Why is the United States so urgent? Stablecoins are rapidly changing the global financial landscape.

Stablecoins are becoming a support point for the US dollar and a new source of demand for short-term US debt, such as Tether has joined the ranks of major holders of US Treasuries.

Written by: Zhao Ying

Source: Wall Street News

The hegemony of the US dollar is on the verge of collapse, the stablecoin market is rapidly expanding, and is becoming a new support point for the dollar, reshaping the global financial system?

According to the Wind Trading Platform, Jim Reid, the head of global macro and thematic research at Deutsche Bank, mentioned in a recent report that stablecoins are expanding at an unprecedented pace, and corporate finance executives have felt the wave of change. Reid stated:

I attended a corporate finance conference on the West Coast of the United States this week, where all the financial executives noticed the increase in stablecoin transactions in their businesses, which is a growing market.

The so-called "stablecoin" is a type of digital asset, where over 99% of the stablecoin market value is pegged to the US dollar, effectively acting as a money market fund that supports the US short-term debt market, such as Tether, which has become a major holder of US Treasury securities.

Currently, the United States is accelerating the advancement of stablecoin regulatory legislation, with payment being a major use case. Regulation may open the door to broader adoption of payments. Recently, the GENIUS stablecoin bill was rejected, but Deutsche Bank expects significant progress on the bill this year.

Analysis suggests that the stablecoin market has enormous potential, and payment applications may lead to broader acceptance of crypto infrastructure. Citigroup expects that, in the long term, the potential market size for stablecoins could reach $1.6-3.7 trillion in both the baseline and optimistic scenarios by 2030.

What is a stablecoin? How does it work?

A stablecoin is a type of digital asset that can be used for payments, and due to its 1:1 peg to a "stable" asset, it has lower volatility than other cryptocurrencies. A report by Deutsche Bank points out that there are mainly four types of stablecoins: fiat-backed, asset-backed, crypto-backed, and algorithmic.

Currently, dollar-supported stablecoins dominate the market, with over 99% of the stablecoin market value pegged to the dollar. These stablecoins hold over 120 billion dollars in U.S. reserve assets, effectively acting as a money market fund that supports the U.S. short-term debt market.

The report from Citibank further explains that stablecoins have become an important part of the cryptocurrency ecosystem: first, they serve as an entry point to decentralized finance—tracking the growth of stablecoin issuance helps to determine the overall health and growth of the digital asset environment; second, stablecoins can be viewed as a means of storing value without the inherent volatility of native tokens.

One use case of stablecoin is reserves, and its "safe haven" characteristic increases its attractiveness as a store of value amid current market volatility. Another potential use case is payments and cross-border transactions, where regulatory clarity can pave the way for broader adoption of payments.

Stablecoin - a digital extension of dollar hegemony, a new source of demand for US Treasury bonds?

The impact of stablecoins on the U.S. bond market is increasingly expanding, according to data from Deutsche Bank.

As of March 2025, Tether's holdings of U.S. Treasury bonds have reached $98.5 billion, a figure that was nearly zero in 2020, and it has now become one of the major overseas holders of U.S. debt.

Citigroup also pointed out that large stablecoin providers have become greater holders of U.S. Treasury bonds:

Stablecoins, especially those pegged to the US dollar, are becoming an increasingly important source of demand for US Treasury bonds. The two main reasons proposed by the US Secretary of Commerce and the Secretary of the Treasury for legislation are: to increase demand for short-term government debt and to strengthen the dollar's position as a global reserve currency.

Major stablecoin providers, such as Tether, have become significant holders of U.S. Treasury securities. The proposed legislation requiring stablecoin holders to hold short-term U.S. Treasury securities has created a new source of demand for U.S. short-term debt.

However, analysts at Citibank also pointed out two mitigating factors: first, if any inflows come from existing US Treasury holders, whether directly or indirectly, the demand effect will be weakened. For example, funds moving from money market funds to stablecoins will represent a substitution but will not have a net effect on overall demand. Second, while supporting short-term demand, long-term debt demand may not be affected.

Stablecoins are becoming increasingly important in the digital dollar infrastructure, Deutsche Bank said:

The most beneficial for the United States is to increase the demand for stablecoins, thereby strengthening the US dollar, especially when the adoption of stablecoins is accelerating, as their "safe haven" characteristics make them an attractive store of value in the current market volatility.

The Citibank report pointed out:

The US dollar still dominates the share of foreign exchange reserves, and the dominance of the US dollar stablecoin not only stems from its first-mover advantage but also reflects the "excessive privilege" of the dollar as the preferred reserve currency. The stablecoin market has enormous potential, with Citibank estimating it could reach a scale of $1.6 to $3.7 trillion by 2030.

At the same time, Citigroup reminds that since the launch of the euro stablecoin under the European MiCA legislative framework, the market capitalization of non-dollar stablecoins has increased, which aligns with the weakening of the dollar and the cracks in the "American exceptionalism" narrative. Although euro-based stablecoins currently account for only a small share, changes in this area could be a leading indicator of the shift in the dollar's status.

The legislation for US stablecoins is being expedited.

The United States is accelerating the advancement of stablecoin regulation legislation. According to media reports, the GENIUS bill in the U.S. Senate did not make it to the full voting stage but is expected to gain bipartisan support. The House bill has passed committee and is awaiting a vote by the full chamber.

A report from Deutsche Bank indicates that the United States is currently accelerating efforts to establish a regulated, dollar-backed stablecoin ecosystem by August of this year. The stablecoin bill named GENIUS was recently rejected, but significant progress is expected on the bill this year.

Citi's analysis shows that there are currently two stablecoin bills in the U.S. legislative process: the House's STABLE bill and the Senate's GENIUS bill. Both have similar provisions regarding consumer protection and reserves, but there are still differences that need to be coordinated and content that needs to be revised.

Both bills focus on payment functionality, the so-called "payment stablecoin," and include provisions related to anti-money laundering (AML), national security, consumer protection, and reserve requirements. The reserve requirement is 1:1 using short-term U.S. Treasury bills and repurchased custodial deposits.

Analysis suggests that a stable regulatory environment will pave the way for the widespread adoption of stablecoins, with the payment sector becoming an important use case for stablecoins.