What is the stablecoin landscape and how might it reshape cross-border payments and dollar hegemony
Who Controls the Dollar When the Dollar Goes Digital?
Based on analysis of a 107-node, 354-edge knowledge graph exploring the stablecoin landscape and its implications for cross-border payments and dollar hegemony.
What Is a Stablecoin, and Why Does It Matter?
A stablecoin is digital money that is always worth exactly one dollar (or one euro, or one of something). Unlike Bitcoin, which swings wildly in price, a stablecoin is designed to stay stable. The most familiar ones are Tether (USDT) and USD Coin (USDC).
Here is the part that surprises most people: there is more Tether in circulation than there are US dollars in most countries. Tether holds tens of billions of dollars in US government debt (called Treasury bills, or T-bills) to back its coins. When someone buys a Tether coin, Tether buys a T-bill. When someone sells, Tether sells. This means a private company in the British Virgin Islands is now one of the largest buyers of US government debt in the world.
The question this analysis explores is: what does that mean for the dollar’s role in global finance, and who actually controls that?
The Spine of the Whole Thing: A Chain That Feeds Itself
The single most important structure in the graph is a chain:
People buy stablecoins → issuers buy T-bills → US government gets cheap borrowing → dollar stays dominant → more people want stablecoins
This is a self-reinforcing loop. The more stablecoins exist, the more T-bills get bought, the better the US government’s financing conditions, the more reason to keep the dollar as the world’s reserve currency, the more people trust dollar-denominated stablecoins.
Seven separate parts of the graph feed into this chain. No other single mechanism in the analysis has that many reinforcing inputs. This is the graph’s way of saying: this chain is load-bearing. If it holds, a lot of other things hold with it.
The US government passing the GENIUS Act (proposed legislation to regulate stablecoins) essentially locks this in further — it would require stablecoin issuers to hold T-bills as backing. A proposed law would turn a coincidence of incentives into a legal requirement.
The Catch: Growth Creates the Very Risk It Depends On
Here is a tension the graph highlights explicitly, and it is not obvious at first glance.
As stablecoins grow larger, the US government gets more dependent on them to fund its debt. But the larger they get, the more dangerous a sudden collapse becomes. Imagine a run on a stablecoin — millions of people selling at once. The issuer would have to sell T-bills very quickly to pay everyone back. Selling T-bills quickly, at scale, drives their price down, which raises US borrowing costs, which is bad for the US government.
So the growth that makes stablecoins useful to the US Treasury also creates a fragility that could damage the US Treasury. The graph shows these two things pulling against each other with no clear resolution mechanism. There is no node — no policy, no institution — that manages this risk without unwinding the dependency itself.
The Law That Creates the Loophole It Is Trying to Close
One of the more structurally interesting findings involves the GENIUS Act’s prohibition on yield-bearing stablecoins.
Plain English: the proposed US law says stablecoin issuers cannot pay interest to holders. The reason is to protect banks — if stablecoins paid interest, people might move money out of bank accounts and into stablecoins. Banks lobby against this because it would drain their deposits.
But here is what the graph shows: by prohibiting yield in the US, the law pushes anyone who wants yield from their dollar holdings toward offshore alternatives. The main beneficiary the graph identifies is Ethena, a platform that issues synthetic dollar-pegged tokens backed not by T-bills but by derivatives contracts. Ethena can pay yield because it operates outside US jurisdiction.
So the law that was meant to protect US banks from deposit flight is, according to the graph’s structure, the mechanism that routes users toward the product that produces neither T-bill demand nor domestic deposits — the one category the law cannot touch. The regulation and its unintended consequence are directly connected by a single edge.
Sanctions: When the Weapon Makes the Problem Worse
The US can freeze stablecoin accounts. Because dollar stablecoins run on public blockchains, US authorities can mark certain addresses as prohibited. This is a powerful tool — it extends the reach of financial sanctions into digital currency without needing to go through a bank.
But the graph shows this tool is structurally self-defeating over time.
Each time sanctions are applied via stablecoins, it demonstrates the capability to other countries. Countries that fear being sanctioned respond by building alternative systems. China leads a project called mBridge, a cross-border settlement system that does not use the dollar or touch the US financial system. The more the sanctions weapon is used, the faster alternatives are built. The faster alternatives are built, the more the dollar’s dominant position erodes. The more it erodes, the more reason there is to use sanctions preemptively — which accelerates the cycle.
The graph does not contain any node that breaks this cycle. The sanctions weapon and the counter-infrastructure it generates are connected in a loop with no dampening mechanism.
Three Worlds Forming, Not by Design
The analysis identifies what it calls a “tripolar” structure — three distinct payment blocs forming globally:
- A US-led dollar stablecoin zone, anchored by USDT, USDC, and the GENIUS Act
- A European zone, shaped by MiCA (the EU’s crypto regulation), which has different rules and different issuers
- A China-led alternative using mBridge, BRICS payment infrastructure, and CBDC (central bank digital currency) networks
What is notable is that no one built this intentionally. The tripolar structure is the combined output of: the US passing its own rules, the EU passing its own different rules, China building infrastructure to avoid both, India running its own payment system (which, importantly, also weakens BRICS coordination from the inside), and Saudi Arabia hedging between all of them.
Each party made decisions for their own reasons. The three-bloc structure is what you get when you add all of those decisions together and let them run. The graph shows no mechanism capable of reversing this fragmentation once it reaches a certain point — it converges but does not unwind.
India’s Quiet Structural Role
India is a BRICS member — the bloc of large non-Western economies that includes Brazil, Russia, India, China, and South Africa, which has been exploring alternatives to dollar dominance. But the graph places India in a structurally contradictory position.
India’s domestic payment infrastructure (UPI) is highly developed and internationally active. The graph shows India’s payment diplomacy weakening BRICS payment coordination and connecting India to Western-aligned alternatives like the Nexus cross-border payments project. This is not stated as a political position — it is a structural observation. India’s infrastructure choices put it in tension with the BRICS de-dollarization project regardless of its formal membership.
One Company at the Center of Public Infrastructure
Circle, the company that issues USDC, is planning to go public on the New York Stock Exchange. The graph contains an edge that is unique — the only place where a corporate event directly modifies a category of dollar privilege. Circle’s IPO is connected to what the graph calls “privatizing the digital dollar’s exorbitant privilege.”
The “exorbitant privilege” is the historical term for the benefit the US gets from the dollar being the world’s reserve currency — essentially, other countries have to hold dollars, which lets the US borrow cheaply and spend more freely. The graph encodes the possibility that a version of this privilege is being transferred to a publicly listed company with shareholders who have fiduciary obligations to maximize profit.
This is identified as an open question, not a conclusion. But the graph treats it as structurally distinct from everything else — a corporate event with monetary system implications that no other node addresses.
What the Graph Trusts and What It Does Not
There is a structural pattern worth naming explicitly. The graph assigns a “weight” to each node — a confidence rating from 0 to 10. The most connected, most central nodes all have a weight of 1. The highest-confidence nodes have modest connection counts.
Translation: the things the graph is most certain about are the operational mechanics — how Tether earns money, how T-bill purchases work, how seigniorage (the profit from issuing currency) functions. The things the graph is least certain about are the big macro outcomes — whether dollar hegemony will survive, whether the erosion loop will accelerate, what the end state looks like.
This is not a contradiction. It reflects something accurate about the world: how specific financial mechanisms work is fairly well understood. What happens to global monetary order when those mechanisms interact with geopolitics is genuinely uncertain.
Bottom Line
The graph’s structure points to four findings worth holding together:
The T-bill chain is real and self-reinforcing. Dollar stablecoins have accidentally become a mechanism for extending dollar dominance into digital payments. The GENIUS Act would codify this. This is the most structurally validated part of the graph — seven independent inputs reinforce it.
Growth creates the fragility it depends on. The larger stablecoins get, the more the US depends on them, and the larger a potential crisis would be. No mechanism in the graph resolves this tension.
The regulation and its opposite are connected. The yield prohibition that protects US banks channels users toward the offshore products that produce none of the intended benefits. The sanctions tool that extends dollar power creates the counter-infrastructure that erodes it. These are not predictions — they are structural relationships encoded in the graph.
The three-bloc fragmentation is emergent and may be self-stabilizing. It was not designed by any actor. It is the combined output of regulatory decisions made for unrelated reasons. And unlike most other structures in the graph, it has no reversal mechanism visible at its scale.
The graph’s deepest implication may be this: the dollar’s digital future is being determined less by deliberate policy than by the interaction of private business models, fragmented regulation, and geopolitical hedging — each making local sense, each contributing to a global structure that no single party fully controls.