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US Bets on Stablecoins to Boost Dollar Dominance, Treasury Chief Tells Congress

US Treasury Secretary Scott Bessent testified before Congress, advocating for stablecoins backed by U.S. government securities as a tool to strengthen the dollar's global role. He praised the GENIUS Act, arguing it could expand dollar dominance, increase demand for Treasuries, and draw new funding to the government. While Democrats raised stability concerns, Bessent emphasized that proper regulation would mitigate risks and championed a private-sector model over central bank digital currencies. The hearing underscored bipartisan interest in providing clear rules for digital assets to maintain U.S. financial leadership.

Key Points: US Treasury Defends Stablecoins to Strengthen Global Dollar Role

  • Stablecoins could boost demand for US Treasuries
  • GENIUS Act requires high-quality asset backing
  • Warns against foreign central bank digital currencies
  • Bipartisan push for regulatory clarity
  • Aims to prevent bank deposit volatility
2 min read

US Treasury Secretary defends stablecoins to boost dollar power

Treasury Secretary Scott Bessent testifies that stablecoins backed by US Treasuries can expand dollar dominance and draw in new government funding.

"We believe that with the US having the safest, soundest best practices, we can draw in new sources of funding via the stablecoin mechanism. - Scott Bessent"

Washington, Feb 6

The US Treasury is betting that stablecoins backed by government securities can strengthen the global role of the dollar, with Treasury Secretary Scott Bessent defending new legislation on digital assets before Congress.

Testifying before the Senate Banking Committee, Bessent praised the GENIUS Act, which requires stablecoins to be backed by high-quality liquid assets such as US Treasuries.

"This framework has the potential to expand dollar dominance, increase global demand for dollar-denominated assets like US treasuries, reduce systemic risk and support economic growth and innovation," said Chairman Tim Scott.

Bessent said stablecoins could become an important source of funding for the US government. "We believe that with the US having the safest, soundest best practices, we can draw in new sources of funding via the stablecoin mechanism," he said.

Republican lawmakers said the law would keep innovation onshore. Senator Bill Hagerty said it would help maintain the dollar's central role in the global financial system.

Bessent warned against the rise of central bank digital currencies overseas. "We are going to see a choice between American private sector assets with our best practices in regulation or between central bank digital assets," he said.

"And I think the world is going to choose the US dollar," Bessent added.

Democrats raised concerns about financial stability and consumer protection, but Bessent said proper regulation would prevent risks. "We don't want to have central bank digital assets," he said, arguing for a private-sector led model.

The Treasury secretary said agencies are working to ensure stablecoin growth does not trigger deposit volatility at community banks.

"We will continue to work to make sure that there is no deposit volatility associated with this," Bessent said.

Digital assets and stablecoins are closely watched in India, where policymakers and regulators have taken a cautious approach while monitoring global developments.

India's fintech sector and IT firms with exposure to global payments systems track US policy closely, as shifts in dollar-based digital finance could affect cross-border transactions.

The Senate hearing highlighted bipartisan interest in providing regulatory clarity for digital assets while maintaining US financial leadership.

Treasury officials said further work on crypto market structure legislation is expected later this year.

- IANS

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Reader Comments

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Priya S
The US is smartly leveraging its private sector for financial innovation while we in India are still so hesitant. Yes, caution is good, but we risk being left behind. Our UPI is world-class, but for global finance, we need a clear framework for digital assets too. Hoping for positive regulations soon! 🤞
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Rohit P
"World is going to choose the US dollar" – that's quite a confident statement. It shows the sheer power of their financial system. For us, the lesson is that currency strength comes from trust, stability, and now, technological adoption. Building that level of trust for the Rupee is a long-term project.
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Sarah B
As someone working in fintech, this is huge. Stablecoins backed by US Treasuries could make international payments and settlements much smoother and cheaper. Indian companies involved in exports/imports or IT services with global clients should benefit if implemented well. Reduces forex volatility risk.
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Vikram M
With respect, I think the US is being a bit arrogant here. The world doesn't *want* to choose the dollar; it often has to because of existing systems. This is a chance for other economies, including India, to develop alternatives. Our digital rupee should aim for regional trade settlements in INR, not just follow the dollar path.
K
Kavya N
The concern about deposit volatility at small banks is valid. We saw something similar with Paytm Payments Bank issues here. Regulation is key. India's cautious approach might seem slow, but it protects our millions of new-to-banking citizens. Let the US experiment, we should learn from both their successes and failures.

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