GENIUS Act Bolsters US Dollar Dominance through Stablecoins: BlackRock Insights

Stablecoins Set to Reinforce US Dollar Dominance with Helpful Regulation

According to a recent analysis by BlackRock, the global leader in asset management, stablecoins – digital currencies pegged to stable assets predominantly USD – have the potential to underpin the dominance of the U.S. dollar. The report suggests that this is mostly due to fresh legislation coming into effect, symbolized by the GENIUS Act in the U.S.

The GENIUS Act and Stablecoins

The titled GENIUS Act is a notable stablecoin statute put into law recently in the U.S, which according to BlackRock, strengthens the role of stablecoins as modes of payment. The Act’s focus lies on treating stablecoins as payment tools and not as investment mechanisms. This stance changes the landscape for stablecoins that yield interest, limiting issuance to federally regulated banks, some known non-banks, and state-controlled firms. Putting it succinctly, BlackRock’s report proposed that the Genius Act could potentially enforce dollar dominance by forming a tokenized U.S. dollar-based ecosystem dedicated to international transactions. This opinion aligns with those of industry experts, as well as some U.S. lawmakers who considered the merits of the Act.

Stablecoins in Emerging Markets

As for emerging markets, the implementation of this system might significantly simplify access to the U.S. dollar, especially in economies where local currencies are highly volatile. There might, however, be constrictions in developed economies owing to the prohibition on interest payments. The reason is to avoid creating a low-friction competitor capable of rivaling with bank deposits and thereby potentially harming traditional lending practices.

Growth and Dominance in the Crypto Market

Stablecoins have exhibited massive growth in the crypto market with a total capitalization of more than $260 billion in the year 2025, a massive leap from less than $10 billion five years back in 2020. This astronomical increment is around 7% of the overall crypto market, according to BlackRock’s weekly market commentary. In terms of total market capitalization, as of now, stablecoins stand at an approximate $266 billion, as per data from DeFiLlama. Tether’s USDT remains the dominant force in the stablecoin market with a market cap of $164 billion, which is about 62% of the total.

Impact on Treasury Yields and The Future of Stablecoins

BlackRock’s report points out that the rising demand for stablecoins will unlikely change short-term Treasury yields, considering the bulk of USD stablecoin issuers keep U.S. Treasuries as part of their portfolio. The report mentions that Tether and Circle, two of the leading stablecoin issuers, have at least $120 billion in Treasury bills, which is only about 2% of the $6 trillion aggregate. Moving into the future, BlackRock identifies stablecoins among five mega forces driving investment returns. These are more pronounced, structural changes that affect the way we invest, in the immediate present and far into the foreseeable future. The firm is optimistic that the new regulations coupled with government backing for digital assets will lead to greater usage. It’s also worth noting, though, that BlackRock expresses a degree of uncertainty about precisely how stablecoins will compete with other digital assets, considering they represent such a small percentage of the wider crypto universe.

Other Views and The Future

Interestingly, BlackRock’s report was made public on the same day Bitwise, a digital currency asset handler, opined that the trajectory of stablecoin is going parabolic. Sygnum, a digital currency bank, in a recently published report shares a similar view that stablecoins could bolster the global position of the U.S. dollar in the face of increasing challenges. In summary, while it is agreed upon that the dollar is the linchpin to global markets, it’s also believed that it could face challenges to its long-term dominance. In response to those looming challenges, the U.S. government appears to be strategically relying on stablecoins to counteract the potential decline of dollar use, especially by making dollar-pegged digital payments more accessible to emerging markets.