Impact of Digital Assets on US Dollar

Over the years, this gathering has aimed to bring together

different perspectives

to better understand the forces shaping the dollar's central role in the global

financial system.

Last year's conference, for instance, was focused on global investor

allocation to US safe assets and their liquidity in a

time of geopolitical and technological change.

This year, we are here to discuss the implications of

financial innovations,

especially digital assets such as one of my favorite things, stablecoins,

for the international roles of the US dollar.

One striking feature of these discussions has been how rapidly

the underlying questions have evolved since the first conference in this series.

While the traditional drivers of the central role of the US dollar in the

global

monetary system, from the size, strength, and depth of the US economy

and financial markets to trust in US institutions and rule of

law remain critically important today, the environment around

these drivers is changing rapidly.

Technological innovation is increasingly altering how households

and businesses

interact with US dollars,

whether it is through holding new types of assets or through

changes to the payment rails by which dollar-denominated

assets are transferred, intermediated, and settled.

Distributed ledger technologies and tokenized assets such as stablecoins

are

creating new channels for global dollar intermediation that operate

alongside or sometimes in conjunction with traditional banking and

payment systems.

As a result, the dollar's international role

is also evolving.

The private sector is moving rapidly to expand access to

dollar-denominated

assets, innovate in new financial services, and

explore potential business opportunities that perhaps did not make

sense with legacy technologies.

In doing so, there will be compliments to the

traditional financial sector,

and there will also be areas of competition, which is good.

As an economist, I believe that is a good thing.

More competition generally leads to better outcomes for both consumers and society

as a whole.

The papers presented at this year's conference collectively highlight

how broad and multidimensional the integration of new technologies into the

global

financial architecture has become.

Let me briefly outline the key research themes you will encounter over the next

two

days.

A set of papers examines the transformation of payment systems

and foreign

exchange markets through stablecoin and blockchain-based financial

infrastructure,

documenting the rapid growth of stablecoin-based transactions,

decentralized foreign exchange trading, and alternative cross-border

payment rails.

Other papers study spillovers from stablecoin adoption into broader financial

markets.

These papers test whether stablecoin flows can affect exchange rates,

dollar funding conditions, covered interest rate parity deviations,

and

cross-border capital movements.

A major theme of the conference concerns the relationship between

stablecoins and US safe assets.

Some papers explore how dollar-backed stablecoins may create a new

channel linking global liquidity demand directly to US

Treasury markets.

Finally, a couple of papers revisit classic

international finance

question through the lens of digital innovation,

asking whether stablecoins may reinforce the dollar's global role by

extending access to dollar-denominated instruments worldwide, or

whether they may introduce new tensions into the international monetary

system by changing the nature of financial intermediation,

safe asset demand, and cross-border capital flows.

We are very fortunate to have an outstanding set of papers of participants

helping us think through these issues over the next two days.