The biggest winner from potential stablecoin legislation may be the U.S. dollar. Here's why.

By Frances YueThis article has been updated to reflect that a news report said U.S. trade negotiators are not working to include currency pledges in prospective trade agreements. An earlier version incorrectly described the report.U.S. policymakers are working to advance legislation to regulate dollar-linked stablecoins - cryptocurrencies whose value is pegged 1:1 to the greenback.One possible reason? They may be hoping to shore up dollar-denominated assets and strengthen the status of the U.S. dollar DXY by driving up stablecoin adoption, a top Deutsche Bank strategist argued in a Thursday note.Stablecoins are cryptocurrencies that have their value pegged to another asset, ranging from fiat currencies to commodities. Right now, USD-pegged stablecoins dominate over 99% of the stablecoin market.Stablecoin issuers are also now one of the biggest holders of the U.S. Treasurys BX:TMUBMUSD10Y, collectively holding over $120 billion in U.S. government debt. They are supposed to hold reserves of U.S. dollars or Treasurys, among other highly liquid assets, to maintain the 1:1 peg of their coins to the greenback."Essentially, stablecoin providers are acting like money-market funds supporting U.S. short-term debt markets and driving currently non-USD liquidity holdings into USD," Jim Reid, head of global macro and thematic research at Deutsche Bank, wrote in a Thursday note.Notably, Tether (USDTUSD), the largest stablecoin issuer, held $98.5 billion in U.S. Treasurys as of March 2025, up from nearly $0 in 2020. As of February, Tether was the 21st-largest foreign U.S. Treasury holder, following the United Arab Emirates and Germany."When you take a step back and consider the current investor focus on dollar weakness, you can see why the U.S. is invested in accelerating near-term legislation to drive stablecoin adoption," Reid said.Wall Street participants say the dollar's status as a reliable "safe haven" was tarnished amid extreme market volatility earlier this year as President Donald Trump aggressively rolled out his tariff agenda - though trade tensions seem to have eased in recent days, as the U.S. and China reached a temporary deal.Investors have also questioned the Trump administration's commitment to a strong-dollar policy. Stephen Miran, the chair of the White House Council of Economic Advisers, previously argued that the dollar's status as the global reserve currency had caused it to be artificially strong, harming U.S. manufacturers and other exporters.But Treasury Secretary Scott Bessent has sought to reassure market participants the U.S. isn't seeking a weaker dollar, and Bloomberg on Wednesday reported that U.S. trade negotiators are not working to include currency pledges in prospective trade agreements."It is in the best interest of the U.S. to shore up stablecoin demand and thereby strengthen the USD (all other things being equal), especially at a time when stablecoin adoption is accelerating (the market has seen exponential growth over the past 4-5 years) due to its 'safe haven' characteristics that make it appealing as a store of value amidst current market volatility," Reid wrote.A bipartisan bill aiming to regulate stablecoins in the U.S. is expected to significantly advance through Congress this year, though it failed to pass a key procedural vote last week, Reid noted.The bill, called the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 - also known as the GENIUS Act - aims to establish a regulatory regime to provide oversight for stablecoins and their issuers.-Frances YueThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.