Stablecoins Fail to Fill Long-Term US Treasury Demand Gap

Stablecoins can help finance short-term US Treasury debt but cannot fill the demand gap for long-term bonds. The key to this difference is maturity, not total amount.

The GENIUS Act requires licensed stablecoin issuers to maintain at least $1 in identifiable reserves for every $1 of stablecoins in circulation. Reserve assets include cash, Federal Reserve deposits, and Treasuries with remaining maturities of 93 days or less. Newly issued 10-year or 30-year Treasuries are excluded from eligible reserves.

Circle's USDC reserves are an example of this short-maturity structure. As of June 30, Circle disclosed $73.269 billion in USDC circulation and $71.904 billion in reserve assets. Of that, $60.717 billion was held in the Circle Reserve Fund, including $52.723 billion in overnight Treasury repos and $7.179 billion in Treasuries.

The Treasury Borrowing Advisory Committee made a similar point: stablecoin issuance can increase demand for short-term Treasuries, but if users shift funds from bank deposits or money market funds that already supported short-term Treasuries, part of the effect could be offset.