Stablecoins Bought $200B in Treasuries, Replace 40% of China Drop

Researchers at the Federal Reserve Bank of San Francisco found that major stablecoin issuers increased their holdings of US Treasury securities and repurchase agreements by about $200 billion over the past five years. That amount equals roughly 40% of the decline in China’s Treasury holdings over the same period.

The report showed stablecoin reserve portfolios rose more than tenfold in five years, driven mainly by Tether’s USDT and Circle’s USDC. Those two tokens accounted for more than 80% of stablecoin market capitalization in recent months. Issuers hold cash, bank deposits, repurchase agreements and short-term Treasury securities to meet redemption requests, and their purchases added significant demand for highly liquid government paper.

China’s Treasury holdings peaked in late 2013 and fell by more than half by mid-2026, to around $600 billion. Foreign investors’ share of outstanding Treasuries dropped from over half in 2008 to about 30% by early 2026. Within that foreign group, official government buyers accounted for just over 40% of foreign demand by early 2026.

Stablecoin reserve purchases have concentrated at the short end of the curve. The San Francisco Fed noted that issuers mainly buy Treasury bills and other short-dated assets, while China’s reductions were concentrated in longer-dated notes and bonds. As a result, growth in stablecoin reserves has increased demand for bills without replacing buyers of longer-term debt.

The report cited research linking strong stablecoin demand to movements in short-term Treasury yields. Since 2023, stablecoin companies added more short-term Treasury holdings than Japan, the largest foreign holder of US government debt.

Regulation has reinforced the link between regulated dollar stablecoins and short-term Treasuries. The 2025 GENIUS Act created a federal framework requiring approved US payment stablecoin issuers to back outstanding tokens with eligible liquid reserves. Proposed implementing rules list Treasury securities with remaining maturities of 93 days or less, cash, bank deposits and certain Treasury-backed repurchase agreements as permissible reserves.

Stablecoin issuers also retain interest income on reserve assets while token holders typically do not receive that yield. Outside the United States, use of stablecoins for cross-border payments and as dollar stores of value is relatively high in parts of Africa, the Middle East and Latin America, providing another channel that can channel funds into US bills.

Fed researchers estimated that if the industry continues to grow at recent rates, stablecoin holdings of Treasuries could reach about $400 billion by 2030. The estimate includes substantial uncertainty, with regulatory changes abroad, competition from banks developing cheaper cross-border settlement tools and new payment technologies cited as factors that could slow future stablecoin adoption and related inflows into Treasury bills.