Stablecoins, cryptocurrencies generally pegged to the U.S. dollar and designed to maintain a stable value, are establishing themselves as a key player in the global financial system. According to an analysis by Jeffrey Cleveland, Chief Economist at Payden & Rygel, this type of digital asset could become the world’s largest offshore market, even surpassing the historic eurodollar market.
In his latest report, Cleveland draws a parallel between the rise of stablecoins in the 21st century and the expansion of eurodollars after World War II. While eurodollars (offshore dollar deposits) helped consolidate the dollar’s dominance internationally, stablecoins could amplify that hegemony in the digital environment. “Could stablecoins further reinforce the dollar’s status as the world’s leading currency? History suggests they could,” the economist posits.
Evolution of Offshore Dollars
He explains that the eurodollar phenomenon dates back to the mid-20th century, when various regulatory and geopolitical conditions led to a growing accumulation of dollars outside the U.S. In the 1970s, the market quintupled, and by the late 1980s, it already totaled $1.7 trillion in offshore deposits. Today, the eurodollar market is estimated to reach $16 trillion.
In his view, stablecoins follow a similar logic, though with a radically different infrastructure. Instead of being managed by banks outside the U.S., they are stored and transferred via public blockchains. Their market value is already approaching $250 billion, with daily trading volumes exceeding $24 billion, nearing that of Bitcoin and surpassing Ether.
“Unlike traditional cryptocurrencies, stablecoins aim to minimize volatility and are mostly backed by real assets. Currently, more than 95% of them are secured by financial instruments such as cash, Treasury bills, or money market assets. Issuing companies like Tether and USD Coin already rank among the top holders of U.S. Treasury debt, with more than $120 billion in sovereign bonds,” Cleveland notes.
Transforming the Global Payment System
Cleveland’s analysis highlights that stablecoins not only replicate many of the functionalities of eurodollars, but also offer competitive advantages that could accelerate their global adoption. These advantages include the ability to conduct transactions with immediate settlement, available 24 hours a day, seven days a week, independent of traditional banking hours. They also offer significantly lower transfer costs, often below three percent and, in some cases, even below one percent of the amount sent.
Added to this is a high level of transparency, as all transactions are recorded in real time on the blockchain, allowing traceability for both users and regulatory authorities. Furthermore, their accessibility far exceeds that of traditional financial systems: anyone with internet access can use stablecoins without intermediaries or bank accounts, opening the door to broader and more global financial inclusion.
These features have already been adopted by the private sector. For example, SpaceX uses stablecoins to collect payments for its Starlink satellite network services. In the past year, the average monthly transaction volume in stablecoins exceeded $100 billion, even surpassing the volume processed by the Visa payments network.
In addition, stablecoins are being used in the decentralized finance (DeFi) market to generate interest, often higher than what traditional banks offer.
Into the Unknown
Cleveland warns that, like eurodollars, stablecoins could pose macroeconomic challenges in the event of liquidity strains or crises of confidence. In 2008, the eurodollar system was one of the focal points of the global financial crisis, due to the pressure to quickly convert offshore deposits into “onshore” dollars.
However, the rise of stablecoins also represents a historic opportunity to strengthen the dollar’s dominance in the digital economy. Despite past efforts by governments to reduce the global influence of the dollar, Cleveland argues that these digital currencies could further deepen its global presence.
“We’ve seen this movie before. Eurodollars cemented the dollar as the hegemonic currency in the 20th century. Today, stablecoins may be writing a new chapter in that same story,” the economist concludes.
