Standard Chartered: Stablecoins may drive $1 trillion in demand for US Treasury bonds; US Treasury may adjust issuance structure.

PANews reported on February 23 that, according to The Block, stablecoin issuers are becoming the largest potential buyers of U.S. Treasury bills (T-bills), which is expected to profoundly impact the U.S. debt financing landscape in the coming years. Standard Chartered Bank analysis suggests that as the market capitalization of stablecoins could reach $2 trillion by the end of 2028, issuers will generate an additional demand of approximately $0.8 to $1 trillion for short-term U.S. Treasury bills as reserve assets. If current issuance patterns remain unchanged, this demand could lead to a supply-demand gap of approximately $0.9 trillion for U.S. Treasury bills over the next three years.

The current stablecoin supply is approximately $300 billion, and growth has slowed due to the sluggish crypto market and the slow progress of regulations under the GENIUS Act. However, analysts believe this is a cyclical rather than structural factor. The GENIUS Act requires US regulators to hold high-quality liquid assets for stablecoins, with short-term Treasury bonds being the core component.

Standard Chartered projects that by 2028, two-thirds of the stablecoin market's growth will come from emerging markets, generating new T-bill demand, while growth in developed markets will primarily replace existing Treasury bond allocations. Meanwhile, the Federal Reserve's reserve management purchases could also generate approximately $500 billion to $600 billion in additional front-end demand, and combined with the replacement of maturing mortgage-backed securities, overall new bill demand could reach approximately $2.2 trillion. In contrast, if the bill-to-total-debt ratio remains unchanged, the net supply is projected to be only about $1.3 trillion, leaving a gap of approximately $0.9 trillion.

The Treasury has indicated it may adjust its debt structure to meet demand. Analysis shows that increasing the proportion of notes issued by just 2.5 percentage points could generate approximately $0.9 trillion in new notes over three years, filling the gap. This could be achieved by reducing long-term Treasury bond issuance, such as suspending 30-year bond auctions annually, similar to the US Treasury strategy of 2002-2006, although the budget surplus at that time was significantly different from the current 5%-6% deficit level.

Analysts point out that this structural adjustment may lead to a bull market at the short end of the government bond yield curve, but Standard Chartered still expects the curve to steepen bearishly over the next year, with the 10-year yield around 4.6% by the end of the year. Investors should pay attention to the potential risks brought about by the shortage of front-end bills and changes in issuance models.

The macroeconomic impact of stablecoins is becoming increasingly significant. Tether USDt, the world's largest stablecoin issuer, holds over $120 billion in US Treasury bonds, ranking among the top holders of short-term Treasury bonds globally, and CEO Bo Hines has indicated that further expansion is possible.

The study also suggests that the growth of stablecoins could lead to a loss of up to $500 billion in bank deposits, driving funds away from the traditional banking system and towards the government bond market. Meanwhile, the GENIUS Act and related SEC guidance are accelerating stablecoin regulation, with industry and White House officials continuing to discuss market structure and yield-generating stablecoin policies. At the consumer level, stablecoins have become integrated into daily life, including savings, retail payments, and everyday transactions, demonstrating their increasing penetration in the global economy.

The current stablecoin supply is approximately $300 billion, and growth has slowed due to the sluggish crypto market and the slow progress of regulations under the GENIUS Act. However, analysts believe this is a cyclical rather than structural factor. The GENIUS Act requires US regulators to hold high-quality liquid assets for stablecoins, with short-term Treasury bonds being the core component.

Standard Chartered projects that by 2028, two-thirds of the stablecoin market's growth will come from emerging markets, generating new T-bill demand, while growth in developed markets will primarily replace existing Treasury bond allocations. Meanwhile, the Federal Reserve's reserve management purchases could also generate approximately $500 billion to $600 billion in additional front-end demand, and combined with the replacement of maturing mortgage-backed securities, overall new bill demand could reach approximately $2.2 trillion. In contrast, if the bill-to-total-debt ratio remains unchanged, the net supply is projected to be only about $1.3 trillion, leaving a gap of approximately $0.9 trillion.

The Treasury has indicated it may adjust its debt structure to meet demand. Analysis shows that increasing the proportion of notes issued by just 2.5 percentage points could generate approximately $0.9 trillion in new notes over three years, filling the gap. This could be achieved by reducing long-term Treasury bond issuance, such as suspending 30-year bond auctions annually, similar to the US Treasury strategy of 2002-2006, although the budget surplus at that time was significantly different from the current 5%-6% deficit level.

Analysts point out that this structural adjustment may lead to a bull market at the short end of the government bond yield curve, but Standard Chartered still expects the curve to steepen bearishly over the next year, with the 10-year yield around 4.6% by the end of the year. Investors should pay attention to the potential risks brought about by the shortage of front-end bills and changes in issuance models.

The macroeconomic impact of stablecoins is becoming increasingly significant. Tether USDt, the world's largest stablecoin issuer, holds over $120 billion in US Treasury bonds, ranking among the top holders of short-term Treasury bonds globally, and CEO Bo Hines has indicated that further expansion is possible.

The study also suggests that the growth of stablecoins could lead to a loss of up to $500 billion in bank deposits, driving funds away from the traditional banking system and towards the government bond market. Meanwhile, the GENIUS Act and related SEC guidance are accelerating stablecoin regulation, with industry and White House officials continuing to discuss market structure and yield-generating stablecoin policies. At the consumer level, stablecoins have become integrated into daily life, including savings, retail payments, and everyday transactions, demonstrating their increasing penetration in the global economy.