Stablecoin Surge: US Treasury Secretary Says It Will Reshape US Debt Demand Structure
US Treasury Secretary James Bessent stated at the annual Treasury Market Conference in New York on Wednesday that the rapid expansion of the stablecoin market is surpassing early regulatory expectations. He predicts that by around 2030, the total global market cap of stablecoins could surpass $3 trillion, becoming a key driving force for US Treasury demand.
He noted that the current total stablecoin market is approximately $300 billion, with an annual growth rate close to 80%. As institutional compliance products are introduced and the regulatory framework is gradually improved, this market is expected to grow tenfold in the next five years. Bessent stated, "Stablecoins are becoming part of the liquidity transmission mechanism. The reserve assets behind them, especially short-term Treasury bills, have become new pillars of demand."
US Treasury Market Welcomes 'New Crypto Fund Flows'
Stablecoins are crypto assets pegged to the dollar or other fiat currencies, with relatively stable prices. Issuers usually hold cash, repurchase agreements, or short-term US Treasuries as reserves to ensure stability in redemption. Bessent emphasized that the expansion of stablecoin issuance means a concurrent rise in natural demand for US Treasuries.
According to Treasury data, current stablecoin issuers collectively hold over $250 billion in US short-term Treasury bills, accounting for about 3% of the total circulation of that category. As issuance volume expands, this proportion is expected to double or more.
"This source of funds differs from traditional foreign holdings of Treasuries; it is driven less by geopolitical or foreign exchange risks and more by a technical, automated reinvestment in the US Treasury market," Bessent stated. He added that the Treasury Department is studying the distribution structure of stablecoin reserves to assess their impact on liquidity cycles.
Regulatory and Policy Interaction: How Structural Funding Will Impact Debt Issuance Strategy
Bessent noted that the rise of stablecoins as a source of long-term funding is leading to changes in US Treasury demand structure, alongside money market funds. Money market funds currently hold about $7.5 trillion in assets, making them one of the largest domestic buyers of Treasuries.
He stated that as the financial system becomes more digital, institutional investors' willingness to allocate short-term Treasuries increases, and the Treasury Department must reassess its bond maturity structure. "We are closely observing whether these fund flows are a short-term technical phenomenon or a reflection of new structural demand."
An announcement from the Treasury Department in early November indicated that the supply of short-term notes would steadily increase, while the issuance size of long-term bonds is expected to remain stable over the coming quarters. This policy adjustment is seen as a dynamic response to market absorption capacity.
Genius Act Implemented: Accelerating the Legalization of Stablecoins
Bessent credited the rapid growth of stablecoins in part to the Genius Act, which took effect this summer. The act established a compliant issuance framework for stablecoins, requiring issuers to register and disclose reserve asset compositions within the US, while providing tax incentives for fintech companies.
He stated that this legislation paved the way for stablecoins to move from the "grey area" into the mainstream financial system, attracting institutional capital to accelerate its entry. Some US banks have already partnered with major stablecoin issuers to explore application scenarios in payment settlements and cross-border clearances.
Complex Market Reaction: Investors Concerned About Narrowing Returns
Following Bessent's remarks, market performance of stablecoin-related stocks showed divergence. On the same day, Circle announced that its USDC circulation had doubled from last year to $60 billion, becoming the fastest-growing dollar-pegged asset. However, the company's stock price fell more than 12% that day, reflecting investor concerns that Federal Reserve interest rate cuts would compress its US Treasury reserve yield margin.
Financial analysts pointed out that as the interest rate decline cycle approaches, the yield advantage of stablecoin issuers will weaken, but their structural position in the payment and clearing system will continue to strengthen. "Even if the yield spread narrows, the Treasuries held by stablecoins will still constitute a vast low-volatility capital pool, forming a new underlying support for the US financial market."
Integration of Crypto Capital with Sovereign Debt
The expansion of stablecoins marks the blurring of boundaries between crypto finance and traditional capital markets. As regulatory policies mature, their reserve model may become a new stabilizing factor in the US Treasury market.
Bessent concluded, "Stablecoins are not speculative bubbles; they are the natural result of the evolution of the financial system. By 2030, they may not only be buyers of Treasuries but also a key pillar in the digitalization of the dollar system."
