Stablecoin Issuers Now Hold Over $120 Billion in US Treasury Notes, Overtaking Numerous Nations

Stablecoin issuers now hold over $120 billion in US Treasury notes, becoming the 18th largest holder of US Debt and overtaking numerous nations.

Stablecoin issuers have now become the 18th largest holder of US Debt, surpassing several nations, with a total holding of over $120 billion in US Treasury notes. Of this, Circle holds about $29 billion, while Tether holds a whopping $91 billion.

The former holds short-dated US Debt, such as repos, while the latter holds Treasuries.

However, as demand for US Debt grows in the crypto industry and elsewhere, concerns begin to mount, and the US needs to consider appropriate debt management measures. Rising debt levels can lead to a sharp drop in the strength of the Dollar and even cause political uncertainty, also known as Liz-Truss-style market chaos.

The US government has surpassed $34 trillion in debt this year, with interest payments expected to reach $892 billion by year-end. Analysts speculate that the country’s debt will reach $50 trillion in the next ten years.

Stablecoin issuers back their dollar-pegged assets with cash and its equivalents, such as the US Debt. Cash and debt instruments serve multiple purposes for stablecoin firms.

Beyond backing the on-chain assets, they earn companies like Tether and Circle tremendous revenues through interest. Thus, their business model necessitates them to leverage US Debt to generate profits.

Moreover, they can acquire a vast amount of US Debt due to the demand for their stablecoins within the crypto ecosystem. They act as a convenient and essential tool to store value, trade, and transact on-chain.

This demand is pushing legislators in the US to prepare and pass the first-ever stablecoin bill in the country, which will favor the asset and its users.

Many believe that stablecoins will be legitimized before the elections this year. Earlier this year, legislators attempted to include stablecoin regulations in must-move bills but were unsuccessful.

Now, they look forward to the lame-duck period to try again and hopefully succeed. The lame-duck period refers to the time between the election and the president-elect formally stepping into office a few months later.