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Stablecoins as Eurodollars

USDT, USDC, USDe, USDS/DAI, PYUSD — the dollar instruments living outside the US banking perimeter, and what MiCA and US legislation are doing to them.

35 min · intermediate · part of Crypto Macro & Geopolitics

The Eurodollar Analogy

In the 1950s and 1960s, dollars started accumulating outside the United States banking system. Soviet banks parked dollar deposits in London to avoid US jurisdiction. European banks discovered they could make dollar-denominated loans to dollar-denominated borrowers without ever touching a US bank. London, Tokyo, Singapore, and the Cayman Islands grew into offshore dollar centers handling trillions of dollars of transactions that the US Federal Reserve does not directly control. These offshore dollars are called eurodollars (the "euro" refers to their origin in European banking, not to the euro currency, which came later). The eurodollar market is huge — estimates run into the tens of trillions of dollars — and it is the actual global plumbing of dollar settlement. When a Brazilian importer pays a Korean exporter in dollars, those dollars almost certainly never visit a US bank. They move between correspondent banks in London, Singapore, or Tokyo. The Federal Reserve sets US-domestic interest rates, but the eurodollar market sets the rates at which the rest of the world actually borrows and lends dollars (which is why LIBOR — and now SOFR — matters globally). Stablecoins are the eurodollar of the crypto era. USDT, USDC, USDS, USDe, and PYUSD are dollar-denominated instruments that exist outside the perimeter of the regulated US banking system. A factory owner in Argentina holding USDT in a wallet is functionally holding offshore dollars. A freelance designer in Nigeria getting paid in USDC is using the dollar's purchasing power without needing a US bank account, a SWIFT code, or correspondent banking access. The same way eurodollars extended the reach of the dollar by routing around the US banking system, stablecoins are extending the reach of the dollar by routing around the entire traditional banking stack. This lesson covers the major stablecoins by issuer, model, and current status, and the regulatory frameworks (EU MiCA, US GENIUS Act) that are now reshaping the category.

Also in this lesson

  • USDT (Tether): The Largest by Far
  • USDC (Circle): The Compliant Counterpart
  • USDe, USDS/DAI, PYUSD: The Other Important Players
  • MiCA: The EU Framework Now in Full Effect
  • US Stablecoin Legislation and the Treasury Demand Question

Key terms

Eurodollars
US dollar deposits held in banks outside the United States, primarily in London, Singapore, Tokyo, and Caribbean centers. The eurodollar market is the actual global plumbing of dollar settlement and dwarfs US-domestic dollar activity in cross-border use.
USDT (Tether)
The largest stablecoin by supply (approximately 186-190 billion dollars in 2026). Issued by Tether (now based in El Salvador). Majority US Treasury reserves; quarterly attestations by BDO Italia. Dominant in emerging market crypto activity.
USDC (Circle)
The second-largest stablecoin (approximately 74-77 billion dollars range). Issued by US-based Circle, regulated as a money services business. Reserves in BlackRock-managed Circle Reserve Fund plus GSIB-tier bank deposits. MiCA-authorized; native multichain via CCTP.
USDe (Ethena)
A synthetic dollar launched in early 2024 by Ethena Labs. Maintains its peg via a delta-neutral position (spot crypto hedged with short perpetuals) rather than cash reserves. Yield comes from funding rates and staking. Structurally different from fiat-backed stablecoins.
USDS / DAI (Sky Protocol)
Decentralized stablecoin originally from MakerDAO (rebranded Sky in 2024). Backed by overcollateralized crypto deposits plus growing real-world-asset Treasury exposure. USDS is the 1:1 upgrade to DAI introduced under Sky.
PYUSD (PayPal)
Stablecoin launched August 2023 by PayPal in partnership with Paxos as issuer. Available on Ethereum and Solana. Lower supply than top three but strategically important as the first major payments-incumbent stablecoin.
MiCA (Markets in Crypto-Assets)
The European Union's comprehensive crypto regulatory framework. Stablecoin provisions took effect June 30, 2024; remaining provisions (CASPs) effective December 30, 2024. Classifies stablecoins as EMTs or ARTs, requires authorization, reserve backing, and redemption rights.
GENIUS Act
US legislation (Guiding and Establishing National Innovation for US Stablecoins) progressing through Congress in 2025-2026. Proposes a federal framework for payment stablecoins with reserve standards, redemption rights, and authorization pathways. Exact status and dates evolving.
EMT (Electronic Money Token)
Under MiCA, a token that references a single fiat currency (e.g., a euro or US dollar stablecoin). Requires EU authorization, full reserve backing, and redemption rights.
Castle Island EM stablecoin survey
Research from Castle Island Ventures (March 2024 and follow-ons) documenting that majority stablecoin use in emerging markets is for savings, currency conversion, and dollar access rather than trading — confirming the eurodollar-analog framing.

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