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A new Federal Reserve discussion paper finds that the US dollar’s role in global bond markets has risen and fallen in cycles over the past six decades, with no clear long-term trend toward either greater dollar dominance or de-dollarization.
Using the Bank for International Settlements’ (BIS) international debt securities database, the authors identify three distinct “dollarization waves” since the 1960s, showing that shifts in currency use have followed cyclical patterns rather than a steady structural change in global financing.
“We find no monotonic dollarization or de-dollarization trend; instead, the dollar’s share exhibits a wavelike pattern,” the paper says.
The most recent wave emerged after the 2008 global financial crisis, when the dollar regained market share in international bond issuance, climbing back toward levels seen before the surge in euro-denominated bond issuance in the early 2000s, according to the report.
Share of international debt issued by currency, 2000–2024. Source: Federal Reserve
The study also found that, as of 2024, emerging market issuers still rely predominantly on dollar-denominated debt, which accounts for about 80% of their outstanding international bonds, while efforts by China begun in 2010 to internationalize its currency, the renminbi, have produced only modest gains.
“While the dollar’s eminence rests on vulnerable foundations, the absence of viable alternatives has left the dollar’s primacy unchallenged,” the report said.
Related: Intuit to use Circle’s stablecoin for financial platforms
Stablecoins back US Treasurys
The global stablecoin market has expanded sharply over the past year, growing to roughly $309.6 billion from $205.5 billion in December 2024, according to DefiLlama data.
Most of that growth has been concentrated in US dollar-pegged tokens, with Tether’s USDt (USDT) and Circle’s USDC (USDC) together accounting for about 85% of total stablecoin supply, or roughly $264 billion of the market at the time of writing.
Stablecoin market cap. Source: DefiLlama
As dollar-pegged stablecoins have expanded, issuers have become significant holders of short-term US government debt.
In its second-quarter 2025 reserve report, Tether said its exposure to US Treasurys exceeded $127 billion, including $105.5 billion held directly and $21.3 billion held indirectly. According to the company, that level of Treasury holdings places Tether among the largest holders of US government debt.
Circle’s latest transparency report, dated Dec. 15, shows USDC is also backed largely by US government debt instruments, including $49.7 billion in overnight reverse Treasury repos and $18.5 billion in short-term Treasurys.
Circle’s reserves composition. Dec. 15, 2025. Source: Circle
A July report from digital asset bank Sygnum said the US government sees dollar-pegged stablecoins as a means to reinforce the dollar’s role as a global reserve currency and is backing their growth through legislation.
Other countries have taken notice. In April, Italy’s Economy and Finance Minister Giancarlo Giorgetti warned that US policies supporting dollar-backed stablecoins pose a greater long-term risk to Europe’s financial system than trade tariffs, citing their potential to erode the euro’s role in cross-border payments.
In December, a group of 10 European banks said they plan to launch a euro-pegged stablecoin in the second half of 2026.
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