Buying Dollar Coins Amid Dollar Distrust? Stablecoins Become Major U.S. Treasury Holders [Weekend Money]

Interest in Gold and Bitcoin Soars Amid Fiscal Deficits and De-dollarization
Stablecoin Growth Drives Increased Demand for U.S. Short-Term Treasuries
Expansion of Real-World Asset and AI Payments Use Cases Is Pivotal

Due to chronic fiscal deficits in the United States and concerns about a weakening dollar, the "debasement trade," which seeks alternative assets like gold and Bitcoin, is once again attracting attention. At the same time, dollar-based stablecoins have emerged as major buyers of U.S. Treasury bills (T-bills). It is a paradox where trust in the dollar is declining even as the dollar-based payment network is expanding.

Recently, Hyunkyung Yang, a researcher at iM Securities, analyzed, "As trust in U.S. fiscal policy and the value of the dollar continues to weaken, the debasement trade is expected to remain valid in the medium to long term."

As Fiscal Anxiety Grows, "Gold and Bitcoin Instead of Cash"

The debasement trade is a strategy of purchasing real or alternative assets such as gold and Bitcoin to hedge against the decline of fiat currency's purchasing power. As U.S. government debt has surpassed 40 trillion dollars and annual interest expenses now exceed 1 trillion dollars, this strategy is regaining momentum. A vicious cycle has been set where fiscal deficits increase government bond issuance and interest expenses, which in turn amplify the fiscal burden.

Demand for U.S. Treasuries from major countries such as Japan and China is also weakening. Despite a rise in long-term U.S. interest rates, the dollar has continued to weaken, lending support to interpretations that this rate hike is due more to eroding trust in U.S. fiscal policy and economic leadership than to actual economic improvement.

However, there are differences in the underlying supply-demand structures for gold and Bitcoin. Central banks globally have steadily purchased gold as a means to diversify their foreign exchange reserves, while Bitcoin is more sensitive to ETF (exchange-traded fund) inflows and investor sentiment. Yang noted, “Gold’s price floor is supported by central banks, who are long-term buyers relatively insensitive to price, while Bitcoin depends much more on ETF fund flows, capital-raising conditions among digital asset financial companies (DAT), and risk appetite in broader financial markets.”

The Bigger Dollar Stablecoins Get, the More U.S. Treasuries They Buy

Paradoxically, it is dollar stablecoins that are propping up the dollar in recent times. In July 2025, the GENIUS Act was enacted in the U.S., requiring issuers to hold reserve assets equal to or greater than the total amount of their stablecoin issuance. Those reserve assets must be restricted to safe assets such as cash, deposits, and U.S. Treasuries. This means every new stablecoin issuance directly increases demand for U.S. Treasuries.

Currently, in the approximately 300 billion dollar stablecoin market, Tether’s USDT and Circle’s USDC account for 64% and 24%, respectively. The two companies directly hold a combined 128.2 billion dollars in short-term U.S. Treasuries—surpassing the holdings of the United Arab Emirates and Israel. When including indirect assets like Treasury-backed repurchase agreements, the total U.S. Treasury-linked assets reach 203.4 billion dollars.

If the market capitalization of stablecoins grows to 1.2 trillion dollars by 2028, and the current proportion of reserve assets is maintained, the amount of short-term U.S. Treasuries directly held by issuers is projected to expand to approximately 513 billion dollars. If the market grows to 2 trillion dollars, the total would reach about 855 billion dollars, amounting to 7~12% of the current outstanding balance of short-term U.S. Treasuries.

However, it is difficult to achieve such growth based on crypto-asset transaction demand alone. With the recent downturn in the crypto-asset market, the market capitalization of stablecoins has stagnated at around 300 billion dollars. Broader use cases—such as real-world asset (RWA) tokenization, international remittances, crypto-asset cards, and payments between artificial intelligence (AI) agents—will be key to expanding demand.

Yang commented, “Stablecoins function more as dollar settlement and payment infrastructure than as investment assets seeking price appreciation. The key for medium- and long-term investment will be whether the spread of RWA, international remittances, crypto-asset cards, and agent-based payments actually leads to an increase in transaction volume.”

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