The U.S. stablecoin market is rapidly becoming a new force in the Treasury market. With national debt now above $37 trillion, stablecoin issuers like Tether and Circle are emerging as major buyers of Treasury bills. Analysts believe this shift could reshape demand patterns and strengthen U.S. financial dominance.
The GENIUS Act recently created a clear framework for the industry. This law requires issuers to back digital tokens with cash or high-quality assets. As a result, short-term Treasury bills have become the preferred collateral. Supporters argue that the U.S. stablecoin system not only boosts Treasury demand but also extends dollar access globally.
Tether and Circle dominate the $250 billion market, holding a combined 90 percent share. Tether controls about 65 percent, while Circle manages roughly 25 percent. With adoption rising, these companies have already begun influencing demand for government debt. The U.S. stablecoin market is expanding at a pace that excites Wall Street investors.
While stablecoins currently hold about $125 billion in Treasury bills, this remains less than 2 percent of the overall market. By comparison, insurance companies hold five times more, while mutual funds control $4.5 trillion. Even so, projections suggest the stablecoin industry will grow exponentially over the next decade.
Coinbase forecasts a market cap of $1.2 trillion by 2028, while Standard Chartered estimates $2 trillion by the same time. Bernstein projects growth as high as $4 trillion by 2035. If these estimates prove accurate, stablecoins could soon become a crucial source of Treasury demand.
Meanwhile, foreign demand for U.S. debt is shrinking. China, Japan, and Canada have all reduced their holdings, while the Federal Reserve has scaled back purchases. Tether has already become the seventh-largest buyer of Treasurys, trailing only the U.K. and Singapore among international players.
Ark Invest analysts suggest that by 2030, stablecoins may replace China and Japan as leading buyers of U.S. debt. That shift could help stabilize interest rates and provide reliable demand. Furthermore, the Bank for International Settlements found that $3.5 billion in stablecoin inflows lowers short-term yields by up to 2.5 basis points.
Some concerns remain. As money shifts from bank deposits into digital tokens, banks may face reduced reserves, limiting lending activity. However, fintech leaders argue the overall impact will remain positive. They believe stablecoins will accelerate economic growth both in the U.S. and abroad.
Ultimately, the rise of U.S. stablecoins highlights a turning point for digital finance. By linking dollar-backed tokens with Treasury demand, the market is creating new momentum for American financial leadership.
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