How stablecoin adoption could reshape the global monetary order

Across global finance, accelerating stablecoin adoption is reviving debates about private money, monetary competition, and the future architecture of the dollar system.

From early crypto chaos to the rise of USDT

In 2014, when the digital asset market was still nascent, Giancarlo Devasini launched USDT and Tether. At the time, a few exchanges—Kraken, Bitfinex, Coinbase, Poloniex, and Bitstamp—dominated trading in a lightly regulated, fragile crypto ecosystem. However, the collapse of Mt. Gox in February 2014, then the largest bitcoin (BTC) exchange, exposed severe structural weaknesses.

Back then, these platforms operated across different jurisdictions and traded what was effectively the only meaningful token: Bitcoin. Arbitrageurs tried to exploit price gaps, yet they could not move dollars between banks, brokers, and countries fast enough. For example, when bitcoin traded at $115 on Kraken and $112 on Poloniex, a trader should have sold one BTC at the higher price and wired USD to buy back at the lower price. In practice, settlement took one to two days, eroding opportunities.

Thanks to Giancarlo and Paolo Ardoino, USDT emerged as a solution, moving dollar equivalents at internet speed. Launched in July 2014 as “Realcoin,” Tether initially built USDT on the Omni Layer atop Bitcoin, because Ethereum and other smart contract networks did not yet exist. However, in November 2014, the founders rebranded the project “Tether” and introduced three fiat-pegged tokens: USDT (US dollar), EURT (euro), and JPYT (Japanese yen).

In 2015, Bitfinex, then one of the largest exchanges, adopted USDT and created its first deep liquidity pool. Between 2017 and 2019, Tether expanded beyond Omni to Ethereum and subsequently to Tron, Solana, Avalanche, and other chains. Moreover, this multichain strategy boosted transaction speed, reduced fees, and enhanced interoperability. By 2019, USDT had become the most traded crypto asset by volume, with daily turnover surpassing even that of bitcoin.

By late 2019, as competitors advertised that their tokens were backed 100% by cash or cash equivalents, Tether disclosed a different mix. Its reserves included A1- and A2-rated commercial paper, and the company signaled plans to shift gradually toward short-term U.S. Treasuries and cash. This disclosure set the stage for debates about usdt reserve composition and risk management standards across the industry.

Pandemic stress and the shift to emerging markets

COVID was the inflection point for USDT. In the two years to March 2022, during a period of extreme global financial stress, USDT supply soared 25-fold from $3.3 billion to $80 billion. That growth came primarily from emerging markets. Moreover, the token’s main use case shifted from speculative trading and arbitrage to a defensive tool against domestic currency crises.

Between 2020 and 2023, households in Venezuela, Lebanon, Argentina, and other emerging markets facing deep devaluations against the US dollar increasingly turned to USDT. In many of these countries, USDT served simultaneously as a savings account, a means of payment, and a store of value. When physical access to black-market dollars dried up under lockdowns, younger users introduced parents and grandparents to “digital dollars,” demonstrating how they could preserve wealth from home.

From living rooms in Caracas and Beirut to Buenos Aires, users discovered faster and safer ways to hold dollar value without relying on unstable banks or weak local currencies. However, this was not just a story about technology; it was also about monetary competition and trust. For many, USDT became a parallel financial rail, standing in for bank deposits, cash, and cross-border remittances.

Tether’s current position and regulatory context

Today, Tether stands at the center of the digital asset economy. With $187 billion in circulating supply and roughly 60% market share, it is the largest stablecoin issuer, rivaled only by Circle’s USDC at $75 billion. With more than 450 million users worldwide and an estimated ~30 million new users added every quarter, USDT has become a systemic player. Tether is headquartered and regulated in El Salvador, while its reserves are custodied by Cantor Fitzgerald.

The US government has developed a strategic interest in Tether’s balance sheet. Composed largely of U.S. Treasury bills, its asset portfolio rivals those of some developed nations. As a result, Tether has become one of the largest and fastest-growing sources of demand for US sovereign debt. Moreover, this intertwining of digital assets and traditional bond markets highlights why genius act regulation and similar frameworks are drawing attention in policymaking circles.

Including corporate bonds, gold, bitcoin, and secured loans, Tether reported more than $5 billion in surplus collateral relative to USDT liabilities as of January 2026. On the back of ongoing supply growth, dominance in emerging markets, and the landmark passage of the GENIUS Act in 2025, some analysts have compared the present landscape to the so-called free banking era before 1913. Critics also invoke that period when warning about the dangers of privately issued money.

Lessons from free banking and private money

In a recent ARK Bitcoin Brainstorm podcast, Tether CEO Paolo Ardoino joined economist Dr. Arthur Laffer and ARK CEO/CIO Cathie Wood to unpack these historical parallels. During the discussion, Dr. Laffer argued that modern stablecoins could usher in a more efficient form of free banking in the United States and that fears of 19th-century “wildcat banking” are often overstated. However, he acknowledged that concerns about credit risk and redemption were central to that earlier era.

In the 1800s, private entities issued banknotes that frequently traded at discounts to par as users evaluated issuer solvency. Crucially, the US government did not guarantee these notes; they were liabilities of individual banks, redeemable in specie—gold or silver—only if the banks remained solvent. Both Dr. Laffer and historian Brian Domitrovic noted that currencies competed domestically until the Federal Reserve was created in 1913 and given a monopoly on note issuance.

Dr. Laffer further explained that in 1834 the US government established a gold peg by fixing the price at $20.67 per ounce. Yet Washington did not stand behind each banknote in circulation. Redemption depended entirely on the issuing bank’s balance sheet and reputation, violating the “no-questions-asked” principle under which money is accepted at face value without doubts about its backing. That said, from 1776 to 1913, cumulative inflation in the United States was effectively zero, even as prices fluctuated around a stable long-term benchmark.

Outside the US, some free banking systems fared even better. In Scotland (1716–1845) and Canada (1817–1914), inflation remained low, bank failures were relatively scarce, and banknotes usually traded at par. Mechanisms like competitive redemption and clearinghouses imposed strong market discipline. In contrast, the American experience from 1837 to 1861 was hampered by restrictive state rules, including bans on bank branching and requirements to hold risky state bonds as collateral. After a tumultuous stretch in the early 1840s, “busted bank notes” settled at less than 2% on average—a figure echoing today’s 2% Federal Reserve inflation target.

From historical free banking to blockchain-based dollars

The mid-19th century turmoil did not prevent growth. During this period, the US economy expanded strongly, laying the financial foundations for the industrial revolution that accelerated after the Civil War ended in 1865. However, the free banking era ultimately closed as the Civil War and the National Banking Acts centralized currency issuance under federal authority.

During the war years from 1861 to 1865, the US suspended the gold standard. States helped create demand for their bonds by requiring banks to hold state debt as reserves. Later, the Federal government taxed all bank-issued currency not backed by a robust reserve of federal bonds, effectively eliminating free-bank notes. In 1879, the country resumed the gold standard, and the 1870s and 1880s became some of the strongest decades for economic growth in American history.

Requiring banks to hold large quantities of federal bonds as reserves became problematic as the private economy outpaced government borrowing. With too few bonds relative to demand, banks often curtailed currency issuance, contributing to deflation and periodic bank panics. These constraints encouraged Congress to pass the Federal Reserve Act of 1913 and nationalize the reserve system. Since then, the Consumer Price Index has risen more than 30-fold, while the prior century of mixed gold and bimetallic standards plus currency competition produced zero cumulative inflation.

Modern stablecoins share important features with those earlier currencies: they are privately issued liabilities backed by reserves. Yet technology, transparency, and regulation mitigate many past weaknesses. Stablecoin issuers are not constrained by branch rules, because their tokens are natively digital and global. Moreover, clearinghouse-like roles are now performed by liquid secondary markets, centralized and decentralized exchanges, and algorithmic arbitrage that keeps pegs tight.

Collateral quality has also improved. Under the GENIUS framework, regulated issuers typically hold cash and short-term Treasuries, while some unregulated issuers such as Tether also prioritize highly liquid assets. Compared with the illiquid state bonds of 19th-century American banks, these portfolios look far more resilient. Fraud risk is further reduced for the largest players through regular audits, on-chain visibility, and federal oversight. This combination of innovation and safeguards is central to the renewed debate around private money history.

Technology rails and the new monetary infrastructure

Historically, free banking thrived where central banks were weak or absent—Scotland, Canada, and pre-Civil War America. In similar fashion, stablecoins have emerged where traditional banking and payment systems are slow, restrictive, or expensive. Just as railroads, telegraphs, and advanced printing underpinned earlier experiments, blockchains and global internet infrastructure now support tokenized dollars.

Stablecoins like Tether and Circle do not actively manage pegs via discretionary issuance or redemption in open markets. Only whitelisted, KYC-compliant institutions can mint new USDT by depositing cash or redeem tokens by returning them to the issuer. Institutions, not Tether or Circle, maintain the peg through arbitrage, while the companies guarantee one US dollar for each USDT or USDC in circulation. This structure allows regulators and market participants to track flows with increasing precision.

Dr. Laffer believes this model is particularly powerful in emerging and inflation-prone economies but argues that a more advanced design is required for broad usage in developed markets. He envisions a stable token that maintains a dollar peg yet also appreciates in line with inflation, preserving purchasing power against goods and services. However, implementing such a design within existing securities law raises significant challenges.

According to Paolo Ardoino, and based on the GENIUS Act, any stablecoin that passes yield directly to users would likely be treated as a security and fall under U.S. Securities and Exchange Commission scrutiny. For now, yield-bearing “tokenized money markets” remain largely restricted to accredited investors and qualified purchasers. Over time, Dr. Laffer expects some stable currencies to track an index of goods and services while being backed by long-term assets like bitcoin or gold.

Alloy, XAUT, and collateralized stable value

Already, Tether is experimenting with new structures. It has launched Alloy (AUSDT), a gold-backed stablecoin, and XAUT, a tokenized representation of gold. As Ardoino emphasized, these designs enable users to be long bitcoin or gold while transacting in a stable-value unit that appreciates with the underlying collateral. Moreover, they can expand borrowing capacity in collateralized debt position (CDP) systems, echoing designs popularized in decentralized finance.

In a CDP, users lock crypto assets as collateral on-chain and borrow stablecoins against them, with automatic liquidation if collateral values fall below safety thresholds. Notably, this is not a new idea in crypto. One of the earliest and most durable DeFi protocols—Sky, previously known as MakerDao—pioneered crypto-collateralized stablecoins. Sky functions like a decentralized bank, issuing the USDS stablecoin to users who deposit assets such as ETH into smart contracts and borrow against that collateral.

To ensure solvency, loans on Sky are overcollateralized and subject to liquidation if collateral values drop too far. Today, USDS is backed by diversified collateral designed to optimize efficiency and yield while managing risk. The basket includes major stablecoins like USDC and USDT, on-chain overcollateralized crypto lending, AAA corporate debt, short-duration U.S. Treasury bills, over-the-counter crypto lending to vetted counterparties, and other assets or operational buffers.

To stabilize its peg further, Sky deploys a Peg Stability Module (PSM) that allows direct swaps between USDC and USDS. This mechanism gives arbitrageurs a straightforward way to keep USDS trading near $1 and enhances liquidity beyond the more volatile crypto collateral. In addition, Sky offers sUSDS, a savings instrument backed by revenue from borrower interest, tokenized money market funds, U.S. Treasuries, and DeFi allocations. In effect, USDS acts as both a transactional medium and a global savings vehicle.

Commodity settlement and the next phase of stablecoin adoption

The passage of the GENIUS Act in 2025 has intensified questions about how Tether will enter the US market. In Ardoino’s view, one of the fastest-growing applications lies in commodity settlement. Increasingly, commodity traders are realizing that stablecoins offer a more efficient way to close trades than legacy correspondent banking. Last year, Tether began facilitating oil transactions, triggering a surge in global demand for USDT from broad-based commodity markets.

Ardoino notes that if a token is not integrated into local economies, it typically serves only as a temporary settlement layer before conversion back into domestic currency. In contrast, in emerging markets with unstable monetary regimes, USDT functions as means of payment, savings vehicle, and store of value. Consequently, it circulates locally and remains in use, deepening the foothold of digital dollar payments in daily life.

Strategy’s research suggests that stablecoin adoption is segmenting by region. The US, Latin America, and Africa are evolving along distinct paths. In developed economies, electronic dollars are already easily accessible via platforms like Venmo, Cash App, and Zelle, reducing the immediacy of demand. However, cross-border trade, wholesale settlements, and on-chain finance are creating new niches even in markets with mature banking systems.

Within this context, the phrase stablecoin adoption encapsulates more than simple user counts. For some countries, especially in Latin America and parts of Africa, demand is driven by capital preservation and escape from inflation. For others, including advanced economies, the draw is programmability, 24/7 settlement, and composability with DeFi. Understanding these divergent drivers will be crucial for regulators and investors assessing systemic risk and opportunity.

USAT and the US market outlook

Tether recognizes that the United States is different from typical emerging market strongholds. Domestic users already have multiple low-cost options for instant payments and transfers. Nevertheless, the company sees space for new instruments that integrate with banks, fintech platforms, and institutional settlement rails.

To that end, Tether plans to launch USAT, a new stablecoin tailored specifically for developed markets, in the coming months. While detailed design parameters remain to be disclosed, USAT will debut in the world’s largest financial system and under the scrutiny of US regulators and institutional investors. Moreover, its launch will test whether the world’s biggest stablecoin issuer can translate its dominance in emerging markets into a durable presence in the US.

As commodity settlement, DeFi, and savings products evolve, the future of stablecoins now hinges on policy decisions, user trust, and continued innovation. The coming years will show whether privately issued digital dollars become a peripheral tool or the backbone of a new monetary order.