Why is demand for stablecoins growing more and more?
U.S. Treasury bonds are allocated into three types by maturity: short-, medium-, and long-term bonds. Medium-term bonds make up 53%, short-term bonds 22%, and long-term bonds 24%.
In recent years, the U.S. Treasury has tended to “shift toward short-term debt” to avoid interest-rate risk at the long end. It does this by issuing more short-term bonds to raise funds to buy back long-term bonds, causing the share of short-term bonds to keep rising.
Short-term bonds are usually used as a cash “reservoir,” but in recent months there has been evidence that holdings of short-term bonds have been reduced.
The Treasury wants to issue more short-term bonds, but short-term bonds are being sold off—what can it do?
At this point, the Treasury sets its sights on stablecoin issuers.
Stablecoin issuers mainly make money from interest-rate spreads. The logic is as follows: users pay the issuer $1 and receive 1 stablecoin pegged to the U.S. dollar. However, the issuer must also take on the obligation to redeem $1 when users want out. Therefore, the issuer invests the reserve funds into assets that can be quickly liquidated—short-term Treasury bills fit this need very well.
Normally, when buying U.S. Treasuries, it’s institutions or foreign investors that do so. But stablecoin redemption indirectly converts global demand for stablecoins into demand for U.S. short-term Treasuries. In this sense, stablecoin issuers act as a bridge.
That’s why an especially important provision in the GENIUS Act requires stablecoin issuers to hold high-liquidity reserves, with cash and short-term U.S. Treasuries listed as the top priority recognized reserve assets.
This effectively tells issuers to hold short-term bonds, because cash does not generate extra income.
Today, the total market value of stablecoins is over 300 billion—an undeniably big player.
For the U.S. to stabilize its bond market and its finances, it has to find strong buyers for bonds in the coming years. Stablecoins have become a major focus.
As the market value of stablecoins keeps growing, $CRCL would be a good target.
U.S. Treasury bonds are allocated into three types by maturity: short-, medium-, and long-term bonds. Medium-term bonds make up 53%, short-term bonds 22%, and long-term bonds 24%.
In recent years, the U.S. Treasury has tended to “shift toward short-term debt” to avoid interest-rate risk at the long end. It does this by issuing more short-term bonds to raise funds to buy back long-term bonds, causing the share of short-term bonds to keep rising.
Short-term bonds are usually used as a cash “reservoir,” but in recent months there has been evidence that holdings of short-term bonds have been reduced.
The Treasury wants to issue more short-term bonds, but short-term bonds are being sold off—what can it do?
At this point, the Treasury sets its sights on stablecoin issuers.
Stablecoin issuers mainly make money from interest-rate spreads. The logic is as follows: users pay the issuer $1 and receive 1 stablecoin pegged to the U.S. dollar. However, the issuer must also take on the obligation to redeem $1 when users want out. Therefore, the issuer invests the reserve funds into assets that can be quickly liquidated—short-term Treasury bills fit this need very well.
Normally, when buying U.S. Treasuries, it’s institutions or foreign investors that do so. But stablecoin redemption indirectly converts global demand for stablecoins into demand for U.S. short-term Treasuries. In this sense, stablecoin issuers act as a bridge.
That’s why an especially important provision in the GENIUS Act requires stablecoin issuers to hold high-liquidity reserves, with cash and short-term U.S. Treasuries listed as the top priority recognized reserve assets.
This effectively tells issuers to hold short-term bonds, because cash does not generate extra income.
Today, the total market value of stablecoins is over 300 billion—an undeniably big player.
For the U.S. to stabilize its bond market and its finances, it has to find strong buyers for bonds in the coming years. Stablecoins have become a major focus.
As the market value of stablecoins keeps growing, $CRCL would be a good target.