Carolyn Wilkins, a member of the Bank of England’s Financial Policy Committee, has raised concerns that the rapid growth of stablecoins could further consolidate the US dollar’s position as the primary global reserve currency. Speaking at Queen’s University Belfast, Wilkins highlighted how increased circulation of dollar-backed stablecoins may have implications far beyond the digital asset market.
Stablecoins reinforce dollar strength
Wilkins stated that stablecoins anchored to the US dollar, such as Tether’s USDt (USDT) and Circle’s USDC, are making cross-border settlements more efficient and expanding access to dollar-linked assets around the world. This trend, she explained, drives up demand for US Treasury bills as these reserves are commonly used to back stablecoins.
Data cited by Wilkins shows that, by the end of 2025, major stablecoin issuers collectively held nearly $150 billion in US Treasurys and purchased roughly $33 billion worth of government debt during the year. These figures underscore the growing influence of stablecoin issuers in global finance.
| Stablecoin Issuer | Treasury Holdings (2025) | Purchases in 2025 |
|---|---|---|
| Tether (USDT) | $150 billion (combined) | $33 billion (combined) |
| Circle (USDC) |
Wilkins also pointed out that this phenomenon strengthens the dollar’s “significant first-mover advantage,” as US dollar-backed stablecoins represent 98% of the sector’s total value, out of more than $300 billion in stablecoins currently in circulation.
Wilkins emphasized the potential for digital dollars to reinforce the greenback’s global role, observing that dollar-denominated stablecoins are making it easier for people and institutions outside the US to settle transactions and hold dollar-linked assets.
Risks of rapid redemption and market volatility
Despite the benefits of dollar-denominated stablecoins, Wilkins warned that the relationship between stablecoins and financial markets could cut both ways. If redemptions surged at scale, stablecoin issuers might be forced to sell large volumes of US Treasurys quickly, which could exacerbate volatility during periods of financial stress.
At sufficient scale, mass stablecoin redemptions could force issuers to sell Treasury bills, potentially amplifying volatility in an already stressed market.
Slow progress for pound-backed stablecoins
In contrast to the dominance of dollar-backed stablecoins, British pound-denominated stablecoins have experienced slow adoption. UK regulators have pursued several measures this year to stimulate their development, aiming to increase the competitiveness of UK-based digital assets.
The UK Financial Conduct Authority (FCA) launched a regulatory sandbox to allow stablecoin issuers to test their products under close supervision. In June, the FCA finalized a regulatory framework for stablecoin issuance, aiming to provide legal clarity and investor protection for UK-based projects.
The Bank of England has also explored the future of digital money and payment systems. Recent experiments have tested whether pound-backed stablecoins could interact with a simulated digital pound for use in cross-border payments.
This shift in stance follows criticism from industry leaders, who previously argued that strict regulations could suppress innovation in the UK’s digital finance sector. The Bank of England has since shown a more flexible approach as part of broader efforts to develop a robust regulatory environment for stablecoins.
Mini dictionary: Financial Policy Committee, an independent committee at the Bank of England responsible for identifying, monitoring, and addressing systemic risks in the UK financial system.
