Bessent: stablecoins will help ensure dollar dominance

• Key insight: Bessent argued stablecoins could strengthen dollar dominance and become an important source of Treasury funding as adoption expands internationally.
• Forward look: Bessent also predicted regulators would set up "guardrails" and best practices to prevent banks from cutting ties to customers over reputational concerns. 

NEW YORK — Treasury Secretary Scott Bessent on Tuesday predicted dollar-backed stablecoins could become an important source of demand for federal government funding if adoption picks up, particularly in emerging markets.

Processing Content

In a conversation with Ripple CEO Brad Garlinghouse at the company's Swell conference in New York Tuesday, the Bessent said stablecoin adoption could heighten demand for Treasuries at a time when many are concerned about dollar dominance. Since stablecoins are backed by U.S. dollar-denominated assets like Treasurys, stablecoins could emerge as a new source of demand for long-dated bonds, and that demand will be all the more durable if more stablecoins used outside the U.S. are based in dollars.

"Everyone likes to predict the end of dollar dominance … and every single time something new has happened that has increased or fortified our position," Bessent argued. "Stablecoins backed by U.S. government assets they are popular around the world, and I think once we get to a U.S. regulatory regime that respects both rule of law and provides the holders with good fundamentals, that we are going to see a big uptick in stablecoins backed by our assets, and I think it's going to be an important source of funding for the Treasury."

Bessent's comments — made just a week before the midterm elections — come at a time when regulators are charging ahead with their own stablecoin rules after lawmakers in September failed to move forward the CLARITY Act, a highly anticipated market structure bill. 

Bessent pointed to the example of Brazil, where investors moved away from the Real after incumbent president and left-wing Labor organizer Luiz Inácio Lula da Silva won re-election in a surprising upset Sunday. Bessent argued stablecoins can meet this demand for dollar-backed assets in places experiencing high inflation. 

"Yesterday we had the single biggest move in the history of the Brazilian Real, and that for people to be able to instantly move into a dollar asset for small holders, this is a game-changer for people to be able to protect their assets in high inflation environments," he said. "So I think stablecoins backed by U.S. regulation — but done by private firms — is the answer to central bank digital currencies."

Bessent did not offer a prediction on how much stablecoins might boost demand for Treasurys or when such demand might be felt in the market. But he said that, in the absence of legislation for crypto market structure, regulators could "convene" to provide a dependable regulatory framework for digital assets. 

Read more:

• As fintechs nab bank charters, what's happening to BaaS?
• Overheated data center knocked 23 credit unions offline
• Chris Britt still says banking is broken, but Chime can fix it
• Credit unions bulk up a business that banks long dominated

Bessent also touched on the administration's push to root out "debanking," or the administration's latest effort to crack down on alleged bias against politically disfavored groups. 

The debate was kicked off during a November 2024 appearance by Marc Andreessen, cofounder of venture capital firm Andreessen Horowitz, on the Joe Rogan Experience podcast. During the interview, Andreessen alleged that the Biden administration was orchestrating a campaign, which he dubbed "Operation Choke Point 2.0," — after the preceding Obama-era initiative — whereby regulators pressured banks to deny services to politically disfavored businesses, particularly in tech and crypto.  

Ripple CEO Garlinghouse, who said he "was personally debanked," asked Bessent whether the administration had successfully "moved past that chapter." Bessent said passing the CLARITY Act would have prevented debanking, but argued regulators can continue to encourage banks to serve controversial sectors, but declined to say with which mechanisms. 

"That would have been one of the strong points of CLARITY. It would have prevented that from happening again," Bessent said. "I think we can set up regulatory best practices, guardrails that will prevent that from happening again … we are going to see a melding of the traditional and innovative assets, and it's going to make both more secure for the future and more powerful."