Economist Peter Schiff issued stark warnings that dollar-pegged stablecoins could disrupt U.S. Treasury markets by reallocating liquidity away from long-term bonds, potentially driving up interest rates and triggering economic instability. Schiff emphasized that stablecoins like USDT and USDC merely shift existing demand rather than generating new capital, stating: "Liquidity shifting to stablecoins does not create new demand, it reallocates existing demand. This may lead to higher interest rates on Treasury bonds in the long run." He specifically highlighted risks to mortgage rates and financial markets, noting issuers prefer short-term Treasuries, reducing long-term bond demand.
Contrasting sharply, U.S. Treasury Secretary Scott Bessent projects stablecoins will significantly boost Treasury demand, estimating market growth through 2030. Schiff countered that non-yielding stablecoins primarily facilitate crypto trading and fail as inflation hedges, suggesting investors may turn to alternatives like gold-backed tokens. The debate unfolds amid pending regulatory clarity via the GENIUS Stablecoin Law, with historical parallels drawn to liquidity crises during 2008 and COVID-19 disruptions.