Contrary to expectations that digital financial technology would reduce reliance on the U.S. dollar, new economic research presented at the Jackson Hole symposium shows stablecoins and tokenized money could actually entrench the currency’s global dominance by intensifying network effects and boosting international demand for debt. Dollar dominance gives the U.S. enormous financial clout and helps keep demand for its debt strong. If the paper is right, stablecoins and other forms of tokenized money could strengthen that position, even as concerns grow about America’s fiscal health.
Financial innovation is the theme for the annual gathering of central bankers, where they’re grappling with how these technologies reshape the financial system. Yet, a paper authored by Gordon Liao, Eswar Prasad, and Tony Zhang suggests that tokenized assets and digital tokens backed by traditional assets could achieve the exact opposite outcome for global finance.
How Stablecoins Amplify Global Dollar Dominance
The research models how modern financial technologies, particularly stablecoins like the dollar-backed USDC issued by Circle, reinforce the greenback’s central position. When currencies become easier to access and transact in globally, market participants naturally gravitate toward the deepest and most liquid pools available. The authors argue that making currencies easier to access and transact in could steer more financial activity toward those that already dominate global finance.
Rather than dissipating network effects by leveling the playing field … digitalization could intensify them,
wrote Gordon Liao, Eswar Prasad and Tony Zhang, economists at Circle, Cornell University and Arizona State University, respectively. Circle issues USDC, one of the world’s largest dollar-backed stablecoins.
The authors use stablecoins — digital tokens backed by traditional assets — to model how new financial technologies could reinforce the dollar’s dominance. They find that more companies would choose to borrow in dollars, creating more demand for dollar assets and making dollar markets deeper and more attractive to other borrowers. Issuance begets issuance,
Liao, Prasad and Zhang wrote.
By the numbers, the dollar remains firmly dominant in global finance, even as rising U.S. debt and geopolitical tensions test the foundations of its dominance. The paper says the dollar is on one side of roughly 90% of foreign-exchange transactions. It notes the euro, yen and pound have lost ground, while the Chinese renminbi has gained at their expense.
However, the authors warn that a more dollar-reliant world, propelled by new technologies, comes with its own risks. It comes at the cost of greater exposure of other countries to spillovers from U.S. policies,
they noted. Greater demand for tokenized Treasuries could also concentrate risk in that market, particularly if it leads to less fiscal discipline
in Washington.
Banks Bring Tokenized Deposits Onchain
The competition to shape the future of digital money is accelerating, and the latest development is coming from an institution that few market analysts would describe as a crypto-native company. Wells Fargo plans to introduce tokenized deposits for select corporate and commercial clients beginning in fall 2026, initially supporting transactions involving U.S. dollars and British pounds. Following the launch the bank expects to expand the service to more clients and currencies during 2027.
Tokenized deposits represent a direct response from the banking sector to the growth of stablecoins. Instead of issuing a separate digital asset backed by a pool of reserves, a bank can place an existing customer deposit onto blockchain infrastructure. The deposit remains a liability of the bank, but it can gain several features associated with crypto markets, including continuous transfers, programmable payments, faster settlement, and improved transaction visibility.
Wells Fargo is not acting alone. JPMorgan has already expanded its blockchain-based payment services for institutional clients, while other major financial institutions are developing similar products and shared networks. At the same time, stablecoins continue to grow in both circulation and transaction volume. USDC, for example, has become an increasingly important settlement asset across crypto markets, payment networks, and tokenized financial platforms.
The key question is no longer whether dollars will move across blockchain networks, and that shift is already taking place. The forward-looking question is whether banks or stablecoin issuers will control the movement of digital dollars. The answer will influence corporate treasury operations, financial reporting, payment policy, and the structure of digital markets for years to come.
Corporate Treasury Adoption and Stablecoin Advantages
The appeal of tokenized deposits is relatively straightforward. Banks can provide clients with many of the operating benefits associated with stablecoins without requiring those clients to leave the traditional banking system. Funds can move outside normal banking hours, transactions can be programmed to occur when certain conditions are met, and settlement can take place more quickly than it does through traditional correspondent banking networks.
For corporate treasury teams, this structure may be easier to adopt than a privately issued stablecoin. A tokenized deposit remains connected to an existing bank account, established compliance procedures, and familiar counterparty relationships. This can simplify customer verification, sanctions screening, custody arrangements, and internal approval processes. It may also reduce concerns from boards, auditors, and regulators that remain cautious about direct exposure to cryptoassets.
Tokenized deposits give banks a way to offer blockchain functionality while keeping customer funds inside the regulated banking system. This is more than a technology upgrade or newest on-chain asset strategy. It is a strategy designed to protect deposits, retain corporate clients, and ensure that banks remain central to payments as financial markets become increasingly digital.
Yet, tokenized deposits do not eliminate the advantages that stablecoins have already developed. USDC and other dollar-backed tokens can move across public blockchain networks, digital wallets, exchanges, and tokenized asset platforms. This portability allows stablecoins to operate as settlement instruments across a wide range of financial applications.
A tokenized deposit issued by one bank may work efficiently inside that bank’s own platform, but businesses will eventually demand the ability to transfer value between different banks, blockchains, markets, and service providers. Without that level of interoperability, tokenized deposits could simply recreate the closed systems that blockchain technology was intended to improve. Stablecoins also have a meaningful head start, as they are already used for trading, remittances, cross-border payments, decentralized finance, and the settlement of tokenized assets.
Technology alone will not determine whether tokenized deposits or stablecoins achieve broad corporate adoption, as accounting treatment, regulatory clarity, and interoperability will be just as important. Treasury departments need to know how a digital instrument should be classified, reported, secured, and controlled before it can become a routine part of cash management, though tokenized deposits may have an accounting advantage because the underlying asset remains a bank deposit.
