.

Wilkins also argued that the impact of stablecoins on the dollar's global position should not be measured only by the currency people hold, but by the payment infrastructure through which money moves. The dollar remains dominant in global finance, accounting for about 57% of disclosed foreign-exchange reserves in the first quarter of 2026 and appearing on one side of 89.2% of over-the-counter foreign-exchange transactions in April 2025.

Alternative payment networks are nonetheless emerging, particularly in China, through systems such as CIPS, the Cross-Border Interbank Payment System, and experiments including mBridge, a multi-central-bank cross-border payment initiative. That creates a potentially important distinction in which the dollar could remain the world's dominant reserve and financing currency while international payments increasingly move through digital or regional networks that are less dependent on traditional dollar infrastructure.

"Technology cannot secure dollar dominance on its own," Wilkins said. She argued that the dollar's long-term position ultimately depends on deeper foundations, including sustainable fiscal policy, credible institutions, the rule of law, deep capital markets, and the ability to provide liquidity during financial stress.

REALITY CHECK | Dollar Stablecoin's Long-term Position Ultimately Depends on Deeper Foundations

Since the end of Bretton Woods in the early 1970s, there has been no promise to convert dollars into gold. The anchor instead has rested on confidence in the fiscal and monetary… pic.twitter.com/W4db9MzzWa

— BitKE (@BitcoinKE) September 16, 2026

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Wilkins drew a historical parallel with the pound sterling, whose dominance persisted for decades after Britain's relative economic position had begun to weaken. "Network effects can sustain a dominant currency for a long time," she said, "but, ultimately, they sit on top of fundamentals."

The implication for stablecoins is significant: they could become a powerful new distribution layer for the dollar without changing the underlying foundations that determine whether the dollar remains the world's dominant currency. For readers tracking the issue, the markers are the ones she named: the sector's scale, the quality of issuers' reserves, and the growth of payment networks operating outside traditional dollar infrastructure.

Source: BitcoinKE