The Dollar's Grip on Stablecoins Is a Policy Choice. IOG Argues It Doesn't Have to Be.
A new analysis from Cardano developer Input Output Global makes the case that the stablecoin market's near-total dependence on the US dollar is not a natural outcome but a structural problem, one that disadvantages users across the developing world and concentrates monetary risk in a single currency.
Published April 9, 2026, the IOG analysis arrives as the global stablecoin market surpasses $311 billion in total capitalization. Of that figure, roughly 99% is denominated in US dollars. USDT alone holds approximately $184 billion in market cap; USDC accounts for another $75 billion. All non-USD stablecoins combined, covering euros, sterling, yen, Singapore dollars, and others, total just $1.2 billion, less than 0.4% of the market, according to Insignia Business Review data from March 2026.
IOG identifies three structural failures driving this imbalance. First, a liability mismatch: users in countries with volatile currencies hold dollar-pegged tokens, but their income and expenses are in local currency, so exchange rate swings still hit them. Second, contagion risk: because the market is concentrated in a small number of issuers, a failure in any one of them propagates systemically. Third, triangular inefficiency: as an illustration of the dynamic IOG describes, a merchant in Lagos paying a supplier in another emerging market still routes the transaction through the dollar, paying conversion costs twice.
Regulation is actively narrowing the non-USD supply
The situation is not just a market preference. Regulation is reshaping the landscape in ways that favor dollar instruments. The US GENIUS Act, signed into law in July 2025, requires all licensed stablecoins to hold one-to-one backing in USD cash or short-term Treasury securities. Treasury Secretary Scott Bessent was direct about the intent. "This groundbreaking technology will buttress the dollar's status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for US Treasuries, which back stablecoins," Bessent said on July 18, 2025, days before the bill was signed.
The effect is already measurable. Tether held between $122 billion and $135 billion in US Treasuries by the end of 2025, making it the 17th largest holder of American government debt globally, ranking ahead of countries like South Korea and the UAE. In Europe, the MiCA regulatory framework had a different but equally constraining effect: Tether discontinued its euro-pegged token EURT in November 2024 after MiCA required 60% of reserves to be held in EU-regulated banks. The dominant euro stablecoin product was removed from the market citing regulatory compliance requirements rather than market performance.
Africa absorbs the most immediate cost
The regional consequences fall hardest on sub-Saharan Africa. Adoption has accelerated sharply: 79% of crypto users in the region now use stablecoins, according to a March 2026 survey cited by Further Africa, with Nigeria and South Africa leading uptake. On-chain value received across the region reached $205 billion between July 2024 and June 2025, a 52% year-on-year increase per TRM Labs data. Stablecoins account for 43% of that total volume.
But nearly all of those stablecoins are dollar-backed. When Nigerian users hold USDT, the Treasury bonds backing those tokens earn yield for Tether's shareholders, not for the Nigerian economy. The Africa Bitcoin Institute has described this dynamic in terms of measurable fiscal drain, with seigniorage revenue flowing from sub-Saharan Africa to Washington. "Part of the seigniorage revenue now generated in sub-Saharan Africa could flow to the US Treasury, further eroding the tax base of countries already struggling to finance development," the institute noted in October 2025.
Remittance costs compound the problem. Sub-Saharan Africa carries the world's highest average remittance fee, around 9% per transaction for a $200 transfer, according to World Bank data from Q1 2025. The UN's development target is below 3%. Non-USD stablecoins settled on public blockchains represent the most direct technical path to closing that gap, as the IOG analysis argues, but large-scale infrastructure remains nascent across most African markets. Nigeria's cNGN stablecoin stands as a live example of local-currency stablecoin infrastructure, though it has struggled to gain meaningful scale, illustrating precisely the architectural and adoption challenges that the IOG analysis is responding to.
IOG's proposed fix: unbundle the stack
The IOG analysis proposes separating the stablecoin stack into three layers. A public blockchain handles issuance, trading, collateral, and payments. Regulated local fintechs or banks manage smart contracts, identity verification, and redemption. A third layer holds 100% reserve backing in local liquid assets, such as German Bunds for a euro stablecoin or Japanese government bonds for a yen instrument, kept in segregated accounts.
The analysis also cites growing off-chain momentum for the concept. CIPS, China's cross-border interbank payment system, processed $245 trillion in yuan-denominated transactions in 2025. Goldman Sachs, Bank of America, Deutsche Bank, and UBS are reportedly exploring consortium stablecoins tied to G7 currencies; this characterisation of bank activity originates in the IOG article itself rather than independent financial reporting and has not been confirmed by those institutions directly. Non-USD stablecoin holder addresses have grown from 40,000 to 1.2 million over three years, with monthly transfer volume rising from $600 million to $10 billion. StraitsX, a Singapore-based issuer, has recorded $28 billion in on-chain volume for its XSGD stablecoin through partnerships with Grab and Ant International, offering evidence that the non-USD model can already operate at meaningful scale.
The gap between that trajectory and the current 0.4% market share figure is the clearest measure of how much ground remains. The IOG argument sits within a broader macro shift as well: China's CIPS network, BRICS payment frameworks, and India's crude oil settlements in non-dollar currencies all point to deepening off-chain de-dollarization pressure that would amplify demand for non-USD stablecoin infrastructure. Whether the next stablecoin infrastructure cycle is built around Washington's preferences or around the payment needs of Lagos, Nairobi, and Mumbai may depend on whether regulators in those markets move faster than the incumbents already embedded in dollar-denominated supply chains.