The thing most readers get wrong about stablecoins is that they are a crypto story. The Bank of England’s Carolyn Wilkins laid out the opposite case on Sept. 15: dollar-pegged tokens are now a structural arm of US Treasury demand, and a potential transmission channel for liquidity shocks. In the same fortnight, the Landfall Strategy Group warned that trade wars are giving way to capital wars, in which cross-border capital itself becomes the weapon. Last week this column tracked the yuan’s quiet momentum and a concentrated decline in dollar reserves. This week the dollar-plumbing question sharpened: Washington now has a private, programmable distribution network for its debt, and the rest of the world is starting to treat that as a problem to be managed.
Start with the scale. Dollar stablecoins account for roughly 98% of a market that has swelled to about $300 billion in circulation, up from less than $5 billion at the start of 2020. Tether and Circle, the issuers of USDT and USDC, held nearly $150 billion in Treasury bills at the end of 2025, per BIS research cited in Wilkins’ speech. They bought roughly $33 billion of the securities during the year. Wilkins called the largest issuers “meaningful participants” in the short-term Treasury market and said stablecoin inflows can place modest downward pressure on short-term yields.
That is not a crypto curiosity. It is a new, price-insensitive buyer of the world’s reserve asset, one that grows with every user in Lagos or Buenos Aires who wants a dollar-linked balance on a phone. Sending a $200 remittance cost an average of 6.4% globally in 2024, and about 8.5% in Sub-Saharan Africa. Wilkins argued stablecoins could “extend dollarization into digital markets” by undercutting those corridors. The euro stablecoin market, by contrast, stood at about €650 million in June. Circle’s euro token passed €400 million in August. The dollar’s first-mover advantage is not close to being contested.
It is a new, price-insensitive buyer of the world’s reserve asset, one that grows with every user in Lagos or Buenos Aires who wants a dollar-linked balance on a phone.
Now place that against the capital-wars frame. Landfall’s Sept. 3 note describes a US government deficit ballooning just as international demand for Treasuries softens, underscored by Norway’s $2 trillion sovereign wealth fund planning to cut its allocation to US sovereign bonds. The note warned of US pressure “to force foreign investors to bear the costs and risks of financing US government borrowing.” Treasury Secretary Scott Bessent’s statements that US capital markets intervention could be used for foreign policy goals arrived shortly after. The failure of a $6 billion Treasury buyback to rein in yields probably makes more drastic intervention likelier.
The scenarios Landfall sketches are worth naming precisely. One is a “US-led tribute system,” where Washington consolidates financial, security and technology interests to drive inflows into long-dated Treasuries. The second is “ruptured alliances,” where current US partners reduce Treasury allocations. The third is “global fragmentation,” where BRICS+ nations and US rivals follow, driving US bond yields up and the dollar down. Landfall warns the second and third scenarios already look to be developing.
Here is where stablecoins cut against the fragmentation thesis in the short run and amplify it in the long run. They are, functionally, a privatized tribute mechanism: foreign users buy dollar tokens, issuers buy T-bills, and the proceeds finance the US deficit without a single foreign central bank signing a deal. No treaty, no basing agreement, no IMF conditionality. Just an app. That is precisely why capital controls become the next vector. A government that wants to restrict dollar access for its citizens no longer needs to police bank wires; it needs to police token rails.
The reverse flow is the real risk, and Wilkins was explicit about it. The same reserve structure that funnels money into government debt during growth can reverse when holders redeem. Issuers may need to raise liquidity quickly, even outside conventional market hours. Several large issuers selling T-bills simultaneously could amplify yield moves and liquidity strains if the Treasury market were already under pressure. She drew a parallel to the UK’s 2022 liability-driven investment crisis, when forced gilt sales drove prices down and forced Bank of England intervention. The trigger need not originate in crypto: concerns about US inflation, public debt or institutional credibility could weaken dollar-asset demand first, with token redemptions then adding to the selling.
That sequence is not hypothetical in kind, only in scale. In March 2020, even Treasurys experienced severe liquidity pressure and the Fed intervened. In March 2023, USDC briefly lost its peg after Circle disclosed about $3.3 billion of reserves sat at the failed Silicon Valley Bank. Wilkins noted the sector is not yet large enough to pose a major threat. The word “yet” is doing a lot of work.
The regulatory divergence matters for who bears the next shock. The GENIUS Act, enacted in July 2025, requires at least one dollar of eligible reserves per token — cash, insured deposits, short-dated T-bills, Treasury-backed repos, qualifying money market funds. But OCC rules may not finalize until November 2026, pushing the effective date to roughly March 2027. Issuers above $50 billion face annual audits; all regulated issuers report weekly and publish monthly disclosures. The UK, by contrast, imposes stricter reserve and liquidity requirements on a narrower set of systemic sterling issuers, with liquidity contingency plans and procedures for issuer failure, finalizing at end-2026.
Wilkins’ point is that reserve rules answer whether issuers have enough assets, not how fast those assets convert to cash in a run. That gap is the capital-wars seam. A dollar stablecoin system governed by US rules but used globally gives Washington an instrument and gives foreign regulators a grievance. Expect the latter to respond with capital controls dressed as consumer protection, and the former to respond with access restrictions dressed as prudential oversight.
The macro backdrop makes all of this sharper rather than softer. The dollar index is trading around 99.70, up six consecutive days ahead of a Fed decision markets price at roughly a 92% chance of a 25 basis point hike to 3.75–4.00%. The 10-year Treasury yield hit 5.041%, its highest since 2007, with oil above $105 after Saudi pipeline closures and Houthi attacks. The trade-weighted dollar index edged up to 111.8 as of Sept. 11. Higher US yields pressure flows into emerging markets — India’s benchmark 10-year at 7.3–7.5% is the level where Centrum’s Jignesh Desai says the risk-reward for Indian equities deteriorates, even as foreign investors net bought close to ₹300 billion in August. Sri Lanka’s foreign holdings of rupee Treasuries rose 1.3% week-on-week to Rs. 213.40 billion. Capital is still moving toward yield, but it is moving with more friction and more conditionality.
That is the delta from last week. The yuan momentum and the concentrated reserve decline were about official-sector choices. This week’s story is about private rails becoming strategic infrastructure. Stablecoins deepen dollar Treasury demand precisely as the political willingness to supply that demand is being questioned. The token is the new correspondent bank, the issuer is the new reserve manager, and the smart contract is the new capital control. The weaponization runs both ways.