For some time there’s been talk of stablecoins replacing eurodollars, but the discussion has accelerated with the new Trump administration. In one of his executive orders, he promoted the idea of dollar stablecoins being used ‘worldwide’. It’s likely the motivation is more about increasing the stock of stablecoins to ramp up demand for US Treasuries, and hence lower the cost of the United States’ enormous borrowing, as stated by crypto czar David Sacks.
The term ‘eurodollar’ refers to any dollar bank deposits held offshore, not just in Europe. It’s a massive market worth around $13 trillion in 2023. At one point it was a figure larger than deposits held in the United States, but the money printing during Covid meant that onshore deposits grew faster.
A key feature of eurodollar payments is that two European banks exchanging dollars with each will clear the payment via a correspondent bank in the United States. Given stablecoins can support direct payments, cutting out the intermediary, the appeal is the potential reduction in friction and cost.
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