Circle economists argue digital finance could strengthen dollar dominance

The conventional wisdom on de-dollarization goes something like this: faster, cheaper cross-border payments mean the world needs the dollar less. A paper published by the Kansas City Federal Reserve flips that argument on its head. Circle executive Gordon Liao, Cornell economist Eswar Prasad, and economist Tony Zhang co-authored the paper, arguing that financial innovations like dollar-backed stablecoins and tokenization are more likely to cement the dollar’s global role than chip away at it. The numbers behind the argument The dollar’s slice of global foreign exchange reserves has slipped over the past quarter-century, falling from roughly 72% in 2000 to 57% in the first quarter of 2026. That drop is real, and it feeds a steady stream of de-dollarization commentary. But the paper points to a different metric: cross-border payments. The dollar still accounts for around 59% of transactions outside the euro area, a figure that has stayed remarkably stable even as reserves have drifted lower. The stablecoin market makes the case more concretely. More than 98% of stablecoins by value are dollar-denominated, with USDC and USDT leading the field. When global users want a digital asset th...