USD stablecoins could boost demand for US treasuries and help prevent a potential debt crisis, according to the Wall Street Journal.
A June report by the WSJ noted that stablecoins were now among the largest purchasers of US Treasuries.
Issuers of USD-denominated stablecoins use US Treasuries to back these tokens, with this use case translating into the improved health of the US debt.
USD Stablecoins Amass US Treasuries
USD-backed stablecoins have accumulated a significant amount of US Treasuries. Stablecoin issuers using US Treasuries to back up their stablecoins now have more US Treasury bill holdings than countries such as Germany, Norway, Saudi Arabia, and South Korea, according to the WSJ.
The report noted that USD-backed stablecoins are now among the top ten holders of US Treasuries. The other giant holders include China, Japan, and the UK.
USD-stablecoins have the potential to emerge among the largest buyers of US Treasuries because of the vast and growing size of the stablecoin market.
If the growth of the stablecoin market persists, the WSJ notes that it could become a reliable source of demand for US Treasuries.
This trend could lower the risk of failed Treasury auctions while ensuring the US economy does not succumb to any debt crisis.
The report comes when the US grapples with financial strains caused by the ballooning debt. The US government is expected to spend $892 billion in the current financial year to settle interest payments on debt.
This debt load is affecting the delivery of services in other areas like retirement programs and healthcare. This problem is creating a need for modern solutions such as stablecoins.
Despite the debt problem being negative for the economy, it could be a net positive for the cryptocurrency industry.
Crypto assets, especially Bitcoin, are negatively correlated with the US dollar.
Tether is a Top Buyer of US Treasuries
The stablecoin market currently has a total market capitalization of more than $162 billion. Tether’s USDT is the largest stablecoin holder with a market cap of $112 billion.
Tether is now the largest buyer of US Treasury bills, according to a statement by Tether CEO Paolo Ardoino last year.
Ardoino said that Tether was exposed to $72.5 billion in US Treasury bills at the time. This makes it one of the top 22 holders of the USDT stablecoin globally.
Ardoino also noted that the USDT stablecoin was becoming helpful to communities seeking a lifeline to buffer them against currency inflation.
Tether’s continued accumulation of stablecoins also comes as some holders seek to abandon these financial products.
For instance, in 2023, China sold off US Treasury securities as a part of a restructuring plan, according to Reuters.
