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Stablecoins are at the heart of a dollar-based revolution and could be a pivotal factor in keeping the U.S. dollar the dominant global currency, according to an Aug. 9 opinion piece published in The Wall Street Journal. 

The authors, Brian Brooks and Charles Calomiris, urged Congress to implement a “sound and stable regulatory framework” for stablecoins in the country. Brooks is the former CEO of Binance.US, former chief legal officer of Coinbase and served as U.S. Comptroller of the Currency. Calomiris is dean of economics, politics and history at the University of Austin and served as chief economist of the Office of the Comptroller of the Currency.

The Clarity for Payment Stablecoins Act was proposed in July by House Financial Services Committee Chairman Patrick McHenry. However, the legislation has faced obstacles due to a lack of bipartisan agreement.

According to Brooks and Calomiris, with emerging concerns about dedollarization — a scenario in which the dollar loses its global reserve currency status — stablecoins could revive the post-World War II arrangement when the greenback emerged as the currency of international trade.

The affirmations are backed by data from the International Monetary Fund showing that the share of U.S. dollar reserves held by foreign central banks has fallen from almost 73% in 2000 to 59% today. “Any tool that could boost the U.S. dollar should be considered,” the piece reads.

The authors issued a warning about the ongoing dollar exodus from big commodity traders such as Brazil and Argentina. Both countries entered into bilateral agreements with China to use the yuan and their local currencies — the real and peso, respectively — for trade settlements. Brooks and Calomiris also argued that stablecoins provide people living under hyperinflation with easier access to the U.S. dollar.

In a call for stablecoin regulation, the authors noted that dedollarization could damage the United States economy, as the currency’s reserve status reduces the country’s borrowing costs, which is crucial during times of record government borrowing and spending. They also noted that it could affect American consumers’ purchasing power, increasing the cost of foreign goods.

“If stablecoins flourish, citizens of other countries will increase the demand for dollars independent of (and perhaps contrary to) their governments’ political decisions,” note the authors, adding that “U.S. politicians need to agree that re-dollarizing the global economy is important.”

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