The U.S. Treasury market, long considered the world’s most important bond market, is entering a new chapter this time shaped by stablecoins. With America’s national debt climbing past $37 trillion, a surprising new buyer is emerging: stablecoin issuers like Tether (USDT) and Circle (USDC). These digital tokens, designed to maintain a one-to-one peg with the U.S. dollar, are quickly becoming key players in global finance.
A Regulatory Shift: The GENIUS Act
The recent signing of the GENIUS Act has given the stablecoin industry its clearest framework yet. The law requires issuers to fully back tokens with U.S. dollars or high-quality liquid assets primarily short-term Treasury bills.
Analysts view the rise of stablecoins as a win for all parties involved. For users, it boosts confidence in the safety of their assets; for issuers, it offers greater legitimacy under U.S. law; and for the Treasury Department, it creates a steady new source of bond demand. HSBC even noted that a well-regulated stablecoin market could help reinforce U.S. dollar dominance in the digital era. The market itself has grown rapidly, reaching $250 billion in 2025 up 22% this year alone with Tether commanding around 65% of market share and Circle holding 25%, leaving the two players with near-monopoly power. Currently, stablecoins account for about $125 billion in U.S. Treasuries less than 2% of the $6 trillion T-bill market but their influence is growing quickly.
Major financial institutions are betting on further expansion: JPMorgan projects stablecoins could reach $500 billion by 2028, Standard Chartered estimates $2 trillion, and Bernstein forecasts up to $4 trillion by 2035. At that scale, stablecoin issuers could emerge as some of the largest buyers of U.S. government debt, rivaling traditional heavyweight holders like China and Japan.
Global Shifts in Treasury Demand
Foreign demand for Treasuries has been falling steadily. Over the past 13 years, the share held by major foreign creditors dropped from 23% to just over 6%. Meanwhile, the Federal Reserve has tapered its bond purchases. This leaves room for new demand and stablecoins are stepping in. In fact, Tether was the seventh-largest buyer of U.S. Treasuries in 2024, ranking just behind countries like the U.K. and Singapore. According to Ark Invest, stablecoins could replace China and Japan as top Treasury holders by 2030, helping keep U.S. interest rates lower in the long term.
The Ripple Effect on Banks
But this growth comes with trade-offs. As funds flow from bank deposits into stablecoins, banks may face reduced reserves. That could mean fewer loans available for businesses and consumers, even as Treasury demand rises.
The Federal Reserve’s Kansas City branch has already warned that this dynamic could reshape not just financial markets, but also the broader economy.
Why It Matters
Stablecoins may have started as a crypto-market utility, but today they are quietly becoming a pillar of global finance. What began as a way to move dollars quickly across borders is now reshaping how the U.S. funds its debt and possibly redefining the balance of global capital flows. If projections prove correct, stablecoins won’t just be a side note in the crypto story they could become one of the most important forces in the U.S. Treasury market for decades to come.
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