Non-dollar stablecoins are struggling to crack 0.5% of market share

(RWA.xyz)

That matters for stablecoins because dollar issuers can plug into a deep, liquid, and yield-bearing collateral base, while non-dollar issuers are trying to build stablecoin markets without anything close to the same reserve infrastructure.

That reserve advantage helps explain why dollar stablecoins have stayed so far ahead. Issuers need liquid, trusted collateral to back redemptions, and on-chain that overwhelmingly means short-term U.S. government debt.

During CoinDesk's recent Consensus conference in Hong Kong, Coinbase’s global head of stablecoins, John Turner, said the dominance became self-reinforcing early because “it was a liquidity story,” adding that “if there was liquidity, liquidity got volume.”

Liquidity attracted volume, volume attracted use cases, and use cases attracted more liquidity. That's a flywheel that non-dollar issuers have never been able to start.

There's a simpler explanation for the gap. Most fiat currencies aren't usable outside their home country in the first place.

The IMF tracks roughly 180 currencies in circulation worldwide. Of those, maybe eight trade with meaningful liquidity in global FX markets — the dollar, euro, yen, sterling, Swiss franc, Canadian dollar, Australian dollar, and yuan. The rest are effectively onshore instruments by design. Major Asian currencies like the Taiwan dollar or the Korean won are restricted onshore.

Stablecoins inherit the international reach of their parent currency, and most of the world's currencies have none.

That leaves a working universe of maybe a half-dozen currencies, like the euro or the yen, that could plausibly support a globally used stablecoin.

But the market doesn't seem interested for now.