Can Stablecoins Break Free From the US Dollar? – Decrypt
In brief
USD‑pegged stablecoins account for nearly the entire market, driven by liquidity, regulation, and global dollar dominance.
Non‑dollar experiments, from national currencies to commodity and basket‑backed designs, have struggled to scale.
Alternatives still encounter skepticism following the collapse of Terra in 2022.
More than a decade after the first stablecoins emerged, the U.S. dollar still reigns supreme in crypto.
The stablecoin market has grown to more than $306 billion in total capitalization, data from DefiLlama shows. According to JPMorgan, around 99% of the stablecoin market remains U.S. dollar‑denominated.
USD-pegged stablecoins’ dominance is half inertia and half convenience, according to Boris Bohrer-Bilowitzki, CEO of Concordium. “The dollar is the global reserve currency, so it’s the natural default for anyone building financial infrastructure,” he told Decrypt.
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But he believes the deeper issue is that most projects have been optimized for adoption over fundamentals, as getting a bank partnership or an exchange listing is easier when you’re tracking something familiar like USD.
“The irony is that in chasing TradFi legitimacy, we’ve replicated TradFi vulnerabilities with centralized control, regulatory exposure, and sensitivity to U.S. monetary policy,” Bohrer-Bilowitzki said.
The dollar remains the world’s primary reserve currency and the most widely used unit for trade invoicing, cross‑border liabilities, and foreign‑currency debt issuance. Yet its long‑term dominance is increasingly questioned.
Geopolitical fragmentation and sanctions have pushed de‑dollarization into the mainstream of investor and policymaker discussion. China, in particular, has made reducing reliance on the dollar a strategic priority in international trade.
Despite this, the crypto industry has doubled down. Non‑dollar stablecoins have struggled to gain traction. There are only three non-USD stablecoins in the top fifty by total market cap.
The first is the sanctioned, rouble-pegged, Garantex-linked A7A5. The second is Circle’s EURC, which saw just $8 million in volumes over the past 24 hours, and the third is a token tracking the Brazilian Real.
Not very stable
Not all USD coins are created equal. Ethereum’s DAI is considered a soft-pegged stablecoin because it is collateralized by other cryptocurrencies rather than fiat dollars. Ethena describes its USDe as a “synthetic dollar,” which is “backed with crypto assets and corresponding short futures positions.”
Algorithmic stablecoins that keep their peg through smart contracts do have an image problem, however, following the collapse of TerraUSD in 2022. An algorithmic stablecoin that lost its peg and dragged down multiple companies with it; that failure wiped out tens of billions of dollars in value and left a lasting scar on the sector.
“Post-Terra, there is limited appetite for purely algorithmic stablecoins, and the market has shifted toward models where stability is engineered through real liquidity and the ability to execute reliably across different blockchains,” Akbar Thobhani, co-founder and CEO of sFOX, told Decrypt.
Another possibility is to break the dollar’s monopoly by tying stablecoins to commodities or asset baskets. In 2024, Tether, the creators of the top US-pegged stablecoin, USDT, which dominates 60% of the market, launched Alloy, a token pegged to the U.S. dollar but over‑collateralized with Tether Gold, which is backed by physical gold stored in Switzerland.
But it hasn’t proved popular. It has a fully diluted valuation of just under $50 million. At the time of writing, the 24-hour volume was just $19,000, according to CoinGecko.
Also being explored are stablecoins pegged to baskets of currencies or assets.
Silk, a stablecoin developed by Shade Protocol on Secret Network, adopted an overcollateralized, basket‑based model intended to reduce reflexive death‑spiral risk in the wake of the Terra collapse.
It is overcollateralized and pegged not to a single currency, but to a weighted basket of global currencies and commodities, including the U.S. dollar, euro, Canadian dollar, Japanese yen, gold, and Bitcoin. The basket is designed to absorb volatility across individual assets while preserving purchasing power over time. It has a current FDV of $1.6 million, according to Coingecko.
Carter Woetzel, founder of Shade Protocol, told Decrypt that building a novel stablecoin that is not USD-denominated is “the ultimate Sisyphus task”, citing liquidity, market makers, and compliance among the reasons preventing large-scale uptake.
He said he chose a basket model for the stablecoin because he despised the fact that USD could be printed and inflated away, calling it “the ultimate hidden tax.”
“Simultaneously, Bitcoin lacks volatility minimization and the requisite speedy rails needed to perform more stablecoin-like operations. In terms of first principles, a basket-pegged stablecoin makes sense,” he said.
“But oftentimes, what the market wants now and the constraints that emerge from a contrarian take means these types of experiments do not have the longevity to experience their golden era. However, I do believe many of these experiments are laying the groundwork for a truly global currency.”
“I think inevitably these models will continue to be played with,” he said, conceding that SILK was “probably a decade ahead of its time.” If the dollar’s global dominance recedes, he suggested, “you will see more basket-pegged experiments,” adding that if its dominance grows, “it will make less sense to have this type of token as settlement and liquidity is already largely unified.”
Better than fiat?
As early as 2019, the Bank of International Settlements said that “in many countries, a stablecoin linked to a basket of foreign currencies might prove more stable than the domestic currency.”
Marc Vanlerberghe, CMO at Algorand, said interest in basket‑based designs is growing at the institutional and policy level, although “fiat-backed models are the easiest for institutions and regulators to understand.”
“The idea that a basket of currencies can be more stable than any one domestic currency is intuitive, especially in countries with high inflation or volatile exchange rates,” he said.
Commodity backed-tokens, such as gold-backed tokens and other commodity-linked instruments, tend to function more as niche stores of value or financial products rather than as everyday money. “So they have not scaled in the same way fiat-pegged stablecoins have,” he added.
There are other drawbacks. Baskets are harder to explain, harder to regulate, and more complex to operate. Liquidity also tends to fragment, as markets usually converge around simple, widely used units of account.
“That said, I think we’ll see renewed interest in diversified designs, especially from sovereign actors or regional blocs that want monetary infrastructure independent of Washington,” Vanlerberghe said.
Woetzel said right now basket-pegged stablecoins are also ultimately constrained by liquidity providers.
“Who is willing to take on both sides of the trade? How much impermanence loss will they be forced to incur? How much volume and demand is there to offset this impermanence loss? If your basket-pegged stablecoin overperforms the dollar too much, it is difficult to find people to essentially ‘short’ the basket in the form of liquidity providing,” he said.
“Protocols are then forced to subsidize these liquidity providers, and the system can really only scale up in terms of usefulness in relation to liquidity actually available on CEXs/DEXs. Arguably, there will be advancements in redemption methodology where the protocol is taking the other side of the trade, but this can also create weird runs on the bank.”
As political tensions rise, financiers have noted a slowdown in trust in the dollar that could lead to greater de-dollarisation. It’s not clear whether stablecoins will follow suit.
But Bohrer-Bilowitzki argues that there is more than just trust in the dollar as to why crypto should explore other options.
“USD dominance should end if crypto is serious about being an independent infrastructure, but only if the market starts valuing long-term stability over short-term convenience. Right now, the incentive structure favors USD pegs because that’s what institutions understand and what users expect,” he said.
“Over time, this could lead to a stablecoin landscape where the USD-backed stablecoins operate alongside local ones, while balancing global liquidity with local monetary needs and improving FX efficiency.”
But on a long enough timeline, single-currency dependence becomes a liability. “If crypto is meant to be infrastructure for the next 50 years, not the next five, we need designs that aren’t structurally tied to any single nation’s monetary policy,” he added.
“The question is whether the market will reward that kind of long-term thinking.”
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