70 years since the dollar left: stablecoins, not a new invention?
By Lacie Zhang, Bitget Wallet Research Fellow
Some people say that the real global reserve currency has never been the US dollar, but the European dollar. The name originated from a bank's telex address, but was eventually used to refer to all dollars outside the US.
70 years ago, in order to avoid the freezing of dollar accounts in the US, the Soviet Union and Eastern European countries deposited dollars in the Nordic Commercial Bank established in Paris and the Moscow National Bank established in London. The Nordic Commerzbank's telex address is “Eurobank” — the name of the European dollar, from there. However, it was Britain that turned these dollars into a large-scale credit market. After the Suez Canal crisis in 1956, Britain tightened foreign exchange controls, and bankers in London switched to using these foreign dollar deposits to lend, and European dollar credit services were born as a result. By 1957, the Bank of England further liberalized its policies, and London became the center of the European dollar market.
Surprisingly, however, the explosion on the scale of the European dollar was mainly driven by the US itself: interest rates on domestic deposits were too low, and foreign dollars had no liquidity; during the oil crisis in the 70s, most of the dollar profits of oil-producing countries did not return. They are locally deposited in London or other offshore banks. The European dollar market has thus been pushed from a few million dollars to the trillions of dollars. From this moment on, the “Eurodollar” no longer belongs only to Europe.
The story of the European dollar also unfolds along two main lines: on one line, institutions that carry dollar credit are constantly changing, from bank ledgers, to fintech companies' databases, to stablecoin issuers' reserve statements; on the other, the relationship between users and accounts is also quietly changing: from completely handing over money to institutions to today being able to control assets themselves.
However, there are three things that run through the two main lines and have not changed in 70 years: the US dollar can continue to expand outside of the US; its final liquidation will always be inseparable from the US; and the person who manages your account is never necessarily the same as the one who actually promises to pay. In other words, the “who owes you a dollar” question itself never went away, but the answer to it changed all the time. The story I want to tell in this article is how this problem entwined two migrations all the way up until today.
1. The US dollar left the US
The moment the deposit was transferred to London, something that was easily overlooked happened: the Bank of New York originally owed this money, but now the person who owed this money has become the Bank of London. The unit of currency has not changed, but the person who guaranteed it has changed.
If that were all, the story would have ended here, but the Bank of London soon discovered something even more interesting: not only can they accept US dollar deposits, but they can also create more dollars out of thin air around these deposits.
When a bank lends a dollar loan to a company, the asset side has an additional claim against the borrower, but the debt side also has an additional “dollar deposit” — this deposit can be immediately used to pay the supplier's bills, buy equipment, and pay off other debts. Milton Friedman (Milton Friedman), a representative figure of monetarism, later commented on this incident and said it very well: the source of the European dollar was not a money printer, but “a bookkeeper's pen.”
Banks don't create wealth out of thin air; they're just using an old credit game rule. As long as payment promises are accepted by the market, dollars written on the ledger can be used as real dollars. This pen proved one thing for the first time: it doesn't have to be a bank in the US to carry the dollar.
What is really growing this market is a regulatory wall. The US “Q Regulations” stipulate the upper limit of interest rates that banks can pay to depositors. Without this wall, the Bank of London can naturally offer higher interest to steal business. Economic historian Catherine Schenk (Catherine Schenk) examined British archives and found that in June 1955, London's Midland Bank absorbed about $49 million in 30-day dollar deposits in just one month because interest rates were a bit higher than what her American peers could give. After the British pound crisis in 1957, Britain did not allow domestic banks to use British pounds for trade financing in third countries. The Bank of London simply switched completely to the US dollar business. Businesses and governments that wanted to finance began to bypass New York and directly ask for money from London.
The world's appetite for the US dollar is growing, yet America's own banks are tied to their feet — this gap feeds an entire dollar market that can self-circulate and expand outside of the US. Around 1960, this market was about 1 billion US dollars; ten years later, it was close to 50 billion US dollars; during the 1973 oil crisis, huge dollars earned by oil producers went back through the London banking system; by 2007, offshore dollar deposits had risen to about 8.9 trillion US dollars, more than 150% of bank deposits in the US. Today, according to the Bank for International Settlements, the dollar credit stocks of non-bank borrowers outside the US have exceeded $14.3 trillion.
The US dollar has long ceased to be America's business, but from the moment the European dollar was born, it has had a paradox that cannot be erased: the Bank of London can generate dollar deposits, but it cannot create the Federal Reserve's reserves. They can write “I owe you a dollar” on their ledgers, but once they actually want to fulfill this promise in cash, or if the market suddenly tightens, they still have to go back and seek help from US correspondent banks and clearing systems.
Dollar credit was the first to break out of the US banking system, but it never left the US clearing system — this difference will only be revealed when a crisis occurs.
Two or three crises, three layers of power
Normally, a dollar in cash, a dollar in a New York bank account, and a dollar in a London bank account look exactly the same. No one really cares who is behind them or what systems they have to go through to actually get it. The crisis is the only thing that can tear this layer apart.
Liquidation rights: The phrase “I owe you” does not mean that the money has arrived
June 26, 1974, New York, a.m. A group of traders in the trading floor still didn't know; the dollar amount they had on their account will no longer be paid.
A few hours ago, they made a foreign exchange transaction with Herstadt Bank in Germany. Mark has already settled in Frankfurt. Now he is just waiting for New York to pay the corresponding US dollar. Because of the time difference, the afternoon on the German side is the morning on the New York side. Meanwhile, just in the afternoon in Germany, the supervisory authority ordered Herstadt Bank to shut down operations on the spot.
What the traders in New York are waiting for is not money; it is a bank that no longer exists. Only then did they understand that what they held was always just a “I owe you” promise, not the money itself. Between promise and payment, between counterparty, agent, time zone, and clearing system — as long as one link in the middle falls down, the rights on the book will not automatically become dollars that can be spent.
This incident later gave birth to the Basel Committee on Banking Supervision, and also left a name that continues to this day: Herstadt Risk. For the first time, it revealed the most basic level of power in the European dollar system: being able to issue a payment promise in US dollars does not guarantee that the money will actually arrive. Whoever is in charge of the settlement can actually make the final decision.
Finally, the right to liquidity: Having money on the account does not mean being able to borrow money
In 2008, European bankers found themselves in a strange situation.
On their books, they hold a large number of dollar assets — US housing loan securities, corporate bonds, and various dollar-denominated notes. However, behind these assets, there is no stable dollar deposit to support them. They all rely on short-term financing such as money market funds, commercial paper, and interbank loans to continue their lives on a rolling basis.
Normally, the cost of this game is very low, provided that the channels for borrowing money are always open. After the fall of Lehman, the market began to doubt whether the assets in each bank's hands were worth anything, and providers of short-term capital collectively stopped renewing loans. Overnight, these European banks held trillions of dollars in assets, but were unable to gather cash to repay maturing debts, and the world fell into a “dollar shortage.”
An embarrassing question confronts everyone: these banks are not in the US and are not managed by the Federal Reserve; who will send them dollars?
The answer is the Federal Reserve. Through central bank currency swaps, the Federal Reserve lends dollars to foreign central banks, and these central banks then distribute them to local banks. In December 2008, the swap balance reached about US$583 billion, accounting for a quarter of the total assets of the Federal Reserve at the time; in 2020, when the pandemic hit, the same mechanism was reactivated, and the balance was once close to US$450 billion.
The truth was completely revealed at this moment: Overseas banks can rely on loans to create dollar deposits, but they cannot create “hard dollars” that can actually be used to settle and repay debts. When everyone wants to replace the phrase “bank promise” with “the highest level of real money,” the only one that can cover all of this is always the Federal Reserve — this is the second level of power: the last level of liquidity provision. Who can get the bottom of the crisis, and who is the real backer of this system.
Pricing power: Whoever has the final say will win for half a century
The bankers in London are still quietly holding the third thing.
The cost of in-house financing reported by the Bank of London later evolved into LIBOR — the global pricing benchmark for loans, bonds, and derivatives. At its peak, the financial contracts linked to it amounted to trillions of dollars. This means that the Bank of London can not only create dollars outside of the US; they have also got an even more powerful thing: the power to price dollar financing around the world.
However, there is a fatal flaw in this pricing mechanism. It relies on the bank's “self-reported” numbers, not actual transaction figures. On the day the scandal broke out, this loophole was completely debunked: Barclays alone paid US and British regulators $450 million in fines for manipulating offers.
After the collapse of trust, LIBOR, which was spoken of by mouth, was replaced by SOFR, which was supported by real repurchase transactions. In June 2023, the USD LIBOR quotation panel was permanently suspended. The European dollar has not disappeared, but the days when the Bank of London decided is over.
Herstadt, the dollar shortage, and the end of LIBOR — these three events each tore apart the three layers of hidden powers: the right to liquidate, last liquidity, and the right to price. Overseas banks have gained the ability to expand credit in US dollars, yet they have never actually taken ultimate control of this system. And in the next financial innovation, the first thing that changed was not this power structure, but the one closest to ordinary people in the two lines: the relationship between you and your dollar account.
3. Enter the US dollar account into the phone
Over the past ten years, the most successful part of fintech was to put a complete set of banking procedures into a mobile app. Account opening, foreign exchange, and cross-border transfers, which used to take several days to complete, have to go to a branch, fill in forms, and now can be completed in a few minutes. The entrance to the US dollar account has moved from the counter to the software interface.
Revolut and Wise are representatives of this generation. They look like twin brothers: they can store multiple currencies, exchange foreign exchange, transfer money across borders, and spend with credit cards, making almost no difference when used by ordinary users. However, the legal structure that supports the string of numbers in these two apps is completely different.
Revolut chose the path of “becoming a real bank.” In 2018, it obtained a Lithuanian banking license and can provide banking services in many European countries — qualified user deposits can be turned into real bank deposits, protected by local deposit insurance. In 2026, it began to slowly bring in British users through banking entities in the UK. As a result, on the same app, balances in different regions and legal entities may not be the same thing at all — some are already protected bank deposits, some are electronic money, and some are just customer funds managed by partner institutions.
Wise has taken a different path. It's more like an “electronic money machine” that doesn't generally turn users' money into bank deposits that it absorbs itself. The balance you see in Wise is an electronic currency that Wise promises to pay you, and the customer funds supporting it must be kept separate from Wise's own money. Wise goes out of business; in principle, you can get your money back from this quarantined asset on a priority basis — but whether you can get it in full and how quickly you can get it depends on the unclear accounts and whether the local bankruptcy process is going smoothly.
One is closer to traditional banks and is covered by heavier supervision and deposit insurance; one does not do bank-style credit expansion and relies on financial isolation to support promises. The only difference is who will cover the bottom, how to save the money, and which way users will get their money back if the platform is shut down.
But the two have one thing in common — account records always lie in the agency's own database. You can initiate an operation with a single click on the app, but in the end, it is up to the institution's system to open an account, freeze, transfer, and withdraw funds. You have a contractual right, not direct control over the underlying funds.
Traditional fintech moved dollar accounts from the counter to mobile phones, but they didn't touch the “who managed” issue. It redesigned the portal without redistributing control, which is the point of the next stablecoins and self-custodial wallets.
4. Stablecoins: The US dollar goes from a closed account to a borderless ledger
The real breakthrough in stablecoins did not create a risk-free currency; it changed the way the US dollar “promise of payment” exists and circulates.
Banks and e-money institutions keep records in their own internal ledgers—you can open the app at any time to take a look, but if you want to move money, you still have to go through the institution's system. Stablecoins seal the dollar's payment promise into a token that can be directly held and transferred directly on the public blockchain. What you have in your hands is no longer a line of numbers in an institution's database; it is an asset that can be freely transferred between wallets, exchanges, and on-chain agreements.
The European dollar moved dollar credit from the New York ledger to the London ledger; stablecoins went even further — moving the dollar balance from any institution's ledger to a public ledger that no one exclusively owns.
To be more precise, stablecoins split “one dollar” into two things: payment and transfer. Paying this half is nothing new — the issuer takes a guarantee of reserve assets. Most of the reserves are US Treasury bonds and bank deposits. They are held in traditional financial institutions, and the final redemption also has to go through traditional channels. This half has never left the old world. What's really new is transferring half of this: for the first time, dollar balances can break away from any agency's internal systems and directly change hands on the public ledger. Stablecoins are not “unbanked dollars,” but rather dollars that remain in traditional finance and transferred to the public ledger.
The driving force behind the European dollar and stablecoins is actually the same force: global demand for dollars has always been much larger than traditional banks are willing to cover at low cost. Ordinary people in countries with high inflation want to preserve their purchasing power. Companies doing business across borders need to settle payments, and overseas workers need to send money home — not that they can't touch the US dollar at all, but they are always blocked by foreign exchange controls, account opening thresholds, high processing fees, and slow review processes.
Demand will not disappear because traditional finance cannot satisfy it; it will only seek new exports. In the 1950s, this demand found banks in London; today, it has found stablecoins and a borderless public ledger.
However, in the core of stablecoins, they still continue the “duality” of the European dollar — global circulation, but eventually they still have to take back the US financial system. Among the reserve assets of mainstream stablecoins, the majority are US treasury bonds and bank deposits. Tokens can run on chains around the world, yet reserve custody, asset management, and ultimate redemption are still tied to traditional financial infrastructure. Looking at it another way, stablecoins not only did not weaken the dollar system, but instead created a larger global distribution network for US treasury bonds and dollar assets. This network is no longer a small business: as of July 2026, the total market value of stablecoins was about US$312 billion, and about US$33 trillion was settled on the chain in 2025; the largest issuer, Tether, had an exposure of about US$141 billion in US Treasury bonds — close to the size of the top 20 US debt holders in the world.
But stablecoins are not simple digital copies of the European dollar. European dollars rely on banks to absorb loans and expand their balance sheets, and banks themselves bear the risk of credit and maturity; mainstream stablecoins are more like encapsulating and then distributing existing dollar assets as they are, and rely on reserve assets such as cash and short-term treasury bonds to support redemption. The two transfer methods are also completely different. The European dollar has to bypass agents and go through a clearing network; stablecoins can be directly delivered on the chain. In the past, to get offshore dollars, you first had to have a bank account; now, an on-chain address is enough.
That's why regulation comes in. This is not surprising. Looking back at the second chapter, the three levels of power of the European dollar were eventually taken back: the risk of liquidation gave birth to the Basel Committee, the shortage of dollars made the Federal Reserve the backbone of the entire system, and the death of LIBOR took the pricing power from banks in London. Regulation never stopped the offshore dollar from being born, but it never allowed it to grow to the point where it endangered the system without taking action.
The same script is rapidly advancing on stablecoins. The European Union, Hong Kong, and the United States have successively legislated to stipulate who is eligible to issue stablecoins, what reserves must be placed, and whether users can redeem them at any time. The US 2025 GENIUS Act even included bankruptcy rules: when a compliant issuer went out of business, stablecoin holders were the first to receive money from reserve assets. You need to know that back then, London debt holders waited 70 years, and were unable to read where they ranked in any law; stablecoin holders waited only about ten years for this line. The entry of regulation is just this kind of coming-of-age gift of a new dollar.
5. Self-hosted wallet: the account does not have to belong to any “creditor” for the first time
Banks, electronic money institutions, and custodian platforms, no matter how different, are essentially the same kind of relationship with users: you hand over your assets to them, then they keep a balance for you, and the service revolves around this balance. Self-hosted wallets change not the payer of the US dollar, but the control relationship between users and assets.
Self-hosted wallets, such as Bitget Wallet, don't accept your deposits, don't create a platform balance for you in your ledger, and don't owe you any stablecoins. The asset is recorded on the blockchain, and in order to transfer it, it must be signed by a private key. The wallet provides address generation, key management, transaction signing, on-chain connectivity, and access to financial services, but it is not a creditor that holds your assets for you.
This changed the organizational logic of traditional financial services. In the past, you had to first become a customer of an institution and deposit money into an account managed by it before using payment, trading, and financial services; now, you can first own and control your own on-chain assets, and then connect to these services through your wallet. The address is not tied to a wallet company. As long as the private key is still there, you can open the same address by changing the wallet app.
Therefore, the self-escrow solution is “who can move this money”, and the stablecoin issuer's solution is “who will pay this money in the end.” Whether stablecoin reserves are sufficient, whether the issuer can redeem them, and whether the regulation approves them is still determined by the issuer and legal structure; wallets address another level of risk: whether you must hand over control of assets to the platform before you can use financial services.
This is the fundamental field of self-hosted wallets and all financial accounts in the past: financial services and asset custody have been split for the first time. Payments, transactions, revenue, and asset management can be integrated in the same portal, but the transfer control of assets does not have to be handed over. The payment responsibility behind the US dollar still lies with the issuer, but the transfer control of the account can remain in the hands of the user for the first time.
Conclusion: The intersection of two migrations
In seven decades, the US dollar has experienced two intertwined migrations.
One incident happened with the “who will carry the US dollar credit” incident. The European dollar proved that banks outside the US can also generate dollars. Fintech companies repackaged dollar accounts into software products that can be used globally, and stablecoin issuers sealed dollar payment promises into a token that can be distributed on public ledgers.
The other one happened between “users and accounts.” Revolut and Wise changed the way ordinary people access dollars, but accounts are always managed by institutions; stablecoins are freed from the confinement of a single bank account, yet they can still be locked into escrow platforms; for the first time, self-hosted wallets allow you to use a full range of financial services without first handing over control of your assets.
Seventy years ago, the US dollar flowed from New York ledgers to London; later, it penetrated into fintech companies' databases and reached a public ledger in the form of stablecoins. The ledger was changed over and over again, and the institutions that carried it changed time and time again, but the promise behind the US dollar never disappeared.
The real change happened in the last step. When stablecoins enter self-hosted wallets, you still have to trust that the issuer will deliver on their promises, but you no longer need to hand over this money to another platform to keep it for you. The credit relationship is still there, but for the first time, control can be left in one's hands.
The dollar has never been able to escape its debtors. Just this time, the account finally doesn't have to belong to the debtor.
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