Latest news with #de-dollarization
Crypto Insight
2 days ago
- Business
- Crypto Insight
USDC stablecoin launches on XRP Ledger
Circle's USDC stablecoin launched on the XRP Ledger (XRPL) on Thursday, bringing the overcollateralized dollar-pegged token to users of the layer-1 blockchain network. According to an announcement from Ripple, the launch of USDC on the platform will enable investors to use XRP as a bridge currency to transfer their stablecoins between decentralized exchanges (DEXs) through an auto-bridging feature. Markus Infanger, the senior vice president of RippleX added: 'Stablecoins are key entry points connecting traditional financial markets with the crypto space — essential for use cases focused on utility rather than speculation.' Support for USDC on the XRPL comes amid a concerted push to establish comprehensive stablecoin regulations in the United States, as the sector swells to over $237 billion in market capitalization with geo-strategic and macroeconomic implications. Stablecoins become the focal point of protecting US dollar salability Overcollateralized stablecoin issuers purchase short-term US Treasury bills to back their digital fiat tokens, collecting the yield from these government securities as profit. A growing number of US lawmakers and officials view stablecoins as a way to mitigate de-dollarization by foreign countries offloading US government debt due to concerns over the creditworthiness of the US government and the declining value of the US dollar. As sovereign powers dump US debt instruments, bond yields spike as investors demand higher interest payments to lend to the government. This, in turn, leads to higher debt service costs for the government, causing the $36 trillion national debt to become even more costly to maintain and further inflating the principal amount owed, creating a vicious cycle of debt monetization to pay back creditors and fund the budget. During the White House Crypto Summit on March 7, US Treasury Secretary Scott Bessent promised to prioritize stablecoin development to protect US dollar hegemony by leveraging the demand for stablecoins to increase the salability of the US dollar globally. However, critics of the fiat system like Bitcoin advocate Max Keiser say the plan to shore up declining demand for the US dollar with stablecoins will only delay the inevitable collapse of the dollar but will not save it. Stable tokens backed by gold will outcompete dollar-pegged stablecoins for several reasons, including gold's high stock-to-flow ratio, which protects its value from rapid inflation and price depreciation, according to Keiser. Source:
Zawya
2 days ago
- Business
- Zawya
Watch out for dollar FX fall more than 'de-dollarization': Mike Dolan
(The opinions expressed here are those of the author, a columnist for Reuters.) LONDON: Evidence of "de-dollarization" around the world remains scant, but many major investors fear a gradual drawback from U.S. assets is now inevitable and the dollar's exchange rate may have to fall further to clear the market. The debate about the U.S. dollar's dominant role in global trade, reserves and investment portfolios has smoldered for decades, but it has reached a crescendo during the turbulent first few months of President Donald Trump's second term in the White House. European Central Bank boss Christine Lagarde recently put a spotlight on this shift in market thinking, noting "highly unusual cross-asset correlations" involving simultaneous drops in the dollar, Treasuries and U.S. stocks after Trump's import tariffs announcement in April. But despite all of the de-dollarization noise, there are still no clear indications of a mass withdrawal from dollar assets at large. In fact, some investors dismiss these fears altogether given the pattern of the past 10 years. Bank of America strategist Ralph Axel argues that despite all of the speculation, the world has actually been "rapidly dollarizing" over the past decade - at least in the sense that dollar liabilities have expanded enormously. In a research report on Thursday, Axel points in particular to the growth of the so-called shadow banking system, otherwise known as "Non-Bank Financial Intermediation", or NBFI, and refers to the universe of investment funds, private credit firms and even crypto funds that exist outside the regulated banking system. All dollar liabilities are effectively "money" in the sense that they can be sold for dollar cash and are thus ultimately claims on the Federal Reserve. Some of these liabilities are direct claims, such as U.S. Treasuries, but there are a blizzard of indirect claims through uninsured deposits, mortgage and corporate debt and investment fund shares. Dollar liabilities have clearly ballooned in the past decade. The U.S. federal debt has increased four-fold in less than 10 years to some $36 trillion, while bank deposits have more than doubled to $18 trillion since 2008. And, as Axel points out, the total size of "shadow banks" has also more than doubled since 2009 to roughly $63 trillion, according to S&P Global data. While much of this expansion simply reflects asset price appreciation, Axel notes that "the NBFI system can only grow because of demand for its liabilities." The point of all this number-crunching is to undermine the simplistic de-dollarization narrative. If de-dollarization were truly accelerating then fewer, not more, U.S. liabilities could be created, whether from the government, traditional lenders or shadow banks. And the trend has clearly been the other way. "A big selling wave can move prices and exchange rates temporarily but does not de-dollarize," he wrote. "As a result, we think the de-dollarization theme is less threatening, especially given what appears to be a stronger trend of global dollarization over time." WOOD FOR THE TREES In other words, the exchange rate of the dollar can fall even if dollar assets are not contracting. A weakening exchange rate simply signals that temporary demand for dollar assets is declining and a lower dollar sticker price is needed to clear the market. "We would caution investors to not miss the dollar story for the dollar trees," the Bank of America strategist concluded, in reference to the confusion between exchange rates and the ubiquity of dollars and dollar assets. Of course, the trends of the last 10 to 15 years may have crested, and that's precisely this year's concern. Questions about the dollar exchange exposure were also raised by Deutsche Bank's currency research team this week in a deep dive into the hedging behavior of the world's big pension and insurance funds with the heaviest overseas assets holdings. They showed that Nordic, Dutch and Australian institutional funds had more than 50% of their investment portfolios invested abroad, with Japan's and Switzerland's foreign holdings also high at above 30%. They concluded that most of these investments are in the U.S. and much of the currency risk is not being hedged, meaning exposure to the U.S. dollar is likely historically high. But as these funds' hedging activity is now increasing, they reckon, it should pressure the dollar exchange rate lower. All of which raises an important, albeit circular, question. To what extent was the performance of U.S. assets exaggerated in recent years by investors assumption of an ever-rising dollar and a hedge against global shocks? And was the dollar just rising because of that outsize overseas demand for U.S. stocks and bonds? And, on the flip side, to what extent could a weakening dollar now cause demand for those assets to fall? What market pricing near mid-year suggests is that even if de-dollarization fears are overblown, the dollar's exchange rate may be a necessary safety valve. The opinions expressed here are those of the author, a columnist for Reuters. (By Mike Dolan; Editing by Jamie Freed)
South China Morning Post
11-05-2025
- Business
- South China Morning Post
Zongyuan Zoe Liu: Latest Articles, Analysis and Profile
+ FOLLOW Zongyuan Zoe Liu, senior fellow for China Studies at the Council on Foreign Relations, is adjunct assistant professor of international and public affairs at Columbia University's School of International and Public Affairs and the author of Can BRICS De-dollarize the Global Financial System? and Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions. Zongyuan Zoe Liu, senior fellow for China Studies at the Council on Foreign Relations, is adjunct assistant professor of international and public affairs at Columbia University's School of International and Public Affairs and the author of Can BRICS De-dollarize the Global Financial System? and Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions.
