Stablecoin Demand Surpasses 40% of Lost Chinese US Treasury Holdings

The US Treasury market is undergoing significant changes as stablecoin issuers become a major source of demand for government debt. Over the past five years, Tether and Circle have increased their Treasury securities and repurchase-agreement holdings by about $200 billion, equivalent to more than 40% of the decline in China's Treasury holdings over the same period.

This shift is altering the investor base underpinning the world's largest government bond market. Stablecoin issuers' Treasury holdings have risen more than tenfold in five years as demand for dollar-linked digital tokens expanded, while China has continued a retreat from US debt that began more than a decade ago.

The rise of crypto-linked buyers comes as the composition of US creditors undergoes a longer-term change. Foreign investors held more than half of outstanding Treasury securities around 2008, but their share had dropped to roughly 30% by early 2026. Within that group, foreign governments have declined even more sharply in relative importance.

The GENIUS Act, adopted in 2025, created a federal framework requiring approved US payment stablecoin issuers to fully back outstanding tokens with eligible liquid reserves. Proposed implementing rules include Treasury bills, notes and bonds with remaining maturities of 93 days or less, alongside cash, bank deposits and certain Treasury-backed repurchase agreements.