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Grab a coffee – why stablecoins can boost the US bond market. A new report from Standard Chartered suggests that growing demand for Treasuries from digital dollar issuers may quietly force Washington to rethink how it finances its debt.
Today’s Cryptocurrency News: Demand for stablecoins may force Washington to rethink US debt strategy
Stablecoins may soon reshape the US Treasury market, potentially forcing a radical change in debt issuance, according to a new report from Standard Chartered.
The bank expects that stablecoin issuers could generate between 0.8 trillion And a trillion dollars in new demand on Treasury bonds at the end of 2028.
This trend, combined with the Fed’s purchases, could push the total demand for short-term Treasuries to $2.2 trillion.
The report warns that the Treasury may use this emerging excess demand as a justification to increase the issuance of Treasury bonds while reducing the supply of long-term bonds. Such a move could effectively allow the US government to suspend all 30-year bond auctions for the next three years.
“We believe that the US Treasury can use this potential excess demand as a reason to issue more Treasuries,” Jeff Kendrick wrote in the latest Standard Chartered report, citing stablecoin issuers as growing buyers of short-term US debt.
It is expected to be Stablecoins in emerging markets It is the biggest driver of this demand. Standard Chartered estimates that two-thirds of expected demand for Treasuries will come from emerging markets, representing net new demand. Meanwhile, stablecoins in developed markets are largely replacing existing holdings.
This model highlights the growing role of digital assets in global capital flows and their impact on traditional fixed income markets.
The potential ramifications on the Treasury yield curve are significant. The conversion of about $9 billion from long-term bonds to Treasuries may initially flatten the US Treasury curve.
The risk of the yield curve increases as Treasurys consider an increasing share of Treasury bonds
However, Standard Chartered notes that long-term leverage, fiscal deficit issues and market sentiment could affect investor reaction over time.
The bank warns that the stabilization of the upside in the front end may be the immediate answer, but the structural factors, including the risk of short premium and conversion, may shape the returns differently in the long term.
It can be exploited Treasurer Scott Besent This scenario increases the share of Treasuries in the total debt portfolio.
Raising the share of Treasuries by just 2.5% over three years would generate about $900 billion in additional supply of Treasuries, offsetting the expected excess demand.
This could mitigate the scarcity at the top of the curve while keeping the 10-year Treasury yield manageable.
The report also notes that Treasuries have historically represented an average of 26.1% of outstanding commercial debt. This is well above the range recommended by the Treasury Advisory Committee of 15-20%, which indicates room for increase.
Despite the short-term stagnation, the market capitalization of stablecoins is expected to increase To $2 trillion by the end of 2028. Growth recently settled at around $304 billion, affected by weak digital asset markets and regulatory delays following the US GENIUS Act.
However, Standard Chartered considers these factors to be cyclical rather than structural. So the demand for stablecoins, coupled with the Federal Reserve’s ongoing purchases and replacement of maturing mortgage-backed securities, could lead to a historic reshaping of US short-term debt markets.
The report finds that while a 30-year suspension of bond auctions would not be unprecedented — the Treasury Department suspended them from 2002 to 2006 — the current deficit environment is markedly different.
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