Stablecoin Demand Likely To Wane, Says This Bank Of England Policymaker, ECB Executive Thinks They Could Deepen Dollar Dominance

Bank of England policymaker Megan Greene anticipated a decline in the popularity of stablecoins, according to a report published on Monday.

BoE Executive Downplays Stablecoins

Greene expected tokenized deposits to “probably take over” from stablecoins over the next five years, Reuters reported her comments from a conference in Croatia on Sunday.

She further argued that although there is a market for central bank digital currencies, stablecoins, and digital deposits, digital deposits may emerge as the ultimate winner once commercial banks recognize their potential to retain traditional bank deposits.

USD Stablecoins Threatening Other Currencies?

Notably, in a speech delivered at the Bank of Korea International Conference in Seoul, European Central Bank board member Isabel Schnabel said that dollar-pegged cryptocurrencies could have a “significant” impact on financial markets.

“The growing use of stablecoins may further cement the international dominance of the U.S. dollar. Today, virtually all stablecoins in circulation are denominated in dollars, with other currencies playing a negligible role,” Schnabel stated.

She added that the growth of stablecoins, such as Tether (CRYPTO: USDT) and USDC (CRYPTO: USDC), could lead to dollarisation emerging as a byproduct of the adoption of the new technology, rather than a “deliberate currency choice.”

“From a European perspective, this could eventually limit the euro's role in emerging forms of tokenised finance and in the international monetary system more generally,” the German economist said.

Schnabel added that these cryptocurrencies could “weaken” the monetary policies of countries with low trust in their currency, encourage people to switch to dollars, and make exchange rates more important for controlling domestic inflation.

Global South Prefers Dollar Cryptos?

These arguments are coming at a time when dollar stablecoins are growing rapidly in emerging markets.

About 36% of all emerging market users on Binance ?the world’s largest cryptocurrency exchange?keep at least half of their portfolio in stablecoins such as Tether and USDC, compared to just 15% of users in developed markets. Overall, 73% of all stablecoin savers globally were based in emerging markets.

Will Dollar’s Dominance Actually Rise?

Market commentator The Kobeissi Letter highlighted that major fiat currencies have collapsed in value against gold since 1971, with the dollar down more than 99%.

When compared with Bitcoin (CRYPTO: BTC), the dollar has lost more than 50% of its value in the last five years.

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Europe Vs. US

The skepticism by European policymakers contrasted sharply with the supportive regulatory climate for stablecoins in the U.S.

The GENIUS Act, which establishes the first comprehensive regulatory framework for dollar-pegged payment stablecoins in the U.S., was passed in July last year. Since then, cryptocurrency card payment volumes have surged dramatically, with 90% of the volumes settled in USDT and USDC.

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