Stablecoin issuers Tether and Circle have added about $200 billion in US Treasury securities and repos over five years, offsetting more than 40% of the decline in China's Treasury holdings over the same period, according to the Federal Reserve Bank of San Francisco. The shift is reshaping who finances US government debt as foreign central banks retreat from the market.
Tether and Circle have increased their Treasury and repurchase-agreement holdings by about $200 billion over the past five years, researchers at the Federal Reserve Bank of San Francisco said. That sum equals more than 40% of the decline in China's Treasury holdings over the same period. Stablecoin issuers' Treasury holdings have risen more than tenfold in five years, while China has continued a retreat from US debt that began more than a decade ago.
Foreign governments pull back from Treasuries
Foreign investors held more than half of outstanding Treasury securities around 2008, but their share had dropped to roughly 30% by early 2026, the San Francisco Fed said. Foreign governments within that group fell even further in relative importance, accounting for just above 40% of foreign Treasury demand by early 2026, compared with nearly all of it at their peak in the 1970s. China's Treasury holdings peaked in late 2013 and had fallen by more than half by mid-2026 as Beijing diversified its reserve assets.
Private investors have taken a larger role as official foreign demand weakened, a shift that can make Treasury financing more sensitive to interest-rate changes and perceptions of US fiscal risk. Tether's USDT and Circle's USDC accounted for more than 80% of stablecoin market capitalization as of mid-August, the Fed researchers said, and both issuers hold large amounts of short-term Treasuries, cash, bank deposits, and repos to meet redemptions. Since 2023, stablecoin issuers have added more short-term Treasury holdings than Japan, the largest foreign holder of US government debt.
A maturity gap limits the comparison
Stablecoins cannot fully replace the demand China has withdrawn because the two groups buy different parts of the Treasury market. China's reductions have concentrated largely in longer-dated debt, while stablecoin issuers predominantly buy Treasury bills and other short-maturity assets. Federal debt held by the public has risen from about 35% of gross domestic product in 2006 to roughly 100% today, sharpening scrutiny of who will absorb new issuance.
The GENIUS Act, adopted in 2025, requires approved US payment stablecoin issuers to fully back outstanding tokens with eligible liquid reserves, and proposed implementing rules include Treasury securities with remaining maturities of 93 days or less alongside cash, bank deposits, and certain Treasury-backed repurchase agreements. That structure links the growth of regulated dollar stablecoins to incremental demand for the shortest-dated US government securities, while issuers collect the interest on reserves that token holders generally do not receive.
Cross-border demand could drive holdings toward $400 billion
The San Francisco Fed pointed to growing use of stablecoins for cross-border payments and as dollar-denominated stores of value in countries with volatile currencies, with usage relative to economic output particularly high in Africa, the Middle East, and Latin America. Extending the industry's recent growth rate would lift stablecoin issuers' Treasury holdings toward $400 billion by 2030, though the researchers cautioned that the estimate carries substantial uncertainty, since regulation outside the US, competing payment products, and new bank technology could all slow adoption.
Source: Federal Reserve Bank of San Francisco
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