De-dollarization is underway and stablecoin legislation can boost USD

• A digital dollar is needed to make the greenback’s use more open and integrated, Jeremy Allaire said.
• “There are de-dollarization efforts that are underway in many parts of the world,” the CEO of Circle said.
• Congress is currently considering a bill that would give the Fed more power over stablecoins.

De-dollarization is already occurring, and Congress must pass new stablecoin legislation to bolster the greenback, according to Circle founder and CEO Jeremy Allaire.

Circle is responsible for USD Coin, the second-largest stablecoin, which is a type of digital token that’s typically pegged to a fiat currency, such as the greenback, or other assets like bonds.

“We have a situation right now where there are questions being raised about the competitiveness of the US dollar. There are de-dollarization efforts that are underway in many parts of the world. And we have a technological revolution that is taking place with blockchain technology,” he told Bloomberg TV last week.

He noted efforts in the European Union, Hong Kong, Singapore, the Middle East and other markets, warning the US is running behind.

“And the dollar is facing, I think, more severe threats than ever has. And so our view is that it’s vital that Congress act, that it act to pass legislation that can help it  remain competitive in this age of internet-based currencies,” Allaire added. “And that’s really what I think some of these draft bills are doing, that have been discussed within the House in recent days.”

Previously, he has shown support for a bill proposed by the US House Financial Services Committee in mid-April.

It would give the Federal Reserve power over non-bank stablecoin issuers, ensuring they are backed by dollars, notes or Treasury bills.

Allaire told Bloomberg that US policymakers need to focus on creating an efficient framework that would introduce a digital dollar into the core economy.

In his view, this would be especially beneficial at a time when global trade partners seem to be supporting a non-dollar trade regime, though analysts say it’s unlikely the greenback loses its dominance in any near future.

“So something that could be held with the central bank or in short duration T-bills and other things,” he said. “And if you had that and you had a way to regulate that at a federal level, that would be an ideal kind of framework for a company like Circle and for a digital currency like USDC.”

Through a tweet from last week, Allaire outlined that the dollar would become safer and more competitive if “unleashed” on the internet, as it would allow for more open use and deeper integration.

The CEO’s calls for further regulation also come after March’s banking turmoil exposed stability concerns for such tokens. With $3.3 billion of USDC reserves stored in Silicon Valley Bank, the currency lost $13 billion in market cap and was temporarily unpegged from the dollar.