Stablecoin Issuers Driving Demand for U.S. Treasury Notes Amid Debt Concerns

Stablecoin Issuers Become Major Holders of U.S. Treasury Notes Amid Growing Debt Concerns

Stablecoin issuers are quickly becoming a significant force in the demand for U.S. Treasury notes as worries about Washington’s debt management continue to escalate. According to data from Tagus Capital, these issuers now collectively hold over $120 billion in U.S. Treasury notes, making them the 18th largest holders of U.S. debt globally, surpassing countries like Germany and South Korea.

Tether Ltd, the issuer of the popular tether (USDT) cryptocurrency, holds a staggering $91 billion in Treasuries, while Circle, the issuer of USDC, holds short-dated U.S. debt totaling $29 billion, as reported by Tagus Capital.

Coincidentally, stablecoin legislation has been making significant progress in the U.S. political arena, with hopes that a new law regulating stablecoins could be passed before the upcoming elections. Key figures like congressman Patrick McHenry and Majority Whip Tom Emmer have expressed optimism about the possibility of a stablecoin law being enacted by the end of the year, potentially during a lame duck session.

The U.S. government’s debt has surpassed $34 trillion this year and continues to grow rapidly, with interest payments projected to reach $892 billion in 2024. The Congressional Budget Office recently warned that the national debt could reach $50 trillion by 2034, equaling 122 percent of annual economic output.

Concerns about the mounting debt have raised fears of market chaos similar to the Liz-Truss incident, where a sharp drop in the U.S. dollar and political uncertainty caused turmoil. Crypto experts have also warned that increasing debt levels and a loss of confidence in Treasuries could lead to a surge in alternative assets like bitcoin and gold.

As stablecoin issuers amass significant holdings of U.S. Treasury notes, their influence on the financial landscape is becoming increasingly apparent, especially as the U.S. government grapples with its growing debt burden.