Stablecoin Issuers Now 18th Largest Holder of U.S. Debt

As an experienced financial analyst, I believe that the emerging role of stablecoin issuers as significant buyers of U.S. debt is a noteworthy development. With cumulative holdings of over $120 billion in U.S. Treasury notes, they have surpassed major current account surplus nations like Germany and South Korea, making them the world’s 18th largest holders of U.S. debt.

Stablecoin creators have recently become a notable buyer group for U.S. Treasury bonds, with increasing unease over the federal government’s debt handling prompting this trend.

As an analyst, I have examined the data compiled by Tagus Capital, which reveals that issuers currently hold over $120 billion in U.S. Treasury notes. This places them among the top 18 global holders of U.S. debt, surpassing countries like Germany and South Korea known for their significant current account surpluses.

According to Tagus Capital’s latest report, Tether Ltd, the entity behind the popular dollar-pegged cryptocurrency USDT (with a market value leading the pack), maintains approximately $91 billion in U.S. Treasuries as reserves. Simultaneously, Circle, the issuer of another prominent stablecoin, USDC, manages around $29 billion in short-term U.S. government securities and repurchase agreements (repos).

As a crypto investor, I’ve been closely monitoring the developments in U.S. politics regarding cryptocurrencies. Among all the proposed bills, I’ve noticed that stablecoin legislation has been gaining traction. In fact, it’s come the closest to passing through Congress. With elections just around the corner this year, there’s optimism that a new stablecoin law could still be enacted before then. Back in April, Representative Patrick McHenry expressed his confidence that we would have a stablecoin law in place by the end of the year.

Despite efforts to add stablecoin regulations into an unrelated bill requiring urgent reauthorization, these attempts were unsuccessful. Later, McHenry informed CoinDesk that “we’re very near to achieving this, we merely require a legislative calendar that will enable us to complete the process in the Senate.”

As a crypto investor following the political landscape, I share the viewpoint of House Majority Whip Tom Emmer. He believes that during the lame duck session, which takes place between elections and the inauguration of the new president in January 2025, it could be an ideal opportunity to add legislation to a crucial bill that must be passed.

Early in the current year, the U.S. national debt exceeded $34 trillion for the first time and has been increasing at a faster rate, approximately $1 trillion every century. By 2024, it is anticipated that the country’s interest payments on this debt, often referred to as the debt-servicing cost, will amount to $892 billion. The escalating debt situation has compelled the Treasury to boost bond issuance since 2023.

On Tuesday, the Congressional Budget Office revealed that the national debt may hit an astounding $50 trillion by the year 2034, which would amount to 122% of our country’s annual economic production.

As a researcher, I’ve been monitoring the financial markets closely this year. In the early stages, the Council on Foreign Relations (COFR) issued a warning that growing debt concerns could potentially trigger market instability reminiscent of the Liz Truss incident, marked by a significant depreciation of the US dollar and political uncertainties. The crypto community has shared similar sentiments for quite some time now. They believe that mounting debt and dwindling faith in Treasuries might lead to a surge in demand for alternative assets like bitcoin and gold.