"Several nations that have historically been large buyers of U.S. debt, such as China and Saudi Arabia, are gradually retreating from the market. They are also increasingly looking for options for settling payments outside the dollar system. There is, meantime, growing risk that the U.S. government could soon experience a failed debt auction. Such an event would roil markets and severely undermine U.S. credibility.

If other countries are successful at bolstering their currencies’ influence while dumping Treasury debt, the U.S. will need to find new ways to make the dollar more attractive. Dollar-backed stablecoins are one answer.

Promoting dollar-backed stablecoins would follow a well-trodden path and offer clear near-term benefits. There would be an immediate, durable increase in demand for U.S. debt, which would reduce the risk of a failed debt auction and an attendant crisis. Unlike China’s digital financial infrastructure, dollar-backed stablecoins issued on public, permissionless blockchains come packaged with the deeply American values of freedom and openness."

"The liquidity of Treasurys is one reason why the dollar is known as the world’s reserve currency, according to analysts. Central banks and governments of other countries hold reserves for a variety of reasons, including managing the value of their own currency, but they favor the dollar in part because they can buy and sell Treasurys more easily than other government bonds.

“What I’ve sometimes said is that it’s not that the dollar is the dominant reserve currency, it’s that Treasurys are the world’s dominant reserve asset,” said Brad Setser, a senior fellow at the Council on Foreign Relations and former adviser to the U.S. Trade Representative."