The U.S. Treasury bond market, worth an astounding $36 trillion, has become a focal point for global media criticism of the U.S. dollar. However, with Donald Trump’s return to power, his political initiatives, coupled with the potential of crypto finance, may help reinforce America’s position as a global hub for blockchain development and crypto technology. If relevant executive orders clearly support the crypto industry, the U.S. could attract increased migration and investment from international crypto companies.
This explains why Trump’s administration has been pushing initiatives such as the introduction of a “Presidential Coin,” the establishment of crypto-focused task forces, and pressuring the Federal Reserve to cut interest rates. These moves could trigger global monetary easing, significantly enhancing the risk appetite in the crypto asset market.
In this context, stablecoins may become the largest reservoir for U.S. Treasury bonds. Correspondingly, U.S. Treasury bonds are playing an increasingly important role in the crypto market.
The Intersection of Trump’s Policies, Crypto, and Treasury Bonds
Trump’s policy trajectory is closely linked to the Federal Reserve’s interest rate decisions. Lower interest rates provide investors with reduced borrowing costs and encourage the flow of capital toward higher-risk, higher-reward assets. Stablecoins, as crypto assets pegged to the U.S. dollar, are poised to circulate at an accelerated pace in such an environment.
Stablecoins, with their high liquidity and resistance to market volatility, act as a “safe harbor” for capital, particularly amidst global economic uncertainty. Should the U.S. government enact policies that further support blockchain and crypto markets, international investors are likely to purchase more stablecoins as a hedge against risks in traditional financial markets.
The circulation of stablecoins will drive increased demand for U.S. dollars, further solidifying the dollar’s global dominance. As the demand for stablecoins grows — especially as a hedge against inflation and currency depreciation — U.S. Treasury bonds will serve as a “safe haven” backing these assets, ensuring market stability.
The Connection Between Stablecoins and Treasury Bonds
Stablecoins are designed to maintain their value pegged to fiat currencies, such as the U.S. dollar, making them critical tools for payment and transactions in the crypto market. U.S. Treasury bonds, known for their relative stability, are regarded as the safest assets in global capital markets. Stablecoin issuance and circulation often require reserves in the form of U.S. Treasury bonds, especially when backed by the U.S. government.
The expansion of the stablecoin market helps boost demand for Treasury bonds and could even become a cornerstone of the Treasury bond market. The liquidity provided by stablecoins facilitates more seamless global capital flows, especially in currency exchanges, enhancing financial interconnectivity worldwide. Under the Trump administration’s support, the further development and regulation of stablecoins will provide robust capital backing for Treasury bonds, enabling the Treasury market to operate beyond the confines of the traditional financial system.
Stablecoins: The “Savior” of U.S. Treasury Bonds
According to the International Monetary Fund (IMF), global economic growth in 2024 is projected to be just 2.9%. Simultaneously, the Federal Reserve’s interest rate policies have constrained capital flows, exacerbating liquidity issues in the Treasury bond market. While the U.S. dollar retains its position as the world’s reserve currency, traditional financial instruments are losing their appeal.
In contrast, the crypto market has grown rapidly in recent years. Stablecoins, particularly those pegged to the U.S. dollar, offer a stable value and efficient liquidity, filling gaps in the liquidity of traditional financial systems. This efficient asset class provides new pathways for international capital transfers.
Data shows that U.S. Treasury-backed USDC reserves have reached over $40 billion, while USDT’s reserves exceed $100.7 billion. Together, these stablecoins have absorbed approximately 3% of maturing short-term U.S. Treasury bonds, surpassing the holdings of Germany and Mexico, ranking them 19th among foreign central banks.
Stablecoins’ stability and liquidity make them a strong complement to U.S. dollar assets, while U.S. Treasury bonds, as stablecoin reserve assets, play an increasingly significant role. At a time when the U.S. dollar-dominated global financial system faces challenges, the widespread use of stablecoins will further drive demand for Treasury bonds, embedding them within the dollar-based system. By purchasing stablecoins, investors combine asset liquidity with the stability of the Treasury market, forming a dual capital-hedging mechanism.
Stablecoins and Treasury Bonds: The “Twin Engines” of Global Capital Flows
The complexity of the global economic environment and geopolitical instability are reshaping global financial systems. Against this backdrop, the combination of stablecoins and Treasury bonds is emerging as a dual driving force for capital flows. On one hand, stablecoins’ high liquidity and resistance to market volatility make them an essential channel for global capital seeking safe-haven assets. On the other hand, Treasury bonds’ high creditworthiness and stable returns make them key components of stablecoin reserves.
This capital flow model is fundamentally built on the following core logics:
A Positive Feedback Loop Between Stablecoin Circulation and Treasury Bond Demand
Stablecoins’ price stability is underpinned by sufficient reserve assets, primarily U.S. Treasury bonds. According to disclosures from major stablecoin issuers such as Tether and Circle, short-term Treasury bonds account for 60%-70% of their reserves. This Treasury-centered reserve model not only strengthens stablecoins’ credibility but also channels funds directly into the Treasury market.
For example:
USDT (Tether) had over $100.7 billion in Treasury bond holdings by the end of 2024, accounting for approximately 72% of its total reserves.
USDC (Circle) had $40 billion in Treasury bond reserves, with further growth expected.
Each newly minted stablecoin corresponds to an increase in Treasury bond holdings. This capital flow mechanism not only secures the asset safety of stablecoin issuers but also injects new funds into the Treasury market. Data shows that in 2024 alone, stablecoin reserves increased demand for Treasury bonds by nearly 30%, providing approximately $50 billion in new funding for the Treasury market.
Furthermore, as stablecoins gain more global adoption, their use cases have expanded beyond the crypto market to traditional financial sectors, such as cross-border payments, international trade settlements, and corporate financing. These growing demands further boost Treasury bond reserves, making stablecoins a stable “lifeblood” for the Treasury market.
- Stablecoins Promote the Dollar’s Internationalization
The dollar’s status as a global reserve currency relies on its strong liquidity and stability. However, emerging market currencies and the internationalization of the Chinese yuan have begun to challenge the dollar. Stablecoins provide new scenarios for the dollar’s global application, reinforcing its central role.
For instance, in cross-border payments:
According to Ripple and Chainalysis, the total global cross-border payments made via stablecoins surpassed $3.5 trillion in 2024, a 21% year-on-year increase.
Stablecoin usage in emerging markets has also risen significantly. For example, in Latin America and Southeast Asia, stablecoin-based remittance transactions account for over 15% of total remittances, far exceeding traditional banking channels.
This trend demonstrates that stablecoins not only enhance the dollar’s circulation speed but also reduce the cost of international capital flows through digitalization. In the process, most stablecoin-backed dollar reserves are held in Treasury bonds, further entrenching the dollar’s dominance in the global financial system.
- Stablecoins Provide Liquidity Support for the Treasury Market
One of the key issues facing the Treasury market is a lack of liquidity, especially as the Federal Reserve continues to raise interest rates, prompting global capital to favor safe-haven assets over high-risk investments. In this context, demand for Treasury bonds largely relies on foreign investors and central banks. However, due to heightened geopolitical tensions, several emerging market central banks have reduced their Treasury bond holdings. For example, China and Japan reduced their holdings by $24 billion and $17 billion, respectively, in 2024.
The rapid development of stablecoins has injected new vitality into the Treasury market.
Their reserve asset demand not only fills the gap left by foreign central bank funding but also quickly reallocates capital through the highly liquid crypto market.
More importantly, stablecoin investors are predominantly younger generations who have lower interest in traditional assets but greater acceptance of digital and decentralized financial products. This makes stablecoins a bridge between traditional finance and emerging capital markets, providing a stable source of demand for Treasury bonds.
Conclusion
As a core tool of crypto finance, stablecoins are becoming a crucial support for the Treasury bond market with their efficiency and stability. Conversely, the creditworthiness and stability of Treasury bonds provide irreplaceable backing for stablecoins. This symbiotic relationship not only alleviates liquidity pressures in the Treasury market but also injects new vitality into global capital markets.
In the future, as the crypto market develops further and policies become more standardized, the integration of stablecoins and Treasury bonds is likely to become a highlight of the global financial system. In an era of uncertainty, this new capital model may prove to be the key to reshaping global financial structures, offering hope for the dollar system to continue leading the global economy.
