The U.S. government is quietly treating stablecoins as more than a crypto convenience — policymakers see them as a fast, predictable channel for buying Treasury debt. With foreign demand for U.S. Treasuries ebbing, officials including Treasury Secretary Scott Bessent view dollar-pegged tokens as an efficient new source of funding for Washington.
How the math works
Stablecoins are designed to be redeemable for dollars, and issuers typically park reserves in cash and short-term government securities. That structure creates a large, direct pipeline into U.S. paper: roughly $0.90 of every dollar placed into some stablecoins ends up in Treasuries, compared with only about 11% of funds held in traditional U.S. bank deposits. In practical terms, moving a dollar from a bank into a stablecoin can translate to roughly $0.79 of net new Treasury demand.
Major issuers have followed the playbook. Tether, for example, holds in excess of $125 billion in U.S. debt, placing it among the world’s top holders of Treasuries. Circle (USDC) and other issuers have built sizable positions too — together rivaling some sovereign portfolios.
Policy push and market plumbing
Recent U.S. policy moves have effectively reinforced that pipeline. The GENIUS Act requires certain stablecoins to back tokens one-for-one with cash or short-dated Treasuries, mechanically directing inflows toward government paper. Other steps — from executive orders limiting banks’ ability to block crypto flows to allowing retirement plans access to digital assets — reduce frictions that help stablecoin balances grow.
For Washington, the appeal is clear: at a time when foreign holders are trimming positions and interest rates sit above 4%, another stable demand source helps finance a national debt above $37 trillion.
Risks and distortions
That convenience comes with trade-offs. Stablecoin-reserve rules concentrate purchases at the front end of the yield curve, potentially crowding out issuance of longer-dated notes and altering the maturity mix of U.S. debt. Stablecoin balances are also still small relative to a roughly $50 trillion financial system and can be sentiment-sensitive — meaning demand can rise and fall quickly.
There’s also a competitive and regulatory tug-of-war: bank deposits moving into stablecoins threaten bank margins, and firms are already exploring ways to offer yield-like products around tokenized dollars despite legal limits.
Whether intentional strategy or a fortunate byproduct of pro-crypto policy, stablecoins have transformed from trading rails into a meaningful Treasury buyer. That reframes the crypto debate in Washington: this is not just about innovation, but about financing.
Source: CoinDesk. Read the original coverage for full details.