Traditional finance is slowly beginning to absorb stablecoins into its systems, and global stablecoin usage is rising at a remarkable pace.

More people and businesses are discovering that stablecoins are one of the fastest, cheapest, and most programmable ways to move money across borders and build fintech products. But moving from old banking infrastructure to a modern, blockchain-based system requires a completely different way of thinking.

As this shift happens, new forms of risk and new policy questions naturally arise. After all, using digital bearer assets held in self-custody is a huge change from the registered, account-based deposits that banks have relied on for centuries.

So what bigger policy and monetary questions must innovators, regulators, and large financial institutions confront as the world moves toward stablecoin-based finance? This article explores three major challenges — and the potential solutions — that both startups and traditional institutions should be thinking about right now. These include:

1. The challenge of achieving “singleness of money.”
2. The impact of dollar-stablecoins on countries outside the U.S.
3. The effects of using U.S. Treasuries as the core collateral behind stablecoins.

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1. The “Singleness of Money” and Why It Matters

The idea of “singleness of money” means that every type of money in an economy — regardless of who issues it or how it is stored — should be fully interchangeable at a 1:1 ratio.

Whether your money is in a traditional bank, a mobile wallet, a fintech app, or on a blockchain, it should all function as the same dollar. This is one of the foundations of a modern, unified financial system.

In the traditional world, this principle is already deeply embedded. A dollar in your Chase account is equal in value to a dollar in your Wells Fargo account, your PayPal balance, or your Venmo wallet.

Businesses, regulators, and consumers rely heavily on this consistency. It makes pricing, accounting, contracting, governance, and everyday financial activity predictable and smooth.

But stablecoins don’t yet fit neatly into this system. Today, if a company like Microsoft or a real-estate developer tried to convert $5 million worth of stablecoins on an automated market maker (AMM), the conversion would not be perfectly 1:1.

Liquidity gaps cause slippage, meaning the user ends up with less than the amount they started with. This breaks the idea of fungibility and prevents stablecoins from functioning like true money at scale.

Currently, stablecoin issuers such as Circle (USDC) and Tether (USDT) offer minting and redemption services, but mainly for large, verified clients. MakerDAO offers the Peg Stability Module (PSM), which lets users exchange DAI for other stablecoins at a fixed rate.

These tools are useful, but they’re not open or convenient for everyone. Without easy, universal, at-par redemption, users are forced to rely on exchanges or swaps — processes that depend on liquidity and carry unpredictable pricing.

While CBDCs could theoretically solve the singleness problem, they raise serious concerns around privacy, government control, financial surveillance, and slow innovation. Because of these issues, private-sector and open-protocol solutions are more likely to dominate.

To integrate stablecoins smoothly into the monetary system, builders should focus on creating technologies and platforms that make stablecoins feel like “just money,” regardless of differences in collateral, regulation, or user experience. This involves:

Potential Solutions

• Universal, seamless minting and redemption: Issuers should work closely with banks, fintech companies, and payments platforms to make at-par conversions easy and instant everywhere.
• Stablecoin clearinghouses: Think of a decentralized ACH or Visa network designed specifically for stablecoins. This would guarantee fast, reliable 1:1 conversions between issuers.
• Neutral collateral layers: Using tokenized deposits, tokenized treasuries, or a shared collateral pool that allows users to easily unwrap their assets at par.
• Advanced on/off ramps and smart routing: Better bridges, AMMs, account abstraction, and intent-based systems that automatically find the best rate while hiding complexity from everyday users.

Creating singleness of money for stablecoins is essential. Without it, stablecoins cannot live up to their full potential or become a core part of everyday global finance.

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2. Dollar Stablecoins, Local Currencies, and Global Monetary Policy

In many parts of the world, stablecoins are more than just a new technology — they are a lifeline. Millions of people living under high inflation, strict capital controls, or weak banking systems turn to dollar-stablecoins to protect their savings and join global commerce.

For businesses worldwide, the U.S. dollar remains the main currency for international trade, so stablecoins make cross-border payments cheaper and faster.

Today, sending money internationally can cost up to 13%. Around 900 million people live with high inflation, and 1.4 billion people are underbanked. In this environment, it’s no surprise that stablecoins are growing quickly: people want better money.

But there’s a challenge. Countries maintain their own currencies because monetary policy gives them the ability to manage local economic shocks — by adjusting interest rates, printing money, or influencing exchange rates.

If dollar-stablecoins spread widely, they make it harder for governments to use these tools effectively. This is linked to the economic concept known as the “impossible trinity,” which says a country can only control two of the following at one time:

1. Free movement of capital
2. A fixed or closely managed exchange rate
3. An independent monetary policy

Stablecoins — because they are borderless and peer-to-peer — push countries toward open capital flows whether they want it or not. This can undermine local monetary policy and weaken exchange-rate controls.

Despite these concerns, many governments still see major advantages in adopting stablecoins. Dollar-based trade becomes easier, remittances become cheaper, and domestic fintech innovation accelerates.

Governments can still impose taxes and regulate local custodians, meaning the state retains some control.

However, existing global financial rules — like AML, anti-fraud, and Know-Your-Customer (KYC) standards — sit at the heart of correspondent banking systems. Entrepreneurs now have a major opportunity to rebuild these safety systems on top of blockchain rails, making them faster and more transparent.

Opportunities for Entrepreneurs

• Local integration of USD stablecoins: Banks and fintechs can accept stablecoins directly, applying small optional fees or taxes, increasing liquidity without destroying local currency systems.
• Local-currency stablecoins: Countries can issue their own digital currencies backed by strong liquidity and deep local banking integration.
• On-chain FX markets: Building advanced pricing, matching, and aggregation systems connecting stablecoins and fiat, with the ability to hold yield-bearing reserves.
• MoneyGram competitors: A retail, cash-in/cash-out network backed by stablecoins. MoneyGram already entered this space, but there’s room for more.
• Next-generation compliance tools: Systems that use stablecoin programmability to provide faster, more transparent, and more efficient regulatory insights.

The challenge is not choosing between innovation and monetary control — it’s building stablecoin systems that support both.

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3. Treasuries as Stablecoin Collateral and Their Economic Effects

Stablecoins are popular because they deliver speed, low cost, and programmability — not because they are backed by Treasuries. But fiat-reserve stablecoins (like USDC and USDT) have grown fastest because they are easy to understand and regulate. If global stablecoin adoption reaches $2 trillion soon — a realistic possibility — and regulators insist that stablecoins hold only short-term U.S. Treasuries as collateral, the consequences could be huge.

Massive Ownership of T-Bills

If stablecoin issuers held $2 trillion in Treasury bills, they would own nearly one-third of the entire T-bill market. This would resemble the role played by money-market funds today — major buyers of government debt — but on an even larger scale.

Heavy stablecoin demand for T-bills would push yields down, making borrowing cheaper for the U.S. government. But it would also reduce available collateral in repo markets, raise competition for high-quality liquid assets, and potentially squeeze the income of stablecoin issuers as yields fall.

One possible solution is for the U.S. Treasury to expand the T-bill supply — for example, doubling it — but even that may not fully solve the imbalance.

Narrow Banking Problems

Stablecoins backed 100% by cash and T-bills resemble narrow banks: institutions that hold reserves but do not lend. While narrow banking is safe, it reduces credit creation — the process that fuels mortgages, business loans, and general economic growth.

If stablecoins pull a meaningful portion of deposits out of traditional banks, those banks lose cheap funding. They must either:

• Reduce lending (fewer mortgages, car loans, small-business loans), or
• Borrow from wholesale markets, which is more expensive and unstable.

In either case, the economy suffers.

The Good News: Stablecoins Also Increase Money Velocity

Stablecoins move much faster than bank deposits. A single stablecoin can circulate multiple times per minute, enabling higher economic activity even if credit creation shrinks. Still, velocity alone cannot replace the multiplier effect of fractional-reserve banking.

A More Balanced Approach: Deposit-Backed Stablecoins

Instead of backing stablecoins only with T-bills, banks could issue stablecoins backed by traditional deposits. This keeps the money inside the banking system, allowing credit creation to continue while still giving users all the benefits of blockchain settlement.

In this model, a user could mint a stablecoin by converting part of their bank account balance, with the obligation shifting to a shared internal account monitored by the bank. The user gets a liquid, programmable asset while the bank continues to lend against deposits.

Other Innovative Solutions

• Bring banks into stablecoins: Let banks issue or support stablecoins to preserve customer relationships and improve margins.
• Expand collateral types: Allow stablecoins to be backed by municipal bonds, corporate commercial paper, mortgage-backed securities, or tokenized real-world assets — as long as they remain high-quality and liquid.
• Tokenize collateral and bring it on-chain: Real estate, commodities, treasuries, and equities can be tokenized for better liquidity and transparency.
• Adopt CDP-based models: MakerDAO’s DAI is an example where diversified collateral allows monetary expansion similar to on-chain fractional banking.

The broader goal is simple: keep the economy dynamic and credit flowing while unlocking the speed, programmability, and global access that stablecoins provide.

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