The legal footing under U.S. tariffs has shifted twice this year. The Supreme Court struck down IEEPA tariffs on February 20, 2026. A Section 122 stopgap expired on July 24, and the same day USTR imposed Section 301 tariffs on 60 economies, at 10% or 12.5% depending on their forced labor import rules. While rates moved, strategic responses did not. A country hit by U.S. tariffs has always had one reliable answer – devaluing its own currency – and dollar stablecoins now give that country’s savers a way around it.

How the currency defense works

Countries targeted by tariffs usually weaken their currencies, which cheapens exports and offsets the tax. The math is simple (Figure 1). Fully offsetting a tariff of t takes a depreciation of:

A 12.5% tariff takes about 11%. A 46% tariff takes about 32%. China’s 145% peak in April 2025 would have taken about 59%. In 2018, Brookings’ Robin Brooks wrote, the average U.S. tariff on China was 12.5% and the yuan fell almost exactly as much, a de facto full offset. (Figure 2)

China and Vietnam both utilized the same tool in 2025. The yuan fell to its weakest level since 2007 on April 9, and the State Bank of Vietnam guided the dong to a record low of 26,436 per dollar in August.

Depreciation has a price the exporter does not pay. It cuts the value of local savings, and savers who expect depreciation move their money into other assets as avenues become available. China saw this in 2015 and 2016, when depreciation fears drove capital flight through bank-intermediated channels despite strict controls. (Figure 3)

Stablecoins open a new exit

In November 2024, The Digital Chamber published How Stablecoins Are Extending U.S. Dollar Dominance. My co-authors and I flagged an implication that deserves a fresh test:

While foreign leaders may seek to diversify their economies and reduce reliance on the U.S. dollar to retain policy independence and shield against U.S. geopolitical maneuvering… those countries’ citizens are increasingly prioritizing acceptance, stability, liquidity, and the backing of a strong referent currency. Stablecoins allow users to realize this preference for U.S. dollars.

A government that weakens its currency is betting that savers stay put. Dollar stablecoins give them an exit pathway. About 97% of stablecoin issuance is dollar-pegged. A July BIS working paper found that stablecoin flows appear largely unaffected by capital controls, and that they share their drivers with old-style dollar deposits: exchange rate dynamics and financial crises. In Vietnam, USDT averaged a 3.35% premium in 2024, and about 7.8% of remittances arrive as stablecoins.

How big is the leak?

Right now? Small, and growing from almost nothing. The IMF reports that stablecoin holdings rose from virtually zero in 2020 to 1.5% of total deposits in Africa and the Middle East and 2.7% in Latin America and the Caribbean by 2024. Chainalysis finds that monthly cross-border stablecoin value more than doubled, from $11 billion in January 2025 to $24 billion in June 2026. The IMF treats lost control of domestic liquidity as a risk that arrives once a significant share of activity shifts. We are not there yet, but there is a trend.

States already see the threat

Governments increasingly are identifying dollar stablecoins as a sovereignty problem. China bans crypto outright. Vietnam’s licensed pilot requires settlement solely in dong and limits tokenized assets to those backed by real assets, which keeps dollar stablecoins out of the legal market. Permissionless architectures complicate this, though – licensing governs exchanges, but can’t govern wallets directly.

TDC’s view

This is a statecraft question, rather than a market question. Dollar stablecoins extend U.S. monetary reach into economies at odds with Washington, regardless of the tech’s intended design. Tariff targets assume they can answer with currency devaluation, and that assumption now may no longer be safe.

We cannot yet point to a tariff that stablecoins neutralized, and the first systematic data, from George Mason University, shows no aggregate effect so far. But the exit exists and volumes are rising. Policymakers weighing tariffs should treat the currency defense as weaker than it was in 2018.

The cost of this capability lands unevenly, and this tradeoff is often not made explicit. Washington gains deeper demand for dollars. Savers in tariffed economies gain protection from depreciation their governments engineered. Those governments lose room to direct their own monetary policy, and the savers adopt issuer and platform risk that deposit insurance does not cover. Dollar stablecoins are not neutral infrastructure – they are inseparable from U.S. geoeconomic statecraft.

What’s next

GENIUS is law. President Trump signed it on July 18, 2025, its core provisions take effect by January 18, 2027, and Treasury’s August proposal on unlawful issuance is open for comment until October 19. Supply sits near $300 billion, off a May peak near $310 billion.

Treasury’s final GENIUS rules will decide how foreign users and foreign issuers fit into the system. States in trade disputes with Washington will answer with their own licensing rules, capital controls, and state digital currencies, and each will struggle to overcome the capabilities introduced by digital assets and sovereign wallets. In a follow-up post, we look at new country-level research from George Mason University’s Future of Finance Lab that tests whether stablecoin growth shows up in money supply, bond yields, and Treasury holdings.