US Dollar Hegemony Shifts to Tech Shield: Digital Assets Key to US-China Competition

U.S. Treasury Secretary Bessent: Tech Leadership, Not Military Might, Now Underpins Dollar Dominance

New York, NY – U.S. Treasury Secretary Scott Bessent declared at Ripple’s Swell conference that the foundation of the dollar’s global dominance is shifting from military strength to technological leadership, framing digital assets as a key arena in U.S.-China competition. He argued that stablecoins can unlock new markets for the dollar and create demand for U.S. debt, and that in the absence of the stalled CLARITY Act, regulatory frameworks will be shaped by rules from the Securities and Exchange Commission (SEC) and the Commodity Futures Futures Trading Commission (CFTC).

Bessent, speaking alongside Ripple CEO Brad Garlinghouse at the Swell 2026 conference in New York on Tuesday, placed digital assets squarely within the context of U.S.-China technological rivalry. He asserted that to maintain its global economic influence, the United States must not only preserve its military advantage but also lead in setting technological standards and financial infrastructure.

The Treasury Secretary’s central metaphor was a shift in the “protective umbrella.” Historically, he noted, the power underpinning the world’s reserve currency stemmed from military might. Now, that foundation is moving towards technological leadership. Bessent described the U.S. as “keeping the military umbrella, but in my view, it’s increasingly becoming a technology umbrella,” effectively moving the discussion of currency hegemony from interest rates and trade surpluses to the choices made in AI systems, semiconductors, and payment pipelines.

He then elaborated on the fracturing of the U.S.-China tech ecosystem. Governments and corporations worldwide are now compelled to choose which AI systems and semiconductor technologies to adopt. In Bessent’s view, digital assets belong to this same competitive landscape, as a nation’s choice of financial infrastructure directly impacts the depth of dollar circulation within its borders. His conclusion was stark: “Digital assets will be no different, we will win on the digital asset stack, and that will continue to reinforce the dollar.”

Within this narrative, stablecoins are positioned as tools for expansion. Bessent stated that stablecoins can open new markets for the dollar, particularly in countries where local currencies face high inflation or extreme volatility, prompting residents to seek ways to preserve their savings in dollars. He refuted the notion that stablecoins merely represent a different form of existing dollars, emphasizing that they bring the dollar to users who were previously inaccessible. “We are opening up entirely new markets around the world,” he said.

More critically, he pointed to the flow of reserve assets. Bessent highlighted that over 90% of stablecoins are currently backed by dollar-denominated assets, with issuers largely holding U.S. Treasury bonds as reserves. As adoption scales, demand for these assets will rise in tandem, effectively creating an additional financing channel for the federal government. “I think this will be a significant source of funding for the Treasury,” he stated directly. The Trump administration, in July 2025, signed the GENIUS Act into law, establishing federal-level issuance and reserve regulations for payment stablecoins, a path that links stablecoin growth with demand for U.S. debt.

However, this blueprint has a missing piece. The market structure bill, the CLARITY Act, which the White House had hoped for, did not pass Congress. Related provisions failed to advance in a September mid-month cloture vote in the Senate, leaving the bill stalled in committee. Bessent expressed disappointment but believes the Treasury still has alternative paths: collaborating with the SEC and CFTC to advance a regulatory framework through agency-level rulemaking.

He described the Treasury as possessing “a lot of convening power” and called the SEC and CFTC “great partners.” He suggested that if these agencies can coordinate an operable set of regulations, it could serve as a template for other countries. Nevertheless, he acknowledged that agency-issued rules lack the permanence of legislation. Once administrations change, regulations can be reversed, creating the uncertainty that the industry finds most concerning.

Bessent also addressed a long-standing complaint from the crypto industry: banks cutting off services to crypto firms due to regulatory pressure, a phenomenon known as de-banking. He believes the CLARITY Act could have prevented such occurrences, but even with the bill stalled, safeguards can be established through regulatory bodies. “We can put in place regulatory best practices and guardrails to prevent this from happening again,” he said.

Placing these remarks in context reveals a shift in the U.S. policy focus on digital assets, moving from “whether to regulate” to “who will regulate and with what tools.” The CLARITY Act’s impasse in the Senate indicates that a legislative path is unlikely in the short term, compelling the executive branch to rely more heavily on SEC and CFTC rulemaking. The shorter lifespan of agency rules means the market must contend with greater risks of policy reversals. Meanwhile, the link between stablecoins and U.S. debt demand is being institutionalized, transforming stablecoins from mere payment tools into a new demand curve for U.S. Treasuries.

For readers in Taiwan and Asia, this shift carries two layers of significance. First, if dollar stablecoins become the default channel for cross-border payments and value storage, the dollar’s role in trade invoicing will become even harder to displace, and the monetary policy space for export-oriented Asian economies will be correspondingly constrained. Second, as nations are forced to choose sides in AI and semiconductor ecosystems, the choice of financial infrastructure is likely to become aligned with these blocs. Taiwan’s financial and technology firms will need to incorporate “which underlying system to choose” into their risk assessments when planning overseas payment and custody operations.

Two points of observation lie ahead. First, whether the Senate will revisit the CLARITY Act in the next session, and whether the executive branch’s alternative rules will encourage voluntary compliance from exchanges. Second, the actual scale of stablecoin reserves’ demand on U.S. debt. If issuers continue to park reserves in short-term Treasury bills, will this financing channel, in turn, make it harder for the Treasury to maneuver on interest rate policy? Bessent’s reframing of dollar hegemony from a military to a technological umbrella sounds like a vision, but in practice, it represents a series of regulatory details yet to be resolved.