---

The United States government is betting that dollar-backed stablecoins will help keep the dollar dominant in global trade as China builds competing digital payment infrastructure. But research presented at the Bank for International Settlements in June suggests the bet rests on a flawed assumption: regulators cannot see or touch the majority of stablecoin activity, raising serious questions about whether the coins can reliably serve American financial statecraft objectives.

Harvard economist Gita Gopinath presented the findings at the BIS Per Jacobsson Lecture in Basel on June 28. Her core number is difficult to dismiss. Between 70 and 75 percent of USDT and USDC holdings sit in self-custody wallets, meaning coins held in addresses that no exchange, bank, or regulator controls. On the Tron blockchain, which accounts for a large share of global USDT volume, the self-custody share reaches approximately 95 percent. The GENIUS Act, which President Trump signed into law on July 18, 2025 as the first major federal U.S. crypto statute, imposes reserve requirements and KYC rules on stablecoin issuers and centralised exchanges. It explicitly excludes self-custody wallets, peer-to-peer transfers, and offshore exchanges from its scope.

"Policies that seek to improve KYC and AML regulations at the CEX and issuer levels can, at best, hope to have only modest effects in curbing illicit activity, given the predominance of wallet-to-wallet transactions," Gopinath said in her lecture. KYC and AML refer to the identity verification and anti-money-laundering rules that licensed financial institutions must follow. Her research also found that US-regulated entities appeared in only 8 percent of USDT transfer volume and 27 percent of USDC transfer volume in 2025. Roughly 11 percent of all stablecoin holdings could be assigned to a specific country at all. François Villeroy de Galhau, former governor of the Banque de France, described the findings as "frightening."

The trend data on USDC transfer channels shows how quickly the regulatory gap is widening. The share of USDC transferred between self-custody wallets rose from 15.4 percent in 2023 to 46.8 percent in 2026 year-to-date, while exchange-to-exchange transfers, the channel most amenable to regulatory oversight, fell from 45.1 percent to 14.5 percent over the same period.

The illicit finance dimension compounds the geopolitical one. Stablecoins now account for 84 percent of all illicit crypto transaction volume, according to Chainalysis's 2026 crime report, which Gopinath cited. Illicit addresses received more than $150 billion in crypto in 2025 alone. Gopinath called stablecoins "the predominant form of identified illicit activity" in the current crypto ecosystem. The strategic irony a Bloomberg Opinion piece draws out is sharp: Washington is promoting stablecoins as a tool of dollar statecraft while those same coins are running on anonymous rails that financial surveillance cannot follow. (The piece was republished by the Japan Times on August 2; its author has not been identified due to paywall access restrictions and is attributed here to Bloomberg Opinion only.)

Not all institutional analysis points in the same direction. The Federal Reserve's Fifth Conference on International Roles of the U.S. Dollar, held on July 16, 2026, concluded that dollar-backed stablecoins are "increasingly functioning as tokenised money" and extend rather than threaten dollar reach. The conference also found that stablecoin demand shocks now measurably affect Treasury yields, exchange rates, and equity prices, a sign of how deeply embedded these instruments have become in broader financial markets. Industry participants offer a parallel rebuttal to the anonymity critique: Tether has reported assisting more than 310 law enforcement agencies across 64 countries and freezing more than $4 billion in illicit assets, while USDT processed an estimated $13 trillion in transfer volume in 2026, roughly $35 billion per day, across an estimated 576 million users. These figures do not resolve the structural opacity problem Gopinath identifies, but they complicate any account of stablecoins as entirely ungovernable.

China is not standing still. The People's Bank of China launched its Cross-Border e-CNY Transfer Service, known as CBETS, in June 2026, onboarding 26 financial institutions across Singapore, the UAE, and Brazil. The digital yuan has now recorded cumulative transaction value exceeding $2.3 trillion as of late 2025, representing roughly 800 percent growth since 2023. Beijing's 15th Five-Year Plan explicitly mandates the development of national blockchain infrastructure and active participation in international digital-currency governance. The two systems represent different approaches: the e-CNY is state-controlled and designed for state oversight, while USDT and USDC are privately issued but increasingly opaque in practice.

The tension plays out most clearly in Sub-Saharan Africa and South Asia, where stablecoin adoption is not a policy debate but a daily financial reality. Stablecoins account for roughly 43 percent of all crypto transaction volume in Sub-Saharan Africa, with inflows growing 52 percent year-on-year. In several Sub-Saharan African markets, stablecoin volumes for retail transfers equal 6 to 7 percent of GDP, exceeding many formal remittance systems. In Nigeria, Ghana, and Kenya, USDT on Tron has become a practical remittance rail for diaspora communities. At the Accra Stablecoin Conference in July, Bitnob's Mosa Issachar put it plainly: "The question is no longer whether stablecoin rails can become core payment infrastructure. That question is settled." Sharon-Rose Lithur of the Bank of Ghana gave the fuller framing: "The question is not whether stablecoins are being used...they are. The more important question is how we bring that activity under a framework that preserves financial integrity."

In South Asia, Pakistan has formally partnered with World Liberty Financial to explore USD stablecoins for cross-border transactions, while India, ranked first globally for crypto adoption, launched an INR-backed Asset Reserve Certificate (ARC) in early 2026, signalling awareness of stablecoin-style instruments while channelling demand toward a sovereign alternative rather than a privately issued coin. The Gulf-South Asia remittance corridor, spanning flows from Saudi Arabia, the UAE, and Qatar to India, Pakistan, and Bangladesh, ranks among the highest-volume remittance corridors globally, and the e-CNY's June 2026 UAE expansion places Beijing's digital currency infrastructure directly at the intersection of this stablecoin remittance hub. The scale of informal adoption across the region is illustrated starkly by Bangladesh, which ranks fourteenth globally for crypto adoption despite a formal ban on cryptocurrency. Neither Washington nor Beijing is designing its digital currency strategy around the monetary sovereignty concerns of these markets.

The GENIUS Act's implementation rules are still being finalised. The OCC, FDIC, and Treasury have each published proposed rules, but none are final. The statute sets implementation at the earlier of January 18, 2027, or 120 days after regulators finalise their rules, meaning that if agencies complete their rulemaking before late September 2026, the compliance deadline would move substantially earlier. Gopinath's closing recommendation in Basel was that international regulatory cooperation, not unilateral mandates, is the most critical mechanism for closing the anonymity gap. "Strengthening international cooperation in the regulation of stablecoins will be critical to ensure transparency in money," she said. Without it, the dollar's stablecoin presence may grow in nominal market cap terms while remaining largely invisible to the government promoting it. That conclusion is an editorial synthesis from the aggregate data rather than a finding stated explicitly in the research.

Stablecoin market cap figures reflect DefiLlama data as of August 2, 2026. Total stablecoin market cap stands at approximately $286.9 billion. USDT holds a 63.9 percent share at $183.3 billion; USDC stands at $72 billion. Dollar-denominated stablecoins represent 99 percent of the total market. These figures fluctuate daily and should be verified against DefiLlama and CoinGecko at time of publication.