Can crypto challenge the Dollar? Experts debate Its global role

How Cryptocurrency Challenges Traditional Dollar Dominance

The US dollar's 80-year reign as the world's primary reserve currency faces its first serious digital challenge. As cryptocurrency adoption accelerates globally, economists, central bankers, and policymakers are debating whether digital assets strengthen or weaken America's monetary dominance. The stakes are enormous: dollar hegemony provides the US with unique economic advantages, from lower borrowing costs to powerful sanctions capabilities.

The idea that crypto could displace the dollar is not new. What has changed is the level of institutional attention. Former IMF Chief Economist Kenneth Rogoff, regulators at the European Central Bank, and even the U.S. Treasury are now publicly weighing how crypto is reshaping the international monetary order. Their views are far from aligned.

Harvard Economist: Crypto Erodes Dollar in Underground Economy

Harvard economist and former IMF Chief Economist Kenneth Rogoff believes the dollar’s global status is no longer assured. In his recent book Our Dollar, Your Problem, he explores the historical rise and potential decline of U.S. currency dominance – including the impact of cryptocurrencies.

Rogoff sees crypto as a meaningful challenge in one critical domain: the global underground economy. He argues that while digital assets are unlikely to displace the dollar in legal markets, they’re already replacing cash in unregulated sectors like tax evasion, informal labor, and illicit trade.

Crypto has not made significant inroads into the legal economy, [but] it is increasingly used in the global underground economy – consisting of criminal activity but mainly tax and regulatory evasion – where cash, especially U.S. dollars, had been king.

He estimates this hidden segment could represent as much as 20% of global GDP. In such a market, the dollar’s erosion matters – not just economically but geopolitically.

A lower demand for dollars in the global underground economy raises U.S. interest rates. It also reduces the informational visibility regulators rely on for national security and sanctions enforcement,

Rogoff notes.

His conclusion is blunt: crypto’s growth in opaque markets creates real challenges for the dollar, and the U.S. government is unlikely to regain full control of these flows.

Stablecoins: Strengthening Dollar Dominance Despite Growth

Others take a more measured stance. Reuters columnist Mike Dolan emphasizes that while stablecoins are expanding, they still represent a niche.

Despite processing less than 1% of global daily payments, stablecoins have grown 62% year-over-year to $269 billion in market capitalization. Projections suggest they could hit $2 trillion in three years, but that growth, Dolan argues, doesn’t yet threaten the dollar’s core functions. This would represent roughly 10% of the current US Treasury bill outstanding, creating significant demand for dollar-denominated assets.

Instead, it may even bolster it:

Some proponents argue that [stablecoins] will generate commensurate demand for U.S. Treasury bills… allowing the U.S. government to more easily front-load its rising new debt issuance.

This paradox is key: crypto may be accelerating dollar usage on new rails, not reducing it. Especially as stablecoin reserves must be held in liquid U.S. assets.

European Central Bank Warns of Digital Dollar Hegemony

The European Central Bank is less sanguine. In a recent blog post, ECB advisor Jürgen Schaaf issued a warning:

Stablecoins are reshaping global finance – with the U.S. dollar at the helm.

The dominance of dollar-based stablecoins, he argues, could marginalize the euro in cross-border payments, e-commerce, and tokenized settlements. If stablecoins become the default digital cash equivalent, Europe risks higher financing costs and reduced monetary sovereignty.

Should US dollar stablecoins become widely used in the euro area, the ECB’s control over monetary conditions could be weakened,

Schaaf writes.

While Schaaf sees opportunity for the euro in developing regulated, euro-denominated alternatives, the concern is clear: without intervention, stablecoins could entrench dollar dominance in digital finance.

US Treasury Embraces Crypto to Preserve Dollar Supremacy

If Europe fears dollar stablecoins, the U.S. Treasury seems to embrace them. Treasury Secretary Scott Bessent recently confirmed that the government will maintain and potentially expand its strategic bitcoin reserve, seeded with $20 billion in seized crypto assets. While he clarified that no new purchases are imminent, he added:

The Treasury is committed to exploring budget-neutral pathways to acquire more Bitcoin.

At the same time, Bessent announced plans to codify how the federal government manages digital assets going forward, calling it “one of President Trump’s great legacies.”

The message is not just regulatory. It’s strategic: to preserve the dollar’s dominance by ensuring it remains the default currency across both traditional and emerging digital systems.

The Verdict: Evolution, Not Revolution

The evidence suggests cryptocurrency represents an evolution of dollar dominance rather than its demise. While digital assets challenge the dollar in niche markets like illicit trade, they may actually strengthen its position in legitimate commerce through stablecoin adoption. 

The outcome hinges on network effects and infrastructure control. First-mover advantage in digital payments could lock in dollar dominance for decades, much like SWIFT did for international transfers. How quickly the US establishes clear regulatory frameworks compared to competitors like China's digital yuan will prove crucial. 

Perhaps most importantly, whether crypto rails strengthen or bypass traditional dollar-based systems depends on integration strategy. The Treasury's embrace of Bitcoin reserves and stablecoin regulation suggests Washington understands this dynamic – that controlling the infrastructure matters more than controlling the technology itself. 

For now, the dollar is adapting to digital finance rather than being displaced by it. But the window for maintaining this advantage may be narrower than policymakers realize.