Stablecoins Supplant China as Major US Treasury Buyers

The US Treasury market is undergoing a significant shift as stablecoin issuers emerge as a new source of demand for US government debt. According to research by the Federal Reserve Bank of San Francisco, stablecoin issuers Tether and Circle have increased their Treasury securities and repurchase-agreement holdings by about $200 billion over the past five years, equivalent to more than 40% of the decline in China's Treasury holdings over the same period.

China's retreat from US debt began more than a decade ago, and its Treasury holdings have fallen by more than half since their peak in late 2013. In contrast, stablecoin issuers' Treasury holdings have risen more than tenfold in five years as demand for dollar-linked digital tokens expanded.

The growth of stablecoin reserves has deepened demand for short-maturity Treasury assets, but it has not created an equivalent buyer for longer-term notes and bonds. This distinction is significant, as the US faces heavier financing requirements, with federal debt held by the public rising from about 35% of GDP in 2006 to roughly 100% today.

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. This structure effectively links growth in regulated dollar stablecoins with incremental demand for highly liquid US government securities.

The next phase will depend on whether stablecoins continue attracting users outside the traditional crypto trading market. The San Francisco Fed pointed to growing use of stablecoins for cross-border payments and as dollar-denominated stores of value in countries with volatile currencies.