Money Funds Dominate Stablecoin Demand for US Treasury Bills

The US Treasury Department reported that net bill supply grew by more than $550 billion in July and August, an increase of about 8% in two months. Money-market mutual funds absorbed approximately 85% of this additional supply, according to Deputy Treasury Secretary Francis Brooke. This means traditional cash managers have the clearest claim to the marginal demand behind the summer issuance wave.

Stablecoin providers remain important holders of short-dated government debt, with Treasury putting their holdings at nearly $200 billion. However, this number measures a stock of Treasury bills and other close-to-maturity securities, whereas the money-fund figure measures purchases associated with a specific two-month supply increase.

The result is a more precise picture of crypto's role in government finance. Stablecoins are already material Treasury-linked investors and could become a larger source of demand as regulation takes shape. The documented incremental buying in 2026 has come primarily from money funds and the Federal Reserve, with foreign investors returning in July.

The Federal Reserve purchased more than $300 billion through reserve-management purchases and reinvestment of principal payments from agency securities. This is on top of nearly $250 billion of bill purchases recorded by the Fed's July monetary policy report. The later Treasury figure reflects a more recent cutoff, showing how quickly bills became a larger part of the Fed's portfolio.

Foreign demand turned positive before Treasury published its buyer breakdown. Foreign residents increased their bill holdings by $38.8 billion in July, according to the Treasury International Capital release. This followed declines of $20.0 billion in April, $43.5 billion in May and $29.0 billion in June.