Washington is exploring a plan to promote U.S. dollar-backed stablecoins in international markets as it looks to preserve the dollar’s status as the world’s leading reserve currency.

Bloomberg reported that the Trump administration is considering partnerships with private companies to encourage greater use of dollar-pegged stablecoins outside the United States. The initiative could increase global demand for the greenback while potentially boosting purchases of U.S. Treasury securities.

The Treasury and State departments could be involved in the effort, with the U.S. International Development Finance Corporation also potentially supporting the international expansion of dollar-backed stablecoins.

Stablecoins are blockchain-based digital tokens that are designed to maintain a stable value relative to an underlying asset, such as the U.S. dollar. They are often viewed as tokenized versions of traditional fiat currencies and are widely used in crypto trading and cross-border payments.

USDT and USDC, the two largest stablecoins, are both pegged to the U.S. dollar at a 1:1 ratio. Combined, they make up almost 90% of the $292.49 billion stablecoin market.

Stablecoin Reserves Drive Confidence

Investor confidence in stablecoins depends on issuers being able to redeem the tokens for fiat currency on demand. To support those redemptions, issuers maintain reserves that can include U.S. dollars as well as relatively safe assets such as short-term government debt.

Under the U.S. Genius Act, stablecoin issuers are required to maintain reserves that include dollars and short-term Treasury securities. Treasury Secretary Scott Bessent has described dollar-backed stablecoins as another mechanism for supporting the dollar’s global position, noting that the U.S. currency is involved in nearly 90% of foreign exchange transactions.

Stablecoin issuers are already significant holders of U.S. sovereign debt. Their combined holdings are nearing $200 billion, putting them among the 20 largest holders of U.S. government debt and ahead of the holdings of several major countries.

Emerging Markets Could Face Pressure

While wider adoption of dollar-backed stablecoins could strengthen international demand for the greenback, it could also expose emerging-market economies with current-account deficits to greater capital-flow risks.

Stablecoins can transfer funds through blockchain networks without relying on traditional banking infrastructure. This could make it more difficult for central banks and governments to monitor cross-border flows or intervene in them. If dollar-backed tokens become common for everyday transactions, demand for domestic currencies could weaken.

The International Monetary Fund and the Bank for International Settlements have repeatedly raised concerns about the impact of dollar-pegged stablecoins on emerging economies. Both institutions have warned that widespread adoption could contribute to faster capital outflows from vulnerable countries during periods of financial stress.