In the U.S. Administration, militarization and digitalization are being considered as factors in maintaining the dominance of the dollar in international circulation

In the defense budget for fiscal year 2027 submitted to Congress by President D. Trump, it is proposed to increase military spending to $1.5 trillion to create a “dream army,” which is $445 billion (or 42%) more than the total amount allocated in 2026. In an article published on June 23 in The New York Post, Pentagon Chief P. Hegseth defined the direct dependence of a stable dollar not only—and not so much—on Treasury policy, but on the condition of the U.S. armed forces.  

For decades, he believes, the Pentagon has quietly ensured the foundation of American prosperity—from the dominance of the U.S. dollar to stable borrowing costs and the protection of global trade. Underfunding military spending, in his view, poses a far greater threat to preserving the country’s economic well-being and ensuring national security than the growing national debt.  If America were to lose its unquestionable military superiority, no strict fiscal policy would be able to sustain the country’s economic well-being and ensure the global dominance of the U.S. dollar.

Recent actions by the U.S. Treasury confirm that strict fiscal policy, despite rapidly rising debt servicing costs, is not its exclusive priority in addressing the task of strengthening the dollar’s international position. In his speech on June 23 at the Economic Club of New York before representatives of big business and leading economists, Treasury Secretary S. Bessent, when assessing the prospects of the dollar in the global economy, focused less on maintaining budget discipline and more on the development of financial technologies. In his opinion, innovation in this area directly strengthens the dollar, increases the efficiency of payment and settlement processes, and preserves the integrity of the financial system.

In this regard, special attention is being paid by the U.S. Administration to the introduction of a digital dollar stablecoin backed by government Treasury securities. The Stablecoin Regulation Act (“GENIUS Act”), signed by President D. Trump in July 2025, creates opportunities to use privately circulating stablecoins backed by Treasury obligations to mitigate the debt problem. This opens an additional channel for issuing debt-based dollars into circulation in digital form.    A mandatory requirement for stablecoin issuing companies is to maintain 100% free reserves in dollars and short-term U.S. Treasury bills.  

Author: Professor, Doctor of Economics, Professor of the Department of World Economy and World Finance at the Financial University under the Government of the Russian Federation Viktor Yakovlevich Pishchik.