Stablecoins Surpass China in US Treasury Demand

Bitwise CIO Matt Hougan predicts that stablecoins will grow significantly, and recent research from the San Francisco Federal Reserve suggests he may be right. The Fed's study found that stablecoin issuers have collectively added approximately $200 billion in Treasury holdings between 2021 and mid-2026, offsetting more than 40% of China's decline in US government debt.

The growth has been steep, with stablecoin issuers' holdings expanding more than tenfold within five years. The Fed also projects that stablecoin issuer demand for short-term Treasuries could reach approximately $400 billion by the end of 2030, assuming current trends persist.

Hougan spoke with over 40 financial advisors, who manage assets exceeding $175 trillion, and found that they showed more interest in stablecoins and tokenization than in Bitcoin as a speculative investment. The stablecoin narrative is now gaining traction among institutions, reshaping how they think about capital markets and payments.

However, there are risks worth watching, including the concentration in two issuers and the potential for sudden redemptions to force issuers to sell their Treasury holdings quickly.