Agnès Bénassy-Quéré, Deputy Governor of the Banque de France, recently debated whether tokenization could enhance the dollar’s dominance on the one hand, or weaken it. In her view, there’s a mismatch between the continuing dollar hegemony and a multipolar global economy.
Purely viewed through the lens of stablecoins, tokenization would seem to favor strengthening the dollar. The central banker notes that since 2000, there’s been a 4% drop in the US dollar in central bank reserves, which has been offset more than three-fold in dollar value by the increase in stablecoin investment in Treasuries. However, the “unsustainability of US fiscal policy and weaponization of the currency by the US administration could weaken the intrinsic appeal of the US dollar.”
Bénassy-Quéré explained this dollar resilience through the international monetary system’s tremendous inertia. The strongest currency also has several reinforcing factors, including its dominance making it cheaper to use, which in turn encourages greater usage. A common example is the difference between exchange rates against a single currency rather than many others, creating far greater liquidity against the single currency. Its popularity as a store of value is reinforced by its usage for payments and as a unit of account.
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