Stablecoin issuers emerge as growing buyers of US Treasury debt

Stablecoin issuers have become a meaningful source of demand for short-dated US Treasuries, according to research from the Federal Reserve Bank of San Francisco, as foreign governments reduce their holdings of US government debt. The research puts stablecoin issuers' Treasury holdings at roughly $200 billion, of which Tether, the issuer of USDT, accounts for $141 billion - a position larger than that of several traditional sovereign buyers.

The San Francisco Fed estimates that if current demand trends continue alongside growth in stablecoin market capitalisation, issuers' ownership of short-duration Treasuries could reach $400 billion by 2030. Standard Chartered separately projects the stablecoin market to surpass $2 trillion by 2028, which the source says could lift demand for short-dated Treasury bills to $1 trillion. The source frames this as a stabilising force for the dollar's reserve status and, by extension, for US interest rates and related markets.

The demand is tied to the mechanics of stablecoin issuance. Each token minted by a regulated issuer is backed by a short-dated Treasury or repo position, and the GENIUS Act, recently passed, requires issuers to back every token 1:1 and limits reserves to cash, deposits or Treasuries maturing within 93 days. The source puts total stablecoin market capitalisation at $305 billion, with Tether and Circle, the issuer of USDC, holding approximately $220 billion in Treasury-linked reserves between them.

Payment and tokenisation initiatives are cited as further drivers. Visa's self-published data shows more than 160 active stablecoin card programmes worldwide and payment volume up 200 per cent year on year, while Circle's Payments Network has 175 financial institutions enrolled, according to the source. The recently launched Arc Layer 1 blockchain lists Intercontinental Exchange, Mastercard, Visa, Standard Chartered and BlackRock among its validator members.

The source also links the trend to tokenised real-world assets, including equities, commodities and Treasuries brought on-chain for round-the-clock trading, and notes growth in tokenised equity supply since a failed procedural vote on the CLARITY Act in the US Senate, after which the CFTC and SEC announced rules affecting stablecoin and RWA issuers. It argues that stablecoins are becoming central to US capital formation and the broader economy.