IGP is proud to release “Interconnection and Rivalry in Global Monetary Networks”, a comprehensive analysis of the evolving landscape of monetary competition.
At a recent House Financial Services Committee hearing titled “A Golden Age of Digital Assets: Charting a Path Forward,” lawmakers once again emphasized the need for a unified federal framework for stablecoins—one that would help foster a vibrant US crypto ecosystem. Representatives from centralized exchanges delivered a clear message: the industry urgently needs consistent rules of the road.
Soon enough, the President’s Working Group on Digital Asset Markets will also share its perspective with Congress, offering recommendations for federal stablecoin regulation and studying the feasibility of a Bitcoin strategic reserve. Despite growing momentum, several critical questions remain:
1.What should the governance model for dollar stablecoins look like?
2.How will stablecoin governance shape global financial markets and the dollar’s international status?
3.What does a forthcoming federal regulatory framework imply for Circle and Tether’s onshore/offshore market separation?
The Race for Global Monetary Dominance
In an increasingly multipolar financial landscape, the dominance of the US dollar is under pressure. While the dollar remains the world’s reserve currency, the expanding BRICS bloc has been actively pursuing strategies to reduce reliance on the greenback. Meanwhile, Bitcoin and stablecoins have introduced a parallel monetary network with global reach and increasing influence.
How can the United States reinforce its monetary primacy in this evolving system?
In response to the BRICS initiatives, the United States threatened to impose 100% tariffs on BRICS nations if they proceed with the proposal of a new currency. At the same time, central banks worldwide are adjusting their monetary policies in response to evolving economic conditions and geopolitical risks. In October 2024, several central banks in developed and emerging economies reduced interest rates to stimulate growth. In this paper, we propose strengthening the dollar’s network effects by strategically interconnecting with Bitcoin via stablecoins. This would not only preempt the rise of competing monetary systems but also ensure the dollar remains the backbone of global finance.
Three Competing Monetary Networks
We conceptualize the monetary landscape as three rival yet interdependent networks:

System 1: The US Dollar Network – The long-standing global financial infrastructure, backed by the Federal Reserve and trusted by global markets.
System 2: The BRICS Alternative – A potential rival network, where countries like China, Russia, and Brazil seek to reduce dependency on the dollar.
System 3: Bitcoin – A decentralized financial system that operates outside state control, increasingly used as a store of value and and hedge against geopolitical risk and inflation.

Drawing from network economics, we argue that when three systems compete, an interconnection between two can effectively marginalize the third. By strengthening its links to Bitcoin through effective governance of stablecoins, the dollar can expand through System 3 while isolating System 2. Below we explain some of the policy recommendation we put forward:
The Case for a Dollar-Bitcoin-Stablecoin Interconnection
The US dollar’s global dominance is built on its deep liquidity, trust, and extensive network effects. However, the rise of competing monetary networks—particularly from BRICS nations and decentralized digital currencies—threatens to erode this position over time. To maintain and strengthen the dollar’s role, US policymakers should adopt a strategy that leverages stablecoins as an interconnection mechanism between the traditional financial system (System 1) and Bitcoin (System 3).
Develop a Comprehensive Regulatory Framework for Stablecoins
Stablecoins are already facilitating dollar-based transactions outside traditional banking channels, especially in emerging markets where access to US dollars is often limited. However, the lack of a clear regulatory framework creates uncertainty and stifles US innovation in digital assets as fintech moves abroad. To ensure stablecoins reinforce the dollar’s network effects rather than weaken financial stability, the US should design a federal regulatory framework centered on open capital markets, strong capital and liquidity requirements, without picking favorites or seeking extraterritorial enforcement powers. By fostering a pro-competitive stablecoin market without the heavy hand of government, the US can expand the reach of the dollar while hedging against any future threat from System 2.
Incentivize Stablecoin Operators to Hold Long-Term Securities and Hard Assets
Stablecoin operators maintain their peg by holding short-term Treasury bills and commercial paper. To strengthen stablecoins as an interconnection tool, policymakers should encourage issuers to shift towards holding longer-term US Treasuries and hard assets. It’s also useful to diversify the reserves to ensure stablecoins remain liquid and solvent even during periods of economic downturn or geopolitical stress.
Expand Access to Dollar Stablecoins and Bitcoin in Emerging Markets
The dominance of the US dollar is largely maintained by its widespread use in international trade and finance. However, countries seeking to reduce reliance on the dollar (e.g., China and Russia) are exploring alternatives. One way to counter this trend is to actively promote dollar stablecoins and Bitcoin as alternative stores of value in emerging markets. It will be useful to frame strategies that encourage partnerships between US-regulated stablecoin issuers and international payment platforms to increase stablecoin adoption in developing economies.
The future of money is being shaped by technology, geopolitics, and market forces, and the dollar’s dominance is not guaranteed. If the US fails to integrate the benefits of private money networks into its financial system, emerging alternatives could erode its power, leading to increased fragmentation and higher transaction costs globally. A strategic interconnection between the dollar and Bitcoin via stablecoins offers a practical way forward, ensuring financial stability while maintaining the dollar’s influence in a rapidly evolving world. Download the full paper here to dive deeper into our findings and policy proposals.
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Source: Internet Governance Forum