GENIUS Act: $2 trillion in stablecoins to save US debt?

This issue briefly analyzes the use of stablecoins to digest U.S. debt for reference.

On May 8, 2025, Eastern Time, U.S. Treasury Secretary Bessant testified before the House Financial Services Committee that cryptocurrency is an important source of innovation to promote the global use of the U.S. dollar. He pointed out that digital assets may have a demand of about $2 trillion for U.S. Treasury bonds, and this demand mainly comes from stablecoins.

According to the analysis of the U.S. Treasury Department and multiple institutions, the demand for stablecoins for U.S. debt is growing rapidly, but can it digest up to $2 trillion in U.S. debt and become a life-saving straw for U.S. debt sales? It needs to be judged comprehensively based on policies, market trends and potential challenges.

1. The current demand scale of stablecoins for US debt

The current demand scale of stablecoins for US debt has reached hundreds of billions of US dollars. As of the end of March 2025, Tether held nearly $120 billion in short-term US Treasury bonds, and Circle held more than $22 billion in Treasury bonds.

The total market value of stablecoins is about 230 billion US dollars (2025 data). If the current reserve ratio (about 60%-80% is US Treasury bonds) is used, the demand for US Treasury bonds is about 138 billion to 184 billion US dollars, accounting for 0.38%-0.51% of the total US Treasury market (about 36 trillion US dollars).

Previously, according to JPMorgan Chase, by the end of 2024, about 114 billion US dollars of US Treasury bonds will be used as stablecoin reserves. With the continuous expansion of the stablecoin market and the advancement of relevant legislation, the demand for US Treasury bonds by stablecoins is expected to grow further in the future. US Treasury Secretary Bessant said that the demand for US government bonds in the digital asset field may surge in the next few years, with a potential scale of 2 trillion US dollars, most of which will come from stablecoins.

Second, the strategic significance of stablecoins to the US dollar

Most stablecoins are pegged to the US dollar at a fixed exchange rate, such as USDT and USDC. The increase in the demand for US debt by stablecoins means that stablecoin issuers need to hold more US dollar assets as reserves, which makes the US dollar more widely used in international payments and settlements. This increases the demand for US debt in the international market, improves the market recognition and attractiveness of US debt, further increases the proportion of US dollar assets in global asset allocation, and strengthens the core position of the US dollar in the international financial market.

The demand for US debt by stablecoins has prompted global funds to flow into the US financial market, providing financial support for the US fiscal deficit and economic development. This enables the United States to raise funds at a lower cost to maintain its huge military spending, social welfare projects and infrastructure construction, further enhance the US economic and military hegemony, and indirectly consolidate the hegemony of the US dollar.

The increase in stablecoin demand for U.S. Treasuries has promoted the continuous innovation and development of the U.S. financial market and improved the depth and breadth of its financial market. For example, it has promoted the development of the derivatives market related to U.S. Treasuries, attracted more international financial institutions to participate in U.S. financial market transactions, enhanced the influence of the U.S. financial market in the world, and further consolidated the core position of the U.S. dollar in the international financial system.

Third, driving factors for the growth of stablecoin demand for U.S. Treasuries

Related legislative promotion: The STABLE Act 2025 and the GENIUS Act 2025 currently under consideration by the U.S. Congress require that stablecoins must be fully collateralized by high-quality assets such as short-term U.S. Treasuries. If the bill is passed, the stablecoin industry will be forced to increase its holdings of U.S. Treasuries, which may bring an additional demand of $400 billion per year.

Most stablecoins are backed by 1:1 cash and highly liquid assets (mainly short-term U.S. Treasuries) reserves. Stablecoin issuers obtain interest rate spreads by holding reserve assets such as U.S. Treasuries. This business model prompts issuers to continuously expand the scale of stablecoin issuance, thereby increasing demand for U.S. Treasuries.

As the circulation and global demand for stablecoins continue to rise, in order to maintain the value stability of stablecoins, issuers need to hold more U.S. Treasuries as reserve assets. Standard Chartered Bank predicts that by 2028, the total market value of stablecoins may increase from the current $230 billion to $2 trillion. If the current reserve rules are followed, the corresponding demand for U.S. Treasuries will reach $1.2 trillion to $1.6 trillion, close to the $2 trillion target.

With the development of the overall digital asset industry, blockchain technology continues to innovate, and stablecoins and other blockchain-based financial products are increasingly integrated with the US dollar and US Treasury markets, attracting more investors and funds into the digital asset field, indirectly stimulating the demand for stablecoins for US Treasury bonds. The on-chain tokenized US Treasury market has grown from US$769 million in 2024 to US$3.4 billion in 2025, with a significant growth rate. If the DeFi ecosystem continues to integrate, it may further expand the demand for US Treasury liquidity.

Fourth, stablecoins do not change the credit logic of US debt

In summary, stablecoins have significant growth potential in demand for US debt, but whether they can digest $2 trillion requires the following conditions: first, the relevant bills are passed and the reserve requirements are strictly enforced to promote industry compliance; second, the adoption rate of stablecoins in cross-border payments and DeFi continues to increase; third, the scale expansion needs to be achieved during the period of slowing growth in US debt issuance or transformation of demand structure.

But from the actual situation, it faces challenges. The stock of US Treasury bonds is about 36 trillion US dollars. Even if the demand for stablecoins reaches 2 trillion, it still accounts for only 5.5%, which is not enough to completely solve the imbalance between supply and demand of US debt. Traditional buyers of U.S. Treasuries continue to reduce their holdings, and the growth in demand for stablecoins needs to fill this gap. At present, the rate at which stablecoins digest U.S. Treasuries (about $100 billion per year) is still lower than the net issuance of U.S. Treasuries (26.7 trillion U.S. dollars in 2024).

The relevant bills face bipartisan differences, and some lawmakers are worried that insufficient investor protection may lead to legislative delays or adjustments to terms, affecting the process of stablecoin compliance. If the proposed relevant legislation is delayed or cannot be passed due to political differences and other reasons, there will be a lack of legal mandatory requirements for stablecoin issuers to invest in U.S. Treasuries, which may affect the expected growth of stablecoin demand for U.S. Treasuries.

In addition,different countries have different regulatory policies on stablecoins and digital assets, which may lead to restrictions on the global operations of stablecoin issuers, affecting their business expansion and demand for U.S. Treasuries. For example, some countries may be cautious about stablecoins and restrict their use and issuance in their own countries, thereby reducing the size of the global stablecoin market and indirectly reducing the demand for US Treasuries.

The competition in the stablecoin market is becoming increasingly fierce, and new stablecoin projects are constantly emerging, and the market share may be dispersed. Some small stablecoin issuers may not be able to invest in US Treasuries as much as large issuers due to limited financial strength. At the same time, in order to stand out from the competition, issuers may adopt some innovative asset allocation strategies to reduce their dependence on US Treasuries. In addition, if other more attractive low-risk, high-liquidity assets emerge, stablecoin issuers may transfer part of their funds from US Treasuries to these alternative assets. Some emerging digital assets or traditional financial assets may show better investment value in specific market environments, thereby diverting the demand for stablecoins to US Treasuries.

In summary, stablecoins may become an important buyer in the US Treasuries market in the short term, but in the long run, their role is more likely to be short-term relief rather than a complete solution to the contradiction between supply and demand of US Treasuries. In fact, the premise of stablecoins digesting US debt is the credit of US debt itself. If policies and markets work together, the 2 trillion target may be partially achieved, but it will not change the credit logic of US debt itself. It is unrealistic to pin the US debt market on stablecoins.