There’s a curious theory doing the rounds in financial circles.
That stablecoins—the seemingly harmless “digital dollars” powering crypto trades and cross-border payments—may not just be a fintech innovation. They may also be quietly reinforcing the dollar’s centrality in global markets, at a time when the world is rethinking its dependence on US debt. With foreign central banks trimming their treasury holdings and parking more money in gold and other hard assets, Washington still needs to attract capital.
Stablecoins have quietly become one of the largest dollar markets outside the United States. Tokens like USDT and USDC now account for nearly $300 billion in circulation—more than the GDP of countries such as Portugal or Greece. That is bigger than the entire high-yield bond ETF market, and regulators can no longer treat it as an experiment.
Once something reaches this scale, the question is never if it will be regulated, but when. Stablecoins had operated for years in a grey zone, but their growth made formal oversight inevitable.
That moment arrived in July this year. The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) became law, establishing a federal framework and requiring a 1:1 reserve for payment stablecoins. In plain English: the United States has decided to bring stablecoins inside the tent and put guardrails around them.
With regulation in place and hundreds of billions already in circulation, stablecoins are shaping up to be one of the most consequential financial innovations of our time. To cut through the noise, here’s what we will explore today:
- What are stablecoins?
- The scale of adoption
- What could go wrong?
- Stablecoins and the treasury feedback loop
- The commercial opportunity
- Should India explore stablecoins?
Let’s dive in.
What are stablecoins?
Stablecoins are digital tokens linked to stable assets, usually the US dollar. They run on blockchains like other cryptocurrencies, but unlike Bitcoin or Ethereum, their purpose is to hold steady in value rather than fluctuate.
There are two dominant models:
- Reserve-backed: Coins such as USDT (Tether) and USDC (Circle) issue tokens only when backed by cash or short-term US treasuries. In effect, every coin should be matched by a dollar sitting safely in reserve.
- Algorithmic: These attempt to maintain their peg through code and trading incentives. Most have failed, with TerraUSD’s $40 billion collapse in 2022 the most high-profile example.
“Stablecoins are essentially tokenised money market funds. They give people the benefits of digital transfer, while being backed by traditional assets.” – Larry Fink, CEO of BlackRock
That description captures why they have grown so quickly: stablecoins blend the familiarity of dollars with the efficiency of blockchain rails.
The scale of adoption
Stablecoins have moved far beyond the margins of crypto. In less than a decade, they have become one of the largest dollar markets outside the United States, circulating across exchanges, wallets, and payment networks worldwide.
What began as a trading tool now serves households in inflation-hit economies, migrant workers sending money across borders, and corporates experimenting with blockchain payments.
The numbers show just how quickly they have scaled:
And the runway is long: JPMorgan expects the market to reach $500–750 billion in the next few years, with some forecasts pointing to $2 trillion by 2028.
Why this matters:
- Crypto trading: Stablecoins are the base currency of the digital asset market. More than 70% of all crypto trades are executed against USDT or USDC, making them the primary source of liquidity. Without them, price discovery and market depth would collapse.
- Remittances: India alone receives ≃$140 billion in remittances each year, the largest in the world. Traditional channels charge 5–7% in fees and take days to settle. A dollar stablecoin can move across borders in minutes, at cents on the dollar — a structural improvement for millions of families.
- Dollar access: In economies battling runaway inflation or capital controls — Argentina, Nigeria, Turkey — stablecoins have become the de facto savings account. For households, they are the closest thing to holding physical dollars without leaving the country.
- Payments: From PayPal’s PYUSD to fintech pilots across Asia, stablecoins are being tested for merchant transactions, payroll, and settlement. They are not just crypto plumbing anymore — they are edging into mainstream payments infrastructure.
Beyond trading, remittances, dollar access, and payments, stablecoins are also proving to be the backbone of decentralised finance, where they serve as the collateral for lending, borrowing, and yield strategies. They are enabling financial access for people without bank accounts, who can hold and transfer value with just a smartphone. Corporates are beginning to use them for faster settlement of supplier payments and cash management, while Wall Street views them as the entry point for tokenised assets, from equities to real estate. Taken together, stablecoins are fast becoming the settlement layer for a broad spectrum of digital finance.
What could go wrong?
Every financial innovation follows a familiar arc: early promise, rapid adoption, and then waves of scepticism. Stablecoins are no exception. At the centre of the debate is trust. Can a digital dollar, issued by a private entity but backed by public assets like US treasuries, ever carry the same confidence as traditional money?
These are the major concerns that surround stablecoins:
- Reserves: Tether, with $160 billion outstanding, has faced years of scrutiny over what really backs its coins. The promise is that every token is fully convertible into a dollar but that only holds if the reserves are rock solid.
- Runs: Confidence can disappear in a heartbeat. TerraUSD, once a top-three stablecoin, collapsed in 2022 and erased $40 billion almost overnight. If a reserve-backed giant like Tether ever faced the same pressure, billions in treasuries could be dumped into the market within days. That would ripple far beyond crypto.
- Regulation: The US has moved first with the GENIUS Act, but most other jurisdictions remain undecided. Are stablecoins money, securities, or something in between? Until that clarity comes, the fog remains.
- Scale: At nearly $270 billion today, stablecoins are already larger than some established asset classes. If they keep expanding without clear guardrails, the tremors from a failure could spread across the financial system — much like money market funds did in 2008.
The conspiracy theory
This is where the chatter in financial circles gets interesting.
Foreign governments are no longer the financiers of US debt they once were. China and Japan, the two largest foreign holders of treasuries, have been steadily reducing their exposure. Instead, many central banks are parking reserves in gold and other physical assets, a shift accelerated after the Russia–Ukraine conflict. When Russia was cut off from SWIFT and saw parts of its reserves frozen, it served as a warning shot to others: dollar assets are powerful, but they can also be weaponised.
That leaves Washington with a problem. With deficits widening and yields rising, the US needs fresh sources of demand for its debt.
Enter stablecoins.
By design, every new USDT or USDC issued creates demand for short-term treasuries. Tether alone now holds more than $125 billion, making it a top-20 holder globally. Circle adds another large chunk. Together, stablecoin issuers have quietly become structural buyers of American debt — just as foreign central banks are stepping back.
Critics argue this isn’t coincidence. They point to the GENIUS Act and Trump’s executive order as deliberate moves to bring stablecoins into the regulatory fold, legitimising them as the new pipeline for dollar demand. In this telling, stablecoins are less about crypto innovation and more about keeping global capital anchored to US treasuries.
Bitcoin evangelists often point to MicroStrategy’s leveraged bets on BTC as the real story. Bitcoin evangelists often highlight MicroStrategy, the US-listed company that has borrowed billions to accumulate over 2,00,000 BTC, as proof that digital assets are the escape hatch from fiat. Michael Saylor, its founder, frames Bitcoin as the ultimate hedge against inflation and dollar debasement — a way to opt out of the traditional system altogether.
But the contrarian view flips that script. Bitcoin may be the rebellion, but stablecoins are the system’s reinforcement. They don’t challenge the dollar; they extend it. Every new USDT or USDC in circulation deepens reliance on the greenback, and every reserve held is another treasury bill bought. In effect, stablecoins are functioning as digital wrappers for dollar assets, quietly binding the crypto economy and much of the developing world’s demand for digital money back to American financial infrastructure.
Whether you buy into this theory or not, the question lingers: are stablecoins simply a market-driven innovation, or are they also an instrument of statecraft in disguise?
The commercial opportunity
Beyond being a payment innovation, stablecoins are starting to look like a commercial business in their own right.
The way it works is straightforward: when users give a dollar to an issuer like Tether or Circle, they get a digital dollar in return. The issuer keeps the real dollar and invests it, usually in US treasuries or money-market funds.
With $300 billion of stablecoins in circulation, even a modest yield translates into billions of dollars in annual income. Most of that income is retained as profit, since the operating costs of issuing and maintaining stablecoins are minimal once the infrastructure is in place.
That makes the economics incredibly attractive. Unlike traditional financial products that require large sales teams or heavy distribution, stablecoins scale almost effortlessly — one platform, one token, millions of users. It’s no surprise that corporates from PayPal to Robinhood have begun experimenting with their own tokens.
The bigger horizon lies in tokenisation. If stablecoins can represent dollars today, they could just as easily represent other financial assets tomorrow — mortgages, equities, or bonds. By moving these instruments onto blockchains, issuers can promise instant settlement, 24/7 liquidity, and fractional ownership at scale.
Should India explore stablecoins?
India has already built the world’s most successful digital payment system in UPI. In sheer scale, UPI is unmatched: 20+ billion monthly transactions worth ₹25 lakh crore, settled instantly, at no cost to the user, and underpinned by the banking system’s trust.
The answer may lie less in domestic payments and more in global flows. Stablecoins could ease cross-border remittances, a ≃$140 billion annual market for India by reducing fees and settlement times. They could also help Indian corporates tap into global liquidity pools more seamlessly.
At the same time, the risks are non-trivial. Stablecoins bypass banks, raising concerns for monetary policy, capital controls, and financial stability. For a regulator like the RBI, which prizes control and prudence, opening the door to privately issued digital dollars could feel like surrendering sovereignty.
And yet, ignoring them isn’t an option. As the U.S. and Europe move toward regulated stablecoin frameworks, India must decide whether to shape the rules of engagement or be shaped by them. With our track record of digital infrastructure, we could set standards for how stablecoins coexist with sovereign systems like UPI.
What we need to watch out for –
- Regulatory clarity: How RBI’s upcoming crypto guidelines treat stablecoins
- Corporate adoption: Which Indian unicorns experiment first with stablecoin treasury management
- Infrastructure plays: Opportunities in stablecoin custody and conversion services
- Tax implications: How authorities will treat stablecoin holdings and transactions
Closing thoughts:
Stablecoins and CBDCs are now running on parallel tracks. One is a market-led innovation, the other a state-led response. Both aim to digitise money, but their philosophies diverge: stablecoins thrive on open rails and global liquidity, while CBDCs emphasise control, traceability, and sovereign backing.
India is already testing a retail CBDC with the e-rupee pilot, and the government’s approach to crypto so far has been cautious. While the RBI embraces a state-backed digital rupee, it remains wary of private tokens that could weaken monetary control or bypass capital account rules.
How regulators choose to balance the two will determine the future architecture of the monetary system.
Disclaimer – Crypto products are unregulated in India and many other jurisdictions and can be highly risky. The information and material contained herein are subject to change without prior notice including prices which may fluctuate based on market demand and supply. The information provided herein is intended solely for educational purposes and should not be construed as solicitation, advertising, or providing any financial or investment advice or an offer to buy or sell any financial instruments. Readers are advised to consult with their financial advisor before making investment decisions based on the information provided herein.
In the preparation of this document, Dezerv has used information developed in-house and publicly available information and other sources believed to be reliable. The information is not a complete disclosure of every material fact and terms and conditions. While reasonable care has been made to present reliable data in this article, Dezerv does not guarantee the accuracy or completeness of the data. The information / data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy.
Any references to names of fund houses, investment securities, or asset classes are for illustrative purposes only. Dezerv, along with its directors, employees, or partners or any of its affiliates, shall not be held liable for any loss, damage, or liability arising from the use of this document. Additionally, all trademarks, logos, and brand names mentioned are the property of their respective owners and are used for identification purposes only. The use of these names, trademarks, and logos does not imply endorsement or recommendation.