Stablecoin legislation sparks $2 trillion demand for Treasurys

In the United States, the recent developments surrounding stablecoin legislation are expected to significantly increase the demand for U.S. Treasurys. Published on April 19, 2025, analysts at Standard Chartered indicate that if stablecoin legislation is implemented, it may lead to an explosion in the supply of these cryptocurrencies, which are pegged to external assets, primarily the U.S. dollar. This surge in demand could generate an estimated $1.6 trillion in new demand for Treasury bills over the next four years, which issuers of stablecoins would likely acquire as reserves. The anticipated increase in demand for USD-denominated stablecoin reserves is projected to bolster the desirability of USD assets. This scenario comes at a pivotal moment as stablecoins are designed to maintain a stable value against non-crypto assets. The trading volume for stablecoins has seen significant growth this year, fueled by the increasing confidence in the crypto market regarding impending U.S. legislation that focuses specifically on the regulation of stablecoins. Relevant legislative measures such as the GENIUS Act and STABLE Act have cleared critical committees in Congress, solidifying the regulatory framework governing stablecoins. According to Standard Chartered's Kendrick, the stablecoin sector could become the single largest source of demand for U.S. Treasuries, surpassing all other sectors combined. The report indicates that issuers in the stablecoin industry would absorb all newly planned bill issuance during President Donald Trump's second term. There is a strong sentiment that the dominance of the U.S. dollar in international transactions could further entrench if stablecoins facilitate easier use of the currency for transactions across borders. The exciting aspect is that while stablecoins represent a new area of growth in the financial landscape, they may also contribute to the long-term stability and desirability of the dollar. Experts argue that the underlying motivation for the growing stablecoin market lies in the need to find a reliable alternative to the U.S. dollar that can offer similar liquidity and flexibility. As stablecoins enhance accessibility to USD assets, their development could initially make USD-denominated stablecoins more appealing. Thus, the anticipated evolution of stablecoin legislative frameworks could lead to significant market changes, marking a transformative phase for both cryptocurrencies and traditional financial instruments. Overall, these developments herald a new era for stablecoins, while reinforcing the importance of the U.S. dollar in global finance.