Clearly, we know that in the immediate aftermath of the 2025 tariffs, investors withdrew their dollars and the dollar weakened. Going forward, as the tariffs are implemented, they should continue to reduce demand for dollars, because the whole purpose of the tariffs was to reduce the US trade deficit. But if the trade deficit decreases, it means that the US capital account surplus also decreases, and that means there is less demand for dollars (see here for explanation).
But there’s a newcomer on the block in the form of the GENIUS Act which establishes a regulatory framework for dollar-denominated stablecoins. It is widely expected that in response to this new law, demand for US dollars will increase as more investors invest in stablecoins.
A Analysis by Amantha Divakaruni and Peter Zimmerman shows how and why this can happen. They looked at the change in demand for dollar-denominated stablecoins in response to the rate announcements in April 2025. What they found is that demand for stablecoins changed little in most countries, but increased significantly in others.
The underlying pattern was that demand for stablecoins was driven by two crucial factors: the size of tariffs and the extent to which a country has capital controls.
Countries that face higher tariffs will have a harder time obtaining dollars through exports. This means that for local citizens in these countries who want to hold dollars as a safe alternative to their own currency, there is suddenly a significant risk of a supply shortage. So, citizens in these countries start buying dollars, while the majority of investors sell dollars. If the people who want to get their hands on dollars before they become scarce live in a country without capital controls, they simply go to their local broker or bank and buy some dollars. It all falls to the investors who want to sell the dollar, and it generally means that there is less demand for dollars in these countries.
But people living in countries that have imposed capital controls cannot simply go to their bank and buy dollars. They have to find other channels to get dollars. And the best way to do that is to buy stablecoins that are pegged to the dollar. The result is that in these countries that are hit by high rates and control the flow of capital, the demand for stablecoins suddenly increases dramatically.
So while demand for dollars in general is declining, demand for stablecoins is increasing, driving prices for these cryptocurrencies up.
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