Daniele Siena

This paper studies the international macro-financial implications of U.S. dollar-backed private money, as payment stablecoins, in the absence of adverse risk scenarios. We show that these assets create a new global safe asset channel, through which global demand for dollar payments and stores of value becomes directly linked to U.S. public debt. By reshaping the demand for safe assets and the geography of dollar intermediation, they alter monetary transmission and international spillovers. Although they widen the dollar’s global footprint and compress U.S. risk-free yields, they generate non-trivial macro-financial costs. By changing exchange rate adjustment to safe asset markets, they dampen the ability of U.S. monetary policy to affect domestic inflation and output while also enlarging U.S. and foreign exposure to cross-country shocks. These effects are small at low adoption levels but rise non-linearly with stablecoin capitalization, potentially reshaping the international financial system.