Stablecoins Emerge as Potential Booster for US Treasury Demand Amid $37 Trillion National Debt
As the United States grapples with a staggering national debt surpassing $37 trillion [1], a new financial innovation—stablecoins—is being touted as a possible solution to ease the government's borrowing burdens. Proponents argue that the rapid growth of these digital assets, which are often backed by U.S. Treasury securities, could drive up demand for Treasuries, potentially lowering borrowing costs and providing a lifeline for fiscal sustainability [2].
US Treasury Bills
Stablecoins, non-interest-bearing digital payment instruments pegged to stable assets like the U.S. dollar, have seen explosive growth in recent years. As of August 2025, the total market capitalization of stablecoins has reached a record high of approximately $280 billion, up from earlier estimates. These assets maintain their value through reserves primarily composed of high-quality, short-dated Treasury securities, making issuers among the largest holders of Treasury bills [3].
US Treasury Secretary Scott Bessent has been vocal about the benefits, stating in a recent address: “A thriving stablecoin ecosystem will drive demand from the private sector for US Treasuries, which back stablecoins. This newfound demand could lower government borrowing costs and help rein in the national debt.” Bessent's optimism is echoed by industry analysts who speculate that stablecoin circulation could balloon to over $2 trillion in the coming years, fueled by increasing adoption in global payments and decentralized finance [4].
This surge in demand stems from the mechanics of stablecoins: issuers purchase Treasuries to back each coin issued, directly increasing gross holdings of these securities. Empirical evidence suggests this has already led to a slight reduction in Treasury bill yields, indicating a potential uptick in net demand. With monthly transaction volumes hitting around $950 billion, stablecoins are facilitating faster, blockchain-based payments, which could amplify their role in the financial ecosystem.
US National Debt
The timing couldn't be more critical. The U.S. national debt, which has ballooned due to decades of deficit spending, pandemic relief, and infrastructure investments, now stands at over $37 trillion—equivalent to more than $110,000 per American citizen. Rising interest payments on this debt are projected to exceed $1 trillion annually, straining federal budgets and raising concerns about long-term economic stability. If stablecoins indeed boost Treasury demand, it could flatten the yield curve for short-term securities, reducing the cost of rolling over debt and freeing up resources for other priorities.
Historical parallels, such as the rise of money market funds (MMFs) [5] in the 1970s and 1980s, offer some context. MMFs became major Treasury holders, helping the government tap into new pools of capital during high-interest periods. While their impact on net demand was debated, they undeniably expanded the investor base for government securities.
However, not all experts are convinced that stablecoins will deliver a net increase in Treasury demand. Ousmène Mandeng, a senior adviser at Accenture and visiting fellow at the London School of Economics, cautions in a recent analysis that while gross demand may rise, net effects could be neutral or even negative due to substitution effects. For instance, users might shift funds from MMFs—which also hold Treasuries—to stablecoins, leaving overall holdings unchanged. Factors like money velocity, liquidity preferences, and the relative scale of stablecoin transactions could mute the benefits.
Mandeng warns against overreliance on this narrative, noting, “It therefore seems imprudent to assume that stablecoins will produce a sustained increase in the net demand for Treasury securities. Governments should be wary of the claim that stablecoins can defy debt-induced gravity.”
Future of Stablecoins
Despite these caveats, the stablecoin sector's momentum is undeniable. Regulatory clarity, such as potential frameworks from the U.S. Congress, could accelerate adoption and solidify Treasuries as the go-to reserve asset. As the national debt continues its upward trajectory, policymakers may increasingly look to innovative tools like stablecoins to mitigate fiscal pressures—though, as experts advise, with a healthy dose of skepticism.