Can Stablecoins Break Free From the US Dollar?
For more than ten years after the first stablecoins appeared, the U.S. dollar still dominates the landscape. Despite countless experiments and grand visions of currency diversity, almost every major stablecoin continues to shadow the greenback.
Data from DefiLlama puts the total stablecoin market above $306 billion in capitalization. JPMorgan estimates that roughly 99% of that value is tied to dollar‑denominated tokens. In other words, nearly the entire “stable” corner of crypto is effectively an extension of the U.S. monetary system—just in tokenized form.
According to Boris Bohrer‑Bilowitzki, CEO of Concordium, this is not particularly surprising. The dollar’s unique geopolitical position does a lot of the work. As he puts it, the dollar is the global reserve currency, so for anyone trying to build new financial rails, using USD as the unit of account is “the natural default.” Exchanges clear in dollars, global trade is largely priced in dollars, and traditional banks feel more comfortable onboarding products that reference the same currency they already understand.
However, Bohrer‑Bilowitzki argues that there’s more at play than simple convenience. Many stablecoin projects, in his view, have been engineered primarily for fast adoption instead of sound monetary design. It is easier to win listings and partnerships when you mirror something that is already deeply embedded in the global financial system. Pegging to the dollar de‑risks conversations with regulators, custodians, and institutional partners. Designing something fundamentally new—like a basket of assets or a non‑USD anchor—makes everything from marketing to compliance harder.
Why the Dollar Won the First Round
The first generation of stablecoins emerged with a very practical goal: solve crypto’s volatility problem so people could trade, arbitrage, and park capital on‑chain without constantly worrying about 20% price swings in a single day. For centralized issuers, the simplest recipe was obvious:
1. Hold dollars or dollar‑equivalents in bank accounts or short‑term Treasuries.
2. Mint tokens representing claims on those reserves.
3. Promise redeemability at (or very close to) one dollar per token.
This model aligns perfectly with existing financial plumbing. Banks and regulators understand it. Exchanges can easily handle accounting and risk management. Retail users intuitively grasp what “one token equals one dollar” means. Network effects then do the rest: if every major trading pair is quoted in USD‑stablecoins, any newcomer has a strong incentive to use the same unit.
Alternative pegs faced a steep uphill battle. A euro stablecoin is less attractive when most crypto assets are priced in dollars. Commodity‑backed tokens are harder to manage and explain. Algorithmic or basket‑based designs introduce a whole new learning curve and new failure modes. As a result, the dollar’s dominance compounded over time.
The Trouble With “Non‑USD” Experiments
That doesn’t mean no one has tried to escape the dollar orbit. The industry has seen experiments along several lines:
– Stablecoins linked to other fiat currencies (euro, yen, pound).
– Tokens backed by baskets of currencies or assets.
– Commodity‑pegged coins (gold, sometimes oil or mixed commodities).
– Algorithmic or crypto‑collateralized systems targeting a non‑USD unit of value.
In practice, these alternatives have struggled for three main reasons.
First, liquidity: if traders, DeFi protocols, and market makers overwhelmingly prefer USD pairs, non‑USD stablecoins rarely see enough volume to be useful beyond niche communities. Thin liquidity makes them less attractive, which further discourages adoption.
Second, complexity: baskets and exotic pegs sound compelling in whitepapers, but they are difficult to maintain. Rebalancing assets, managing different jurisdictions, and explaining how the peg works create both operational and communication challenges. When something goes wrong, the model is often too complex for regular users to trust that it can be fixed.
Third, confidence: after several high‑profile failures of experimental stablecoins, users are more cautious about anything that doesn’t look and behave like a straightforward USD‑backed token. Convincing people to swap a simple one‑to‑one dollar peg for a sophisticated multi‑asset model is difficult when they’ve just watched other “innovations” collapse.
The Psychological Grip of the Dollar
Beyond liquidity and infrastructure, there’s a psychological lock‑in. For most of the world, the dollar functions as the mental benchmark for value. Even where local currencies dominate day‑to‑day spending, people often think in dollars when it comes to savings, global prices, or large transactions.
Stablecoins have inherited that mental model. A token that always equals one U.S. dollar feels “stable” because the unit of account is already trusted. A coin that tracks a composite index of assets or a volatility‑adjusted basket is much harder to internalize. Users may understand it abstractly but still prefer a simple, familiar peg.
This matters because money is not only about economic fundamentals—it’s also about shared expectations. A new form of money must be legible to ordinary people. So far, non‑USD stablecoins have rarely managed to present themselves as more intuitive or more trustworthy than their dollar‑denominated counterparts.
Could Regulation Force Diversification?
One possible path away from dollar hegemony doesn’t start with markets at all, but with regulators and policymakers. If major jurisdictions decide that they do not want their financial systems to be overly dependent on a foreign currency, they may actively encourage—or even mandate—local‑currency stablecoins.
Central bank digital currencies (CBDCs) could play a significant role here. If large economies roll out tokenized versions of their own currencies that can interoperate with public blockchains or permissioned networks, developers might find it easier to plug those units into DeFi protocols, payment systems, and remittance apps. That could slowly chip away at USD‑stablecoins’ monopoly.
In parallel, some jurisdictions may place stricter rules on dollar‑linked tokens than on domestically denominated ones, nudging issuers and users toward local pegs. Over time, a patchwork of regulations could create real economic incentives to diversify away from USD, even if the market would not have moved in that direction on its own.
The Case for Commodity and Basket‑Backed Stablecoins
Another avenue involves decoupling from any single national currency entirely. Proponents of commodity‑backed or basket‑backed stablecoins argue that tying value to a broader base of assets can offer several benefits:
– Reduced exposure to the monetary policy of one country.
– Potentially better protection against inflation or currency debasement.
– Alignment with long‑term stores of value such as gold or diversified baskets of government bonds.
In theory, a well‑constructed basket‑backed stablecoin could act as a sort of “neutral” digital currency—less politically contentious than the dollar, while still anchored in real‑world assets. In practice, building and maintaining such a system is difficult and capital‑intensive. Governance must be robust, transparent, and credible enough to handle questions like: Who chooses the basket? How often is it rebalanced? How do token holders verify the collateral?
Without overwhelming transparency and strong institutional backing, users tend to default back to the simpler model: short‑term U.S. Treasuries and bank deposits, wrapped in a dollar peg.
DeFi’s Structural Bias Toward the Dollar
Decentralized finance itself reinforces U.S. dollar dominance. Core primitives—lending markets, perpetual futures, automated market makers—are most liquid in USD‑stablecoin pairs. Collateral frameworks have been built around the idea that a “stablecoin” means “USD‑based.” Oracle infrastructure, risk models, and insurance pools often assume that the reference asset is the dollar.
Any new stablecoin that doesn’t track USD has to fight this structural headwind. To compete meaningfully, it must offer something powerful enough—better yield, improved privacy, regulatory advantages, or ideological alignment—to compensate for the loss of immediate plug‑and‑play compatibility with existing DeFi ecosystems.
So far, few have managed that. Even when protocols introduce non‑USD stablecoin markets, they often remain secondary to the main USD pools in depth and usage.
Where Non‑Dollar Stablecoins Might Actually Win
Despite the challenges, there are realistic scenarios where non‑USD stablecoins could carve out meaningful niches:
1. Local payment rails: In countries with capital controls or volatile local currencies, a euro‑ or regional‑currency stablecoin might serve domestic trade, payroll, or e‑commerce better than a dollar token, particularly if local regulators favor it.
2. Cross‑border trade corridors: Businesses that trade heavily within specific blocs—say, Europe or parts of Asia—might prefer settlement in a regional currency to reduce FX exposure, making non‑USD stablecoins attractive for invoicing and settlement.
3. Gold‑or savings‑oriented products: For users primarily seeking a hedge against inflation or long‑term debasement, gold‑backed or diversified‑asset stablecoins could appeal as a digital savings instrument, even if they’re less convenient for everyday spending.
4. Policy‑driven ecosystems: Governments or large institutions might sponsor stablecoins that reflect their strategic interests, such as regional integration or reduced reliance on existing reserve currencies.
In all these cases, the key is functional advantage: a non‑USD peg will only succeed if it solves a real problem better than a dollar‑linked alternative.
What Would It Take to Truly Break the Dollar Peg?
For stablecoins to genuinely “break free” from the U.S. dollar, several shifts would likely need to happen simultaneously:
– Deep liquidity in alternative units: Non‑USD stablecoins would need substantial, persistent liquidity across major exchanges and DeFi platforms, so that traders are not forced back into USD for every significant transaction.
– Robust infrastructure support: Oracles, wallets, custodians, accounting tools, and risk systems would need to treat non‑USD stablecoins as first‑class citizens rather than exotic side tokens.
– Clear regulatory frameworks: Issuers and institutional users must have legal clarity and predictable rules around non‑USD pegs so they can commit capital at scale.
– Cultural and narrative change: The industry would have to stop treating “one dollar” as synonymous with “stability” and begin to accept that stability can be defined relative to other baskets or units of account.
Without these changes, even the most innovative designs risk being pulled back into the familiar gravity well of the dollar.
Better Than Fiat, or Just Tokenized Fiat?
There is also a deeper philosophical question: is simply replicating the dollar on‑chain enough? On one hand, USD‑stablecoins already outperform many local fiat currencies in terms of accessibility, settlement speed, and sometimes even perceived safety. For millions of people, holding a dollar‑pegged stablecoin is easier than opening a U.S. bank account, and can provide a lifeline in regions with unstable banking systems.
On the other hand, if stablecoins only ever mirror the U.S. monetary system, they might fall short of the original crypto ambition to create a genuinely new, more neutral financial architecture. They become a more efficient wrapper for existing power structures, rather than an alternative to them.
This tension underlies much of the debate: stablecoins are often praised for bringing “dollars to the internet,” but critics argue that true innovation would involve designing digital money that is not so tightly bound to the policy decisions of a single central bank.
A Future of Coexistence, Not Replacement
Realistically, the most likely future is not one where stablecoins suddenly abandon the dollar, but one where USD‑pegged tokens remain dominant while a growing minority of alternatives serve specific purposes.
Dollar‑linked stablecoins will probably continue to power the bulk of global crypto liquidity, trading, and DeFi activity. At the same time, regional, commodity‑backed, or basket‑based stablecoins may mature into serious tools for specialized use cases—local payments, inflation protection, cross‑border trade within certain blocs, or politically motivated diversification.
In that sense, “breaking free” from the U.S. dollar is less about overthrowing it and more about loosening its exclusive grip. The next phase of stablecoin evolution may not dethrone the dollar, but it could introduce a more pluralistic monetary environment on‑chain—where the greenback is still king, but no longer the only game in town.