Money and Power: Historical Lessons for Stablecoins and U.S. Dollar Dominance

Michael Bordo and Carolyn Wilkins
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Michael Bordo: Rutgers University and NBER
Carolyn Wilkins: Princeton University and Bank of England

Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: This paper uses the history of private money to assess the conditions under which stablecoins could function safely at scale and what their growth may imply for U.S. monetary power. Historical systems of private money in the United Kingdom, the United States, Canada, Sweden, and Switzerland show that par circulation depended on institutional arrangements rather than payment technology. Drawing on the monetary history of private money, convertibility, and international currencies, the paper identifies five foundations for scalable private money: credible convertibility, high quality and transparent backing, a uniform regulatory perimeter, par clearing infrastructure, and credible crisis management and loss allocation. Stablecoins may improve settlement speed, programmability, and cross-border access, but they do not remove these requirements. Applying this framework to contemporary stablecoins and the GENIUS Act, the paper finds that the Act addresses several of these foundations more fully than others, with crisis management and cross-border coordination less fully developed. Dollar stablecoins could extend the reach of dollar settlement, but historical experience reviewed here suggests that whether this strengthens the dollar system depends both on the institutional framework supporting stablecoins and on the deeper foundations of U.S. monetary dominance: confidence in U.S. institutions, fiscal capacity, monetary credibility, and the rule of law.

Keywords: Stablecoins; digital money; private money; commitment; coordination; crisis management; international role of the dollar; dollar dominance; cross-border cooperation; rules; regulations; rails (search for similar items in EconPapers)
JEL-codes: E42 E44 G15 N20 N40 (search for similar items in EconPapers)
Date: 2026-09
New Economics Papers: this item is included in nep-his, nep-ifn, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:359

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