BoE Official: Stablecoin Growth May Lift Dollar Dominance, Treasuries

Stablecoins may be doing more than speeding up crypto payments. Speaking at Queen’s University Belfast on Tuesday, Carolyn Wilkins of the Bank of England’s Financial Policy Committee argued that the rise of dollar-linked “digital dollars” could further entrench the US dollar’s role in global finance—while also creating a channel through which stress in US Treasury markets could spread back to stablecoin issuers.

Wilkins highlighted how dollar-denominated stablecoins can simplify cross-border settlement and extend access to dollar-linked assets beyond traditional US banking rails. She tied that convenience to a straightforward market consequence: greater demand for US Treasuries, especially for reserves backing stablecoin issuance.

Key takeaways

• Dollar-linked stablecoins can increase US Treasury demand by extending reserve access to dollar assets beyond the US, according to Bank of England financial policy committee member Carolyn Wilkins.
• Stablecoin issuers are already large holders of Treasury bills, with figures cited showing nearly $150 billion held at end-2025 by Tether and Circle, and about $33 billion of purchases during 2025.
• Wilkins warned the relationship works both ways: in a large-scale redemption event, issuers could be forced to sell Treasuries, potentially amplifying volatility in an already pressured market.
• The stablecoin market remains overwhelmingly dollar-oriented, with the US dollar accounting for 98% of stablecoin value, giving it a “first-mover advantage,” Wilkins said.
• In the UK, regulators are moving to facilitate development of stablecoins through sandboxes and finalized rules, while the Bank of England experiments with digital money for cross-border use cases.

How dollar stablecoins could strengthen Treasuries—and the dollar

Wilkins’ core argument is about incentive alignment. Dollar stablecoins, by design, are meant to track the US dollar, so expanding their use naturally encourages broader participation in dollar settlement and dollar-linked asset access. As stablecoins become a more common bridge for international transfers, the demand for dollar exposure can rise not only among traders, but also among institutions and intermediaries that prefer simpler settlement mechanics than traditional correspondent banking.

In her remarks, Wilkins specifically pointed to Treasury demand. She cited data indicating that Tether’s USDt (USDT) and Circle’s USDC (USDC) held nearly $150 billion in Treasury bills at the end of 2025, and bought about $33 billion worth during the year—illustrating that at least for the biggest issuers, Treasuries are not peripheral. They are integral to how dollar stablecoin reserves are positioned.

The implication for investors is practical: when stablecoin growth continues, Treasury demand from reserve managers tied to stablecoin issuance can become a persistent, if evolving, source of incremental demand. That matters in a market where Treasury liquidity and funding conditions can have wide knock-on effects across rates and collateral markets.

The other side of the trade: redemptions and volatility risk

Wilkins also emphasized that stablecoins are not a one-way beneficiary of dollar liquidity. Because reserves are connected to marketable US government debt, issuer balance-sheet dynamics can become a financial stability variable when redemption flows surge.

Her warning was specific in direction: at sufficient scale, mass stablecoin redemptions could compel issuers to sell Treasury bills. If that happens during periods of market strain, the forced selling mechanism could contribute to higher volatility—an effect that could be amplified by the fact that Treasuries are widely used as collateral and a benchmark across the financial system.

This is the central tension in the stablecoin-reserves narrative: the same structure that supports stablecoin issuance and cross-border convenience can transmit liquidity pressures when flows reverse quickly. Readers should treat the “stability” of a stablecoin as distinct from the stability of the markets used to back it.

Stablecoins remain dollar-dominated—UK regulators are still watching

The Bank of England official framed dollar dominance as a key structural feature. The stablecoin market is described in the remarks as overwhelmingly tied to the US dollar, with the dollar accounting for 98% of stablecoin value. Wilkins characterized that as a “considerable first-mover advantage,” reinforcing why dollar stablecoins could keep scaling faster than alternatives.

Broader adoption trends were also referenced in the context of market size, including reporting that stablecoin circulation has surpassed $300 billion. Even with continued growth, the near-total concentration in dollar-linked products suggests that, for now, the US dollar will likely remain the primary beneficiary of global stablecoin usage.

For the UK, the policy question is whether—and how—to develop stablecoins in a way that captures benefits without importing unnecessary risk. Wilkins’ remarks align with ongoing UK regulatory and experimental steps aimed at shaping how these products could fit into a broader financial system.

UK’s regulatory push: sandboxes, finalized rules, and digital pound tests

While dollar stablecoins dominate the global picture, British pound-denominated stablecoins have been slower to gain traction. Still, UK regulators have taken concrete steps this year to make local issuance and experimentation easier.

The Financial Conduct Authority began testing prospective stablecoin issuers through a dedicated regulatory sandbox and finalized rules for UK stablecoin issuance in June. The Bank of England has also been experimenting with digital money, including work to assess whether stablecoins and a simulated digital pound could be used together for cross-border trade payments, according to coverage of the Bank’s interoperability testing.

Wilkins’ comments also come in the broader context of the Bank of England adjusting its stance. Earlier coverage noted industry criticism of proposed rules and a subsequent softening of the UK stablecoin regime, reflecting a policy balance between innovation and oversight.

For market participants, this matters because local frameworks can influence which stablecoin projects get launched, which institutions are willing to integrate them, and how quickly alternative fiat currencies could gain traction outside the US dollar orbit.

What to watch next is whether UK and broader European efforts can diversify currency exposure in stablecoin reserves—or whether the dollar’s structural advantages continue to pull most growth back toward US Treasuries. Equally important will be monitoring redemption stress scenarios: if large-scale outflows coincide with Treasury-market strain, Wilkins’ warning about volatility transmission could move from theory to a measurable market dynamic.