The U.S. federal government's interest payments on the national debt surpassed $1 trillion for the first time in fiscal year 2025, a historic milestone that now exceeds both defense spending and Medicare. This fiscal pressure, with the debt-to-GDP ratio reaching 100% for the first time since World War II, is creating a self-reinforcing "debt spiral" where nearly half of annual borrowing goes to servicing existing debt. The Congressional Budget Office projects cumulative interest payments over the next decade will total $13.8 trillion.
In response, Washington is leveraging cryptocurrency infrastructure. The recently signed GENIUS Act mandates stablecoin issuers to hold 100% reserves in U.S. dollars or short-term Treasury bills, effectively transforming them into structural buyers of government debt. Treasury Secretary Scott Bessent hailed stablecoins as a "revolution in digital finance" that will drive demand for Treasuries. Standard Chartered estimates stablecoin issuers could purchase $1.6 trillion in T-bills over four years, potentially absorbing all new issuance and exceeding China's current Treasury holdings.
Concurrently, tokenized U.S. Treasury products are experiencing explosive growth, with their combined market capitalization soaring from under $200 million in January 2024 to nearly $7 billion by late 2025. This nearly 50x expansion is driven by institutional demand for low-risk, yield-bearing assets that settle on-chain. BlackRock's BUIDL fund, with close to $2 billion in assets, leads the market, followed by products from Circle (USYC), Superstate (USTB), and Ondo Finance (OUSG).
These developments position tokenized government debt as a critical bridge between traditional finance and decentralized finance (DeFi), offering regulatory clarity, blockchain efficiency, and a safe-haven asset amid fiscal instability. While social media reactions to the debt crisis evoked comparisons to "Weimar" hyperinflation and calls to "buy gold," the institutional narrative is firmly shifting toward on-chain real-world assets (RWA) as a solution for both yield and debt absorption.
