Jackson Hole Paper Says Financial Innovation Could Strengthen Dollar Dominance

According to Axios, new research presented at the Jackson Hole symposium argues that financial innovation, including stablecoins and other tokenized money, could reinforce the U.S. dollar's role in global finance rather than weaken it. The paper, by Gordon Liao of Circle, Eswar Prasad of Cornell University and Tony Zhang of Arizona State University, says easier access to currencies and lower transaction costs could steer more activity toward already dominant money, with more companies choosing to borrow in dollars and increasing demand for dollar assets. The authors say that could deepen dollar markets and make them more attractive to other borrowers. The paper says the dollar accounts for roughly 90% of foreign-exchange transactions, while the euro, yen and pound have lost ground and the Chinese renminbi has gained. It also warns that a more dollar-reliant system would leave other countries more exposed to spillovers from U.S. policy and could concentrate risk in tokenized Treasuries if it leads to less fiscal discipline in Washington.