The stablecoin market has been overwhelmingly dominated by USD-pegged tokens, reflecting the global financial system’s reliance on the U.S. dollar. However, while stablecoins provide a crucial link between traditional finance and crypto, some analysts argue that this heavy concentration around a single fiat currency presents risks—especially if regulatory or macroeconomic factors impact the dollar’s stability.
These concerns were also recently voiced by a Chinese economist, Zhang Ming, who cited the use of dollar-pegged stablecoins in decentralized finance (DeFi) as one example of how stablecoins are extending the dollar’s hegemony. To counter this, Ming urged the Chinese government to issue its own stablecoin as well as expanding use of the digital yuan on e-commerce platforms.
Ming’s sentiments are shared by Boris Bohrer-Bilowitzki, CEO of Concordium, who sees the current dominance of USD-backed stablecoins as a reflection of the wider financial ecosystem. He warns of dire consequences if the industry does not reduce its dollar dependency.
“If the vast majority of stablecoins are tied to a single fiat currency, any regulatory or macroeconomic disruption affecting the dollar could ripple through the entire market,” Bohrer-Bilowitzki told Bitcoin.com News.
While calls for an alternative reserve currency have intensified in years, the U.S. dollar still reigns supreme in global finance, serving as the world’s primary reserve currency and the benchmark for international trade. This dominance naturally extends into crypto, where USD-backed stablecoins like USDT, USDC and formerly BUSD have maintained a firm grip on market capitalization.
Despite the USD’s grip, Bohrer-Bilowitzki argues the future of stablecoins must embrace multi-currency diversity. He points to the growing presence of non-dollar stablecoins, including EURC and EURS (euro-backed stablecoins) as well as Swiss franc-backed options like DCHF and XCHF.
Meanwhile, in addition to being exposed to risks associated with relying on the USD, stablecoins also face risks peculiar to the industry, such as depegging. As shown by the FUSD depegging, the stablecoin market is just as volatile as the rest of the crypto market. Bohrer-Bilowitzki said this incident, however brief, highlights how quickly trust can be eroded in the stablecoin market.
“The depegging event, triggered by influential figures like Justin Sun, highlights just how quickly trust can unravel in a system that is still fundamentally built on perception as much as technical design,” he states.
Despite offering predictability, stablecoins depend heavily on user confidence, and according to Bohrer-Bilowitzki, this is particularly true in the post-LUNA/UST era in which investors have become “hyper-aware of any signals that echo systemic weaknesses.” After seeing its market capitalization reach a peak of nearly $18.6 billion in early May 2022, making it the third-largest stablecoin at the time, UST crashed soon afterward.
According to the Concordium CEO, the collapse of UST showed that a large share of the market alone does not equate to stability. He said:
Stability isn’t guaranteed by scale. Transparency, consistency, credibility and accountability are not optional; they’re the foundation of long-term trust.
The Concordium CEO meanwhile said he sees payment finance (PayFi), a developing concept in the cryptocurrency and blockchain space, as the inevitable modernization of financial connectivity. He believes blockchain-based stablecoins address the key issues of traditional cross-border payments with near-instant settlement, lower fees and 24/7 availability. While not an immediate replacement, the CEO insist stablecoins hold significant potential for PayFi through their programmability.
Bohrer-Bilowitzki also shared some insights on what building a compliant blockchain entails and the challenges that come with it.
“I’d say the biggest challenge is designing a system that satisfies the regulatory requirements and their nuances without compromising the ethos and core Web3 principle of user privacy,” the CEO explained.
He claims that most blockchain projects treat compliance as “an afterthought” or outsource it to third parties, an approach he insists “won’t scale for real-world adoption.” In contrast, Concordium has its identity layer equipped with zero-knowledge proofs to enable verification through trusted providers without exposing users. This enables Concordium’s permissionless proof-of-stake blockchain to “strike a balance between anonymity and accountability.”
The CEO also spoke of the challenge of ensuring this compliance layer works without trampling on users’ privacy.
“Another challenge is ensuring this compliance layer works seamlessly across use cases. That’s why our identity layer is modular and standard-based, making it easier to integrate with existing financial workflows and introduce features like geofencing and age verification,” Bohrer-Bilowitzki said.
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