The debate around stablecoins often gets framed as though finance has stumbled into unprecedented territory. Silicon Valley talks about programmable dollars, Washington worries about digital bank runs and crypto advocates promise faster payments while skeptics warn about shadow banking in new clothes.
America’s financial sector has seen this movie before. The United States spent centuries absorbing new forms of money-like instruments that blurred the boundary between public currency and private credit — and the endings were rarely clean.
Colonial letters of credit circulated alongside coinage in the 1600s, as described in Brendan Greeley’s new book, “The Almighty Dollar: 500 Years of the World’s Most Powerful Money.” Colonial Maryland’s paper money was backed by a sinking fund at the Bank of England, the same conceptual playbook stablecoin issuers run today with U.S. Treasuries as reserve assets. Lord Baltimore, it turns out, was the world’s first stablecoin issuer. Circumstance just forced him to use paper instead of a blockchain.
Three hundred years later, the dollar still hasn’t finished evolving. That history matters in 2026 because the regulatory fight around digital assets is less about crypto speculation than who gets to create dollar-like instruments in the digital economy and what rules they have to follow.
That fight is centuries old. Stablecoins just gave it better Wi-Fi.
See also: A Stablecoin History Lesson: The Messy Origins of the Internet’s ‘Digital Dollar’
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The Dollar Was Never Just a Piece of Paper
The modern understanding of money tends to assume the dollar was always a sovereign product directly controlled by the federal government. In reality, American monetary history is far messier.
To begin with, British mercantilist policies drained specie, which is gold and silver, from the colonies, leaving local economies chronically short of coinage for small daily money and non-wholesale purchases. Spanish dollars, or talers, based themselves on 1500s Bohemian Joachimstalers, became the de facto medium of exchange in early America before the United States even minted its own currency. In that sense, the printing of paper bills in the United States did not mark the moment America created its dollar. It marked another moment when the dollar won.
Over time, trust in the new nation consolidated around the dollar as a unit of account and settlement system rather than around any specific physical instrument. The 19th century Free Banking Era emerged out of this backdrop, when state-chartered banks began issuing their own banknotes, ones that competed with federal money. This “Wildcat” system fueled commercial expansion, but it also exposed the core vulnerability of private money systems: confidence instability. The era led to a series of bank runs where countless people were scammed or lost their savings. Merchants during the era relied on printed “bank note reporters” to determine which currencies remained trustworthy.
See also: Stablecoins Have a Money Market Fund Problem
The throughline from the Colonial Stamp Act to the National Banking Act of 1863 is that as private money expanded, regulators realized that confidence in commerce increasingly depended on confidence in institutions issuing money-like liabilities.
More than a century after the last of the Wildcat notes was stamped out in the U.S., Eurodollars helped transform offshore banking in the postwar era. More recently, digital wallets and embedded finance systems are integrating quasi-financial infrastructures into technology platforms and software commerce channels.
To understand how the dollar got where it is today, it is helpful to understand why it is called “fiat” money. Fiat is a legal term derived from the Latin phrase “let it be done.” Under a fiat system, the United States declares that there shall be dollars, and then there are.
Stablecoins are now testing whether that same logic can extend across both on-chain and traditional finance and payments.
Some Forms of Digital Money Enjoy Structural Advantages
One reason stablecoins generate so much political attention is that many of their practical advantages are not entirely new. Digital wallets already allow near-instant transfers. Embedded finance already integrates payments directly into software platforms. The broader financial system has been moving toward monetary abstraction for decades.
Consumers hold billions of dollars inside nonbank financial environments. Starbucks balances, Uber wallets, PayPal accounts, Venmo balances, Amazon merchant accounts, Apple Cash, gaming currencies, payroll cards, marketplace seller balances and app-store credits all represent forms of stored value that behave like money for specific economic ecosystems.
Users preload balances, receive funds, make purchases, transfer money and sometimes earn rewards without directly interacting with regulated banking infrastructure. Behind the scenes, sponsor banks and payment processors still anchor these systems, but from the user perspective, the platform itself becomes the financial interface.
See also: Stablecoins’ Shadow FX Market Is Becoming a Corporate Treasury Issue
Some Forms of Digital Money May Pose Structural Threats
What makes stablecoins different is not merely speed or convenience. It is the possibility that programmable private liabilities could achieve money-like scale without fitting neatly inside existing regulatory categories. Stablecoins extend dollar access beyond traditional banking rails into online marketplaces, trading systems and international payment networks.
For users in countries with unstable currencies or underdeveloped banking systems, stablecoins can offer easier access to dollar-denominated savings and transactions than local financial institutions provide. This partially explains why policymakers have become simultaneously fascinated and nervous. The concern is not simply about crypto volatility. It is about private actors potentially building large-scale parallel payment systems denominated in dollars but operating outside conventional banking supervision.
While stablecoins are becoming more mainstream, the PYMNTS Intelligence report “Waiting for Certainty: Why Most CFOs Are Holding Back on Crypto and Stablecoins” found that many chief financial officers are reluctant to adopt them because of regulatory uncertainty.
That uncertainty was mentioned by 67% of CFOs as an obstacle to using stablecoins for business payments or treasury functions, while 77% said the same of cryptocurrencies.
