CryptoSlate
Tether and Circle increased their combined holdings of US Treasury securities and repurchase agreements by about $200 billion over five years, more than 40% of the decline in China's Treasury holdings over the same period, researchers at the Federal Reserve Bank of San Francisco said. Stablecoin issuers' Treasury holdings rose more than tenfold as demand for dollar-linked tokens expanded. Their growing reserves are changing who buys US government debt, particularly at the short end of the market.
Why it matters
Foreign investors held more than half of outstanding Treasuries around 2008, but their share had fallen to roughly 30% by early 2026, according to the researchers. As foreign official demand recedes, private buyers play a larger role in financing US debt. Stablecoin issuers are distinct from many of those buyers: they need liquid dollar assets to back tokens redeemable at par.
Tether's USDT and Circle's USDC accounted for more than 80% of stablecoin market capitalization as of mid-August. Both issuers hold short-term Treasuries alongside other liquid reserves. The 2025 GENIUS Act established a federal reserve framework for approved US payment stablecoin issuers, linking growth in regulated token circulation to demand for eligible liquid assets.
Market impact
The China comparison has a crucial limit. China's reductions have been concentrated largely in longer-dated debt, while stablecoin issuers favor Treasury bills and similarly short-maturity assets. Their purchases can support demand for bills without replacing buyers of longer-term notes and bonds.
Since 2023, stablecoin issuers have added more short-term Treasury holdings than Japan, the researchers said. They cited research indicating that demand is large enough to affect short-term yields. If recent industry growth continued, stablecoin Treasury holdings could approach $400 billion by 2030, though the researchers cautioned that projection is highly uncertain. Adoption in payments, competition and regulation will shape how much additional demand reaches the Treasury market.
Frequently asked questions
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What assets are included in the $200 billion increase?
The figure covers the increase in Tether's and Circle's combined holdings of US Treasury securities and repurchase agreements over five years.
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Why do stablecoin issuers hold US government debt?
Issuers need liquid dollar assets to back tokens that customers can redeem at par. Short-term Treasuries are among the assets held in those reserves.
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Why can't stablecoin demand fully replace China's Treasury purchases?
China's reductions have been concentrated largely in longer-dated debt. Stablecoin issuers mainly buy Treasury bills and other short-maturity assets, so their demand does not directly replace buyers of longer-term bonds.
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How has stablecoin Treasury buying compared with Japan's since 2023?
San Francisco Fed researchers said stablecoin issuers have added more short-term Treasury holdings since 2023 than Japan, the largest foreign holder of US government debt.
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What could limit future stablecoin demand for Treasuries?
The researchers said a projection of holdings near $400 billion by 2030 is highly uncertain. Stablecoin adoption, competition from other payment products and regulation will shape future demand.
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