Stablecoins like USDC and USDT are becoming more popular around the world. People are using them more for payments, cross-border transfers, and remittances. As this trend grows, the global market for US dollar-backed stablecoins is expected to increase significantly.
This also means more countries—such as those in Europe, Japan, Canada, Australia, and even emerging markets—could start using these stablecoins more often for daily transactions.
To keep their value stable, these stablecoins are backed by assets like short-term U.S. government debt (Treasury bills or T-bills). So, as demand for stablecoins increases, the companies behind them will need to buy more T-bills.
In fact, research shows that when a lot of money flows into stablecoins, it can slightly reduce short-term U.S. government bond yields. One study found that large inflows into stablecoins can lower three-month T-bill yields by 0.02% within just 10 days.
As shown in the chart:
In Q1 2023, USDT (Tether) held $53 billion and USDC (Circle) held $38 billion in U.S. Treasuries.
By Q1 2025, USDT’s holdings grew to $120 billion, while USDC’s dropped to $22 billion.
This suggests that stablecoin demand for U.S. Treasuries is growing fast and could one day reach trillions of dollars. If that happens, it could push demand for short-term government debt even higher—possibly affecting the yield curve by making it steeper, especially at the short end.
Key Takeaway
As stablecoins grow, they are becoming a major new source of demand for U.S. Treasury bills. This could have long-term effects on interest rates and the global financial system.
Source: Tether, Circle, Apollo Chief Economist
