Stablecoins are projected to reach $2 trillion in market value by the end of 2028, and analysts say this growth could generate up to $1 trillion of new demand for U.S. Treasury bills. When this inflow is combined with anticipated Federal Reserve purchases, total demand could approach about $2.2 trillion through 2028, outpacing the net new supply by roughly $0.9 trillion. Major issuers like Tether and Circle are already large holders of short-dated Treasuries, channeling crypto capital into U.S. debt and raising questions about market fragility and regulatory oversight.
Analysts estimate that stablecoin issuers alone could drive $0.8 trillion to $1 trillion in new Treasury bill demand. The Treasury could adjust debt issuance composition to accommodate this shift, potentially increasing the share of T-bills by roughly 2.5 percentage points over three years. A reallocation could include suspending 30-year bond auctions for up to three years to ease upward pressure on long-term yields, aligning with a broader trend of governments issuing debt to meet evolving investor bases and a focus on shorter maturities.
The Treasury market has shifted toward private-sector buyers, with foreign demand for U.S. Treasuries declining while Money Market Funds and domestic private investors gain influence. Money Market Funds now hold around 40% of outstanding T-bills. The Federal Reserve’s history of large Treasury purchases during crises underscores liquidity provision, though its balance-sheet strategy is moving toward reduction, influencing how the market absorbs evolving demand from stablecoins.
The reliance on stablecoins for Treasury reserves introduces systemic risks, including regulatory uncertainty and reserve concentration among a few issuers like Tether. A major stablecoin stress event or operational failure could ripple through the Treasury market, potentially worsening liquidity conditions. The Treasury’s issuance of short-term bills also carries turnover risk if rates rise, and the shift toward price-sensitive private investors could amplify volatility and premia required to absorb new debt issuance. The Treasury’s ability to manage this evolving landscape will be challenged if growth falters or rates spike unexpectedly.
Standard Chartered maintains its projection for meaningful incremental demand from stablecoins, viewing crypto-headwinds as cyclical. The Treasury is expected to adjust issuance toward shorter maturities, with long-term liquidity and yield stability depending on regulatory clarity and proactive debt management.
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