The US Treasury Secretary has reportedly contacted leading crypto industry players to discuss the potential impact of the stablecoin sector on the demand for US government bonds in the coming years.
Following the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in July, digital assets pegged to the US dollar are required to be backed on a one-to-one basis by US dollars or Treasury bills.
Sources familiar with the discussions told the news media outlet that Secretary Bessent has signaled to Wall Street that he expects the industry to “become an important source of demand for US government bonds” as Washington seeks to bolster demand for a surge of new US government debt.
The report noted that the focus on the sector follows investors’ concerns about the US’s deteriorating public finances, adding that the Treasury Department’s hopes are also a sign of the White House’s “drive to bring crypto to the heart of US finance.”
“The recent passage of the Genius Act is a significant development which we are monitoring as it will promote innovation in stablecoins and grow demand for short-term Treasury securities” the Treasury Department told FT, explaining that “issuance plans will continue to be informed by a variety of inputs including that from investors, primary dealers and the Treasury borrowing advisory committee”.
Jay Barry, head of global rates strategy at JPMorgan Chase, told FT that “[Secretary Bessent and the Treasury department] absolutely think that stablecoins will be a real source of new demand for Treasuries. And that is absolutely why [Bessent] is comfortable weighting issuance towards [short-term debt].”
“Stablecoins are a $271bn global market, and we believe USDC (…) benefits from market share gains on and off of partner Binance’s platform, as ongoing stablecoin legislation legitimizes the ecosystem, and the crypto ecosystem expands, also potentially catalyzed by legislation,” the report highlighted, citing the bank’s research paper from August 20.
Payments are the most obvious source of (total accessible market) expansion for stablecoins over the longer term. This opportunity is largely untapped so far, with the majority of stablecoin activity being driven by crypto trading activity and demand for dollar exposure outside of the U.S.
“Someone selling Treasury bills to buy stablecoins, which invest the money in Treasury bills, does not change demand for U.S. debt instruments,” he concluded.
