According to a Bloomberg report, the U.S. government is betting that privately issued, dollar-pegged stablecoins such as Tether will expand to a market size of roughly $3 trillion over the next few years. The strategy aims to reinforce the dollar’s global dominance and create new avenues to absorb surging demand for U.S. Treasuries.
However, the report highlights significant risks. The predominant issuer, Tether, faces ongoing concerns over its regulatory compliance and anti-money laundering practices in its jurisdiction of registration. In the event of a bank run or a smart contract malfunction, Tether could be forced to dump large holdings of U.S. government debt, potentially triggering bond market turmoil and disrupting global payment and settlement networks.
In response, the European Central Bank is accelerating the development of a central bank digital currency (CBDC) and “tokenized euro” to support atomic settlement. The aim is to prevent critical financial infrastructure from becoming locked into U.S. private dollar tokens, preserving Europe’s monetary sovereignty.