Fiat & Basket-Based Stablecoins

Can a fiat currency actually benefit from its use in a basket-based stablecoin? I have been reading a Fed paper, "Global Demand for Basket-Backed Stablecoins," in which the authors model a two-country, two-currency economy to determine the demand for a basket-backed stablecoin like Celo, for instance.

Based on their rather limited model, they conclude that there will be little demand for a basket-backed stablecoin. I take that for what it is worth and don't necessarily agree, but the model produced two results that I find interesting.

1. A stablecoin will co-circulate with, and not replace, fiat. This makes sense. "Our model shows that although the basket may have the potential to become important and globally demanded, general equilibrium effects...make it such that the basket never dominates the component currencies."

2. A basket-based stablecoin will dampen the volatility of the fiats held in the basket. "[T]he introduction of the basket leads the more volatile sovereign currency to become more stable, substantially increasing currency holdings, trade, and welfare." This may lead some countries to endorse a basket-based stablecoin that includes and co-circulates with their native fiat.

These findings suggest an interesting future where stablecoins co-circulate with CBDCs and countries (except maybe the US) want their fiat in stablecoin baskets to increase its value and usage.