Tether Emerges as Unlikely Creditor in $39 Trillion US Debt Problem

The United States' debt problem has grown to $39 trillion in gross federal debt. However, the composition of who's lending America that money is shifting in unexpected ways.

Foreign investors hold approximately $9.1 to $9.5 trillion in US Treasuries, representing roughly 30% to 32% of publicly held debt. This is a dramatic decline from where things stood just over a decade ago, when foreign holders owned nearly 49% of publicly held US debt back in 2011-2012.

Japan remains the largest foreign holder at roughly $1.18 trillion, followed by the UK at approximately $866 billion and China at around $683 billion. China's position is particularly notable because it has been steadily reducing its exposure for years, a trend that accelerates every time US-China tensions flare up.

Tether, the issuer of the USDT stablecoin, was one of the top foreign net buyers of US Treasuries in 2024, purchasing approximately $33.1 billion on a net basis. This is an unusual development, given that Tether backs its stablecoin reserves primarily with short-dated US Treasury bills.

The growth of Tether's Treasury holdings creates an unusual feedback loop. The more widely USDT is adopted globally, the more Treasuries Tether needs to buy, which in theory supports demand for US debt at precisely the moment when traditional foreign buyers are pulling back.