Rising demand for dollar-backed crypto assets may reshape global liquidity and monetary policy
The growing demand for U.S. dollar-backed stablecoins could have far-reaching implications for monetary policy, according to Federal Reserve Governor Stephen Miran. Speaking at the BCVC Summit in New York, Miran suggested that the expected multi-trillion-dollar expansion of the stablecoin market over the next five years could push down interest rates by influencing global demand for U.S. dollar assets.
Stablecoins Putting Pressure on the Neutral Rate
Miran explained that stablecoins may be “putting downward pressure on the neutral rate, or r-star,” — the interest rate level that neither stimulates nor slows down economic growth. He argued that if the neutral rate falls, “the central bank would also respond by lowering its interest rate.”
The current total market capitalization of all stablecoins stands at around $310.7 billion, according to CoinGecko data. However, Federal Reserve research projects that figure could reach $3 trillion within the next five years, representing an unprecedented rise in dollar-linked crypto liquidity.
“Stablecoins are already increasing demand for U.S. Treasury bills and other dollar-denominated liquid assets by purchasers outside the United States,” Miran said. He emphasized that “this demand will continue growing,” calling stablecoins a “multitrillion-dollar elephant in the room for central bankers.”
Global and Regulatory Implications
The surge in stablecoin demand is already drawing attention from global institutions. The International Monetary Fund (IMF) and U.S. banking associations have warned that stablecoins could compete directly with traditional financial assets and deposit services, potentially reducing banks’ access to customer funds.
Miran, however, highlighted that effective regulation could mitigate these risks while fostering innovation. He praised the GENIUS Act, calling it a pivotal step toward clear consumer protections and reserve transparency.
“While I tend to view new regulations skeptically, I’m greatly encouraged by the GENIUS Act,” Miran noted. “It requires U.S.-domiciled issuers to maintain one-to-one reserves in safe, dollar-denominated assets — aligning stablecoins more closely with traditional finance.”
As stablecoin adoption accelerates, experts believe the growing appetite for dollar-linked digital assets could have a deflationary effect on global interest rates. For the Federal Reserve and other central banks, this trend underscores a new era in which crypto markets and monetary policy are increasingly intertwined.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.