The base of investors funding U.S. government debt is undergoing a structural shift, with stablecoin issuers moving into a role that official foreign holders have abandoned. According to a late-September study from the Federal Reserve Bank of San Francisco, Tether and Circle have expanded their combined Treasury securities and repurchase-agreement holdings by roughly $200 billion over five years — more than 40% of the decline in China’s Treasury holdings over the same stretch.
China’s Treasury position peaked in late 2013 and had fallen by more than half by mid-2026, nearing $600 billion, while stablecoin issuers’ Treasury holdings approached $200 billion. The researchers noted that foreign investors once held more than half of outstanding Treasury securities around 2008, but their share had dropped to about 30% by early 2026. Within that foreign group, foreign governments now account for just above 40% of demand, down from nearly all at their 1970s peak.
The San Francisco Fed said Tether’s USDT and Circle’s USDC represented more than 80% of stablecoin market capitalization as of mid-August. Since 2023, stablecoin issuers have added more short-term Treasury holdings than Japan, the largest foreign holder of U.S. government debt. The research also cited Bank for International Settlements findings that this demand is large enough to measurably influence short-term government bond yields.
Still, the comparison with China has a maturity gap. China’s sales were concentrated in longer-dated Treasuries, while stablecoin issuers predominantly buy Treasury bills and other short-term, highly liquid assets. The distinction matters as U.S. federal debt held by the public has risen from about 35% of GDP in 2006 to roughly 100% today. The GENIUS Act, adopted in 2025, reinforces stablecoins’ short-maturity preference by requiring approved U.S. payment stablecoin issuers to hold eligible liquid reserves, including Treasury bills, notes and bonds with remaining maturities of 93 days or less, cash, bank deposits and certain Treasury-backed repos.
For issuers, the model is economically attractive: stablecoin holders generally do not receive the yield earned on reserve assets, while issuers collect interest from Treasury securities backing tokens. The Fed researchers said global adoption beyond crypto trading — particularly cross-border payments and dollar-denominated savings in Africa, the Middle East and Latin America — could lift stablecoin Treasury holdings toward $400 billion by 2030, though they cautioned that estimate carries substantial uncertainty. Competing digital payment products, non-U.S. regulation and new bank settlement technology could slow that path.
Separately, the Institute of International Finance reported that global debt reached a record $365 trillion in the first half of 2026, adding $10 trillion in six months. That increase was less than half the $21 trillion rise recorded in the same period of 2025. Emerging-market debt rose by $6.5 trillion to $110 trillion, with China contributing the largest share. The IIF linked the broader borrowing trend to emerging-economy financing, AI-related infrastructure investment and military spending.
