22 Jun 2025 4 min read TrendFoundry

Why Stablecoins Are Quietly Reshaping U.S. Treasury Markets

Stablecoins now hold over $166 billion in U.S. Treasuries—more than Germany. This shift is redefining crypto’s role in global finance, creating new risks and opportunities for investors and policymakers.

Stablecoins like USDT, USDC, and DAI are reshaping U.S. Treasury markets through rising T-bill demand—now surpassing many sovereign holders.

Summary

U.S. dollar-backed stablecoins now hold over $166 billion in short-term Treasuries—more than many sovereign nations.
Driven by yield opportunities and real-time settlement benefits, their rise is shifting the dynamics of both crypto and traditional finance.
But this concentration is creating ripple effects: from suppressed yields to growing regulatory urgency.

Introduction: The Rise of “Digital Dollars” Backed by U.S. Debt

In mid-2025, the global stablecoin market hit $247 billion—equivalent to the GDP of Portugal.
At the heart of this explosive growth is a subtle yet seismic transformation: private issuers like Tether and Circle are becoming some of the largest buyers of U.S. Treasury bills.

Tether alone now holds over $120 billion in short-term Treasuries, more than Germany. This capital inflow is no longer just a crypto story—it’s directly affecting the cost of borrowing for the U.S. government and the structure of dollar liquidity.

This trend is not just financial; it’s political, regulatory, and deeply macroeconomic.

Trend Breakdown

1. Stablecoin Market Structure (as of Q2 2025)

Stablecoin	Market Cap	Key Holdings	Notes
Tether (USDT)	$151B	$120B+ in Treasuries	Largest holder among stablecoins
USDC	$39.7B	44% in Treasuries	Gaining ground via Visa/Mastercard
DAI	$3.18B	Diversified, moving to USDS model	Declining share

Emerging players like PayPal’s PYUSD ($775M) are growing quickly, while BUSD has nearly exited the market (<$58M).

2. Treasury Demand and Yield Dynamics

Stablecoin issuers now hold roughly $166 billion in U.S. Treasuries—mostly short-term bills under 93 days.
This positioning is reshaping Treasury demand:

Metric	Value
Tether’s Holdings	$120B (more than Germany’s $111.4B)
Yield Impact	-2.5 bps for every $3.5B inflow into 3-month T-bills
BIS Observation	Outflows raise yields 2–3× more than inflows reduce them

Stablecoins may soon become the third-largest T-bill buyer group globally.

Tether’s Q1 2025 operating profit exceeded $1B, largely from interest earned on Treasury reserves—outpacing many regional banks.

3. Legislative & Regulatory Shift

2023–2025 has seen bipartisan momentum in regulating stablecoins. Two landmark U.S. bills are reshaping the market:

STABLE Act (House):
- Mandates 1:1 reserves (cash or sub-93-day Treasuries)
- Passed Financial Services Committee (32–17) in April 2025
GENIUS Act (Senate):
- Prohibits Treasuries >3 months as backing
- Requires monthly audits and C-suite certifications
- Passed in June 2025

These frameworks aim to reduce systemic risks and improve transparency—without stifling innovation.

4. Stablecoins as Global Dollar Rails

Stablecoins now play a critical role in global dollar liquidity:

$585B in USDC transfers (March 2025)
Integration with Visa/Mastercard for real-time settlement
Lower U.S. borrowing costs via T-bill demand
BIS warning: could undermine Fed rate control if unmanaged

“Stablecoins are no longer just fintech toys—they’re becoming global monetary instruments.” — [BIS Report]

5. The CBDC Debate: Competition or Complement?

Rather than pushing a U.S. CBDC, regulators are now leaning toward stabilizing and co-opting stablecoin infrastructure:

Pros:
- Private-sector agility and innovation
- Direct support for Treasury demand
- Cost-effective global transfers
Cons:
- Drains bank deposits → tightens credit
- Fire-sale risk during mass redemptions

Some estimates suggest the GENIUS Act could save over $1 trillion in U.S. interest costs by 2026.

Why It Matters

This isn’t just a crypto or DeFi narrative. Stablecoins are:

Altering the global demand curve for U.S. debt
Creating new transmission channels for monetary policy
Challenging traditional banking models and deposit structures

As they scale toward a projected $2 trillion market cap by 2028, they could become a pillar of U.S. macro policy—or its next headache if poorly regulated.

Takeaways

Stablecoins have become systemic players in Treasury markets.
Their yield-seeking behavior compresses short-term rates, benefitting issuers—but adding macro risk.
U.S. legislation (STABLE, GENIUS Acts) is catching up fast to regulate reserves and transparency.
Institutional usage (Visa, PayPal, Stripe) is anchoring stablecoins in real-world finance.
Expect stablecoins to be a silent but powerful lever in U.S. monetary and fiscal policy debates.