Rescuing US Treasuries! Besides buybacks, Baisente has another big move: US dollar stablecoin

Last week, the U.S. Treasury announced an expansion of long-term Treasury repurchase operations, with funding coming from increased issuance of short-term T-bills. Treasury Secretary Bessent referred to this move in a CNBC interview as a "Treasury twist"—relieving pressure on the bond market by lengthening supply at the short end and compressing pressure on the long end.

But Bessent has more in mind. He is also counting on a new source of demand: dollar stablecoins.

Why Must Stablecoins Buy Treasuries?

According to the Genius Act passed in the U.S. last year, stablecoins issued in the U.S. and pegged to the dollar must be backed by specified reserve assets, including short-term Treasury bills maturing within 93 days.

In other words, every $1 of stablecoin issued must be backed by a nearly equivalent amount of short-term Treasuries. This differs greatly from banks— for every $1 of assets banks hold, they typically allocate only about 8 cents to short-term Treasuries; but for every $1 stablecoin, approximately 80 cents is short-term Treasuries.

Stablecoins are naturally buyers of short-term Treasuries.

How Big Is the Market?

Currently, the global stablecoin market capitalization is about $300 billion. Compared to U.S. money market funds totaling nearly $8 trillion, the number remains small.

But Bessent has cited projections that the stablecoin market could grow to nearly $4 trillion, explicitly stating: "This will lower government borrowing costs."

Citi Institute presented a "bullish scenario": if the stablecoin market reaches $4 trillion, their holding of short-term Treasuries could account for about one-quarter of all outstanding short-term Treasuries by 2030.

A report prepared by the Brookings Institution Hutchins Center on Fiscal and Monetary Policy for the Aspen Economic Strategy Group also notes that stablecoins could create "substantial net new demand" for short-term Treasuries—especially as funds flow from bank accounts into stablecoins, or when purchased by foreigners. The report specifically mentions that much demand could come from savers in countries with unstable currencies who are unable to open U.S. bank accounts but can hold dollar stablecoins.

The Clarity Act: The Next Catalyst

Further expansion of stablecoins depends on the passing of another bill—the Clarity Act, which aims to regulate a broader crypto asset market.

At present, the bill is stuck in the tug-of-war between the banking industry and crypto companies. The core point of contention is: interest returns available to stablecoin holders are seen by banks as direct competition to deposit rates.

Last week, Trump met with crypto industry executives at the White House, personally pushing for passage of this bill. At the same time, the U.S. Securities and Exchange Commission (SEC) also proposed a new regulatory framework for crypto assets.

According to a recent report by TD Cowen analyst Bryan Bergin, passing the Clarity Act "would reduce friction by providing a clearer regulatory environment," but he also points out that the adoption of stablecoins has already been advancing even without the bill.

The market has already responded. Stablecoin issuer Circle Internet Group and Coinbase Global, which provides rewards for holding USDC, both surged over 20% last week.

Great Potential, But a Long Road Ahead

TD Securities rate strategists wrote in an October 2025 report that the development of stablecoins could "impact Treasury's debt management decisions, resulting in a shortening of the weighted average maturity of issuance." The Treasury Borrowing Advisory Committee also informed the Treasury last year that "increasing stablecoin issuance could create a new source of demand for short-term Treasuries."

However, this is still an early stage story.

According to tracking by data provider DefiLlama, total stablecoin market capitalization has plateaued recently, with almost no change compared to October last year.

The Brookings report also raises a key question: is the Treasury demand fueled by stablecoins steady or volatile? This is critical for the Treasury to set the optimal debt maturity structure.

Furthermore, the business outlook for stablecoin companies faces competition—not just from other stablecoins, but also from new forms like tokenized deposits and digitized short-term Treasuries.

Bryan Bergin said in an email that "AI agent commerce will be a potential long-term catalyst for stablecoin usage," while cross-border payments and business-to-business payments are nearer-term drivers.

Bessent's strategy is logically sound, but realizing it will take time. As The Wall Street Journal noted, the day when stablecoins truly impact government borrowing costs, "the journey will be far longer than a single presidential term."