The 'Savior' of U.S. Treasuries... Why Stablecoins Are Gaining Attention [Click e Market]

Despite Treasury Buybacks, U.S. Long-Term Yields Remain Unstable
Rising Stablecoin Issuance Set to Boost Demand for Short-Term Treasuries
Beneficiaries Expected to Include Coinbase, Circle, and Others

The U.S. Department of the Treasury has demonstrated its commitment to stabilizing the market by expanding the scale of long-term Treasury buybacks. However, long-term Treasury yields are not coming down easily. The fiscal deficit remains large, and there is ongoing uncertainty surrounding Middle East affairs and the U.S. Federal Reserve's upcoming policy moves. While there are many reasons for the U.S. to keep interest rates low, there are not as many buyers for its government bonds as before.

In this environment, an unexpected player has emerged: stablecoins. Unlike Bitcoin, which is highly volatile, stablecoins are digital assets pegged to fiat currencies like the U.S. dollar. At first glance, this may seem to be a story relevant only within the virtual asset market. However, in the U.S. bond market, stablecoins are increasingly being viewed as a variable that could boost demand for short-term Treasuries.

On August 27, Mirae Asset Securities said in a recent report, "The U.S. Treasury's move to strengthen bond buybacks suggests a potential shift toward active management of long-term rates and a focus on issuing short-term bonds." They also noted, "An increase in stablecoin issuance is likely to raise demand for short-term bonds, so the Trump administration may concentrate on active policy support in this area."

The key reason why stablecoins are drawing attention is the U.S. government's Treasury issuance strategy. For the Treasury to manage long-term rates, it may opt to scale back long-term bond issuance while increasing the issuance of short-term bonds. In fact, during past episodes when the U.S. 10-year Treasury yield exceeded 5%, this kind of strategy—reducing long-term bonds and increasing short-term ones—was actively used. The share of short-term bonds in U.S. debt has also been gradually rising since 2015.

This is where stablecoins come in. Under last year's passage of the fundamental law on stablecoins, also known as the "GENIUS Act," stablecoin issuers are required to hold highly liquid assets such as dollars and short-term Treasuries as reserves, in a 1-to-1 ratio with issuance. As the stablecoin market expands, demand for short-term Treasuries also grows in tandem.

U.S. Treasury Secretary Scott Bessent also emphasized the impact of stablecoin demand on government bonds at the time the legislation passed. Citing research suggesting that by 2030 stablecoin issuers could hold up to $1.2 trillion worth of U.S. Treasuries, he expressed the expectation that increased demand for government bonds from the private sector would result.

For the stablecoin market to grow further, additional legislative efforts such as the "CLARITY Act" are needed. While the GENIUS Act established the basic framework for stablecoins, the CLARITY Act is designed to resolve broader regulatory uncertainties surrounding digital assets. Its key provisions cover how to classify digital assets and draw jurisdictional boundaries between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

With clearer regulations, institutional capital would more easily enter the market. Following the passage of the GENIUS Act, stablecoin issuance initially increased, but has recently plateaued. It is expected that if the CLARITY Act passes, this growth in issuance will resume. Congress is returning from recess, and a procedural vote is scheduled for September 15.

Of course, several variables remain before the bill can pass. Banks are opposed to stablecoin issuers offering interest rates as a tool for attracting customers. Meanwhile, the Democratic Party insists on strengthening regulations regarding public officials' investments in digital assets. However, the more unstable Treasury rates become, the greater the incentive for the administration to push the bill forward. Securing stable outlets for short-term bond demand has also become increasingly important to the U.S. government.

As a result, attention is expected to increase for digital asset exchanges and stablecoin issuers. With the government strengthening digital asset policies such as stablecoins to improve short-term bond supply and demand, some believe this will act as a driver for rising share prices.

Sungkeun Kim, an analyst at Mirae Asset Securities, explained, "Exchanges like Coinbase and stablecoin issuers such as Circle stand to benefit. Digital asset companies can also serve as an effective alternative to portfolios dominated by technology stocks," he added.

This content was produced with the assistance of AI translation services.