Stablecoins surpass China in U.S. Treasury holdings by 2028

In the United States, a significant shift in the demand for government debt is anticipated due to the emerging stablecoin market. The U.S. Treasury Borrowing Advisory Committee, which includes executives from leading financial institutions such as BlackRock and JPMorgan, has identified stablecoins as a rapidly growing force. The committee met recently and discussed the implications of the current regulatory landscape that may allow stablecoins to channel reserves into U.S. Treasuries, potentially exceeding China's existing holdings of $784 billion. This shift represents a fundamental transformation in the U.S. financial architecture, moving from traditional sovereign creditors towards a new digital financial ecosystem. The GENIUS Act, scheduled for consideration this August, is poised to play an essential role in this transition. Under the expected regulations, major U.S. dollar stablecoin issuers like Tether and Circle will be obligated to maintain full reserves, including U.S. Treasuries. This regulatory change will enable stablecoins to operate as significant institutional buyers of U.S. government debt. Analysts project that if the current growth trajectory continues, stablecoin demand could rival or even surpass existing foreign holdings of U.S. Treasuries, a potential game changer for how the U.S. finances its national debt. Currently, foreign creditors such as Japan and China are among the largest holders of U.S. Treasuries, holding $1.13 trillion and $784 billion, respectively. However, projections indicate that the market cap of stablecoins could reach $2 trillion by 2028. If those projections holds true, it suggests that stablecoins will not only fulfill a substantial market demand but will redefine America’s financial landscape. Unlike traditional banks that utilize fractional reserves, the regulations will ensure that stablecoin issuers maintain full reserves, marking them as reliable and transparent sources of Treasury demand. Prominent figures like Treasury Secretary Scott Bessent and Federal Reserve Governor Christopher Waller have voiced strong support for this evolution. Bessent referred to stablecoins as a new channel of strategic demand for U.S. Treasury bills, emphasizing their role in enhancing access to the dollar. Waller has underscored the potential of stablecoins to expand U.S. dollar access globally, particularly in regions experiencing high inflation or lacking adequate banking solutions. With stablecoins already facilitating trillions in transfers and gaining regulatory backing, they are not only positioned to reshape U.S. Treasury demand but also to strengthen the dollar’s role on the global stage.