New Delhi: The US Senate Banking Committee’s approval of the Digital Asset Market Clarity (CLARITY) Act on May 14 marks a major step toward creating America’s first broad set of crypto regulations. Although the legislation is aimed at the domestic market, it has implications for governments and the global crypto industry, reflecting the changing influence of the US dollar in digital finance.
More than 97% of all stablecoins in circulation today are pegged to the US dollar. These digital tokens maintain their value by being backed primarily by US Treasury bills and government bonds. In 2025, the US government passed the GENIUS Act, requiring stablecoin issuers to maintain reserves in US Treasury securities. The interest earned on these holdings helps issuers support the distribution and adoption of their tokens.
As a result, when someone in Vietnam, Nigeria, or India holds a dollar-backed stablecoin, they are effectively holding a digital dollar. By creating clearer rules for stablecoin issuers, the CLARITY Act makes the dollar stablecoin ecosystem easier to access and use across markets.
For many users, dollar stablecoins serve as a store of value in countries where local currencies have lost purchasing power. They also offer a way to send and receive money across borders at lower cost and with faster settlement. In countries with high inflation or weak banking infrastructure, these features have contributed to their adoption.
For governments and central banks, however, the implications are different. As more savings and transactions move into dollar-denominated stablecoins, central banks lose part of their ability to manage money supply and inflation. A growing share of economic activity becomes linked to a foreign currency, governed by foreign regulations, and dependent on another country’s financial system. Large-scale conversion of local currency into dollar stablecoins also puts pressure on domestic exchange rates.
This process, where the dollar gradually displaces local currencies through private digital instruments, is known as digital dollarisation. The Bank for International Settlements has identified it as a key risk that stablecoins pose to emerging economies.
Governments have begun responding in different ways. The European Union’s Markets in Crypto-Assets (MiCA) framework places limits on the use of non-euro stablecoins for payments within the bloc to preserve the euro’s role in the economy. France has supported the development of euro-pegged stablecoins. South Korea has identified a won-backed stablecoin as a policy priority while expanding domestic digital currency infrastructure. Hong Kong has licensed its first stablecoin issuers, both traditional banks, as part of a regulated ecosystem linked to its local currency. India’s regulatory approach will also have to address similar questions as dollar stablecoins become more widely used for savings and cross-border payments.
The CLARITY Act does not resolve these tensions. If anything, by bringing greater legitimacy and clarity to the dollar stablecoin ecosystem, it makes them more urgent. Many global regulators are not waiting for America to decide; they are already participants in the race to build alternatives and protect monetary sovereignty in the digital age.
