Rather than pursue a central bank digital currency (CBDC), Washington appears to be opting for a private-sector solution that could reshape the landscape for cross-border payments, Deutsche Bank says.

The dollar’s dominance rests on two pillars: the world’s willingness to save in dollars, which provides what economists call “exorbitant privilege,” and the dollar’s use in cross-border payments, which grants geoeconomic leverage.

These are tightly linked, with corporate preferences for invoicing and saving reinforcing the system.

But the foundations have begun to shift. The dollar’s share of central bank reserves has been slipping, and payments competition is intensifying amid new technologies, rival systems, and gaps in underserved markets.

“Stablecoins appear to be the U.S.’ answer to defending the dollar’s position in global payments, opting for a private-sector solution over CBDCs,” Deutsche Bank wrote.

Corporate adoption remains limited and doubts over their monetary qualities persist, but regulatory blessing, incumbent FX dominance, and a first-mover advantage strengthen the dollar’s case.

The implications stretch across other major blocs. For Europe, dollar stablecoins pose a threat to efforts to expand euro use in global invoicing and payments. To hedge against this, Deutsche Bank argues Europe should push forward with an ecosystem of bank and corporate-issued euro stablecoins.

The region has advantages over China in this respect, including a higher share of trade invoicing in euros, open capital markets, and stronger institutional trust.

China’s position is more constrained. A managed capital account and limited offshore RMB liquidity reduce its ability to compete in a stablecoin-driven world. Yet the stakes are higher for Beijing, as payments independence underpins its push for reserve currency status.

A more intense global payments contest may even spur China toward greater openness.

The deeper question is whether dollar stablecoins reinforce the fiscal and financial foundations of the U.S. system. Attention has focused on the demand they create for Treasury bills, but Deutsche Bank dismisses this as “a red herring.”

If issuance pulls from bank deposits, it would not strengthen demand for government debt meaningfully. More important is whether stablecoins can secure or expand the private sector’s commitment to dollar-based payments, since invoicing patterns tend to align with savings behavior and, ultimately, official reserves.

“The real power of stablecoins will come if they secure - or ideally expand - the private sector’s commitment to dollar-based payments," Deutsche Bank said in a note. This, the bank suggests, may be the weapon stablecoins hope to become in the fight to maintain U.S. monetary dominance.