Stablecoins pegged to the US Dollar face potential instability due to Trump's policies.
In a significant move, President Trump is planning a deliberate devaluation of the US dollar through the Mar-a-Lago Accord. This devaluation could have far-reaching implications for stablecoins, digital assets that serve as a safe haven for both crypto transactions and international trade.
Stablecoins, such as USDC and Tether, are pegged to the US dollar and aim to maintain parity with it. However, a devaluation of the dollar means the intrinsic value of these stablecoins would effectively fall relative to other currencies or assets. This could reduce investor confidence in USD stablecoins, as the underlying asset loses purchasing power globally. Consequently, investors might experience a decline in value when holding USD stablecoins, particularly in international trade or investment contexts where other currencies strengthen against the dollar.
On the other hand, non-USD stablecoins, pegged to other fiat currencies such as the Euro or GBP, or sometimes to commodities or baskets of assets, could benefit from a weakened dollar. If the dollar weakens while other currencies remain stable or strengthen, non-USD stablecoins would effectively gain relative value compared to USD stablecoins. This could encourage a shift in demand from USD stablecoins to stablecoins pegged to stronger or more stable currencies, increasing the appeal and usage of non-USD stablecoins for international transactions, investment, or as stores of value.
The trade competitiveness enhancement from dollar devaluation could reduce demand for dollar-denominated assets, including USD stablecoins, while potentially increasing interest in alternatives. This aligns with trends of broader market diversification and hedging against USD weakness. A weakened dollar might accelerate decentralization trends in digital assets, where cryptocurrencies and stablecoins not tied to the dollar offer protection against currency risk and inflation eroding USD value.
However, the rising US budget deficit and inflation uncertainty could keep volatility high, affecting stablecoin markets differently depending on regulatory and market responses. The Mar-a-Lago Accord could threaten global financial stability and the dollar's status as a reserve currency.
In summary, Trump's dollar devaluation likely diminishes the relative value and appeal of USD stablecoins while enhancing the attractiveness of stablecoins pegged to other currencies. This dynamic may accelerate diversification away from the dollar in stablecoin holdings, especially in the context of global economic and fiscal uncertainty. The Mar-a-Lago Accord has several economic policy goals, including devaluation of the US dollar, more expensive imports, improved trade balance, debt and interest management, economic independence, and reshoring.
Notable developments in the stablecoin industry include Stripe's acquisition of Bridge.xyz to integrate stablecoin payments into its infrastructure, and MoonPay's acquisition of Iron / Unstoppable Finance to pursue similar paths. Real World Asset (RWA) Protocols like Ondo, which use tokenized US treasuries as collateral, could lose demand if only zero-yield, century-old, and illiquid bonds are available due to the Mar-a-Lago Accord.
Peter Grosskopf, a software developer and founder of several regulated companies, has been involved with blockchain, banking, Web3, FinTech, regulation, and acts as a C3PO between the real world, politics, and the crypto bubble. His column "Kettenbrief" has been published exclusively on Payment & Banking since 2025.
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- The devaluation of the US dollar through the Mar-a-Lago Accord could lead to a decrease in investor confidence in USD stablecoins, like USDC and Tether, as their intrinsic value relative to other currencies or assets might fall due to the dollar's loss of purchasing power.
- In contrast, non-USD stablecoins, pegged to other fiat currencies or commodities, could benefit from a weakened dollar, as they effectively gain relative value compared to USD stablecoins, potentially increasing their demand for international transactions, investment, or as stores of value.
- The Mar-a-Lago Accord might accelerate decentralization trends in digital assets, where cryptocurrencies and stablecoins outside the dollar's peg offer protection against currency risk and inflation eroding USD value, leading to diversification away from the dollar in stablecoin holdings.
