Stablecoin issuers could become a significantly larger source of demand for short-term U.S. Treasury securities over the next four years, according to researchers at the Federal Reserve Bank of San Francisco.
In a September 28, 2026 Economic Letter, San Francisco Fed economists Sylvain Leduc, Luiz Edgard Oliveira and Aleisha Sawyer said that stablecoin issuers’ demand for short-term Treasury securities could nearly double to about $400 billion by the end of 2030 if the recent growth trend in their Treasury holdings continues.
The researchers emphasized that the $400 billion figure is a trend-based extrapolation, rather than a guaranteed forecast. Even at that level, stablecoin-related Treasury demand would remain substantially smaller than the U.S. government’s overall financing needs.
Stablecoin Treasury Holdings Have Grown Rapidly
The San Francisco Fed report examines how the growth of stablecoins is changing the investor base for U.S. government debt.
Stablecoin issuers generally need to maintain liquid reserves because users expect to redeem stablecoins for the underlying currency, typically the U.S. dollar.
To support that one-to-one convertibility, major stablecoin issuers hold assets such as cash, bank deposits, repurchase agreements and short-term U.S. Treasury securities.
The Fed researchers found that Treasury holdings associated with the two largest stablecoins, Tether and USD Coin, have increased more than tenfold over the past five years. As of mid-August 2026, the two stablecoins together accounted for more than 80% of the stablecoin market by capitalization, according to the report.
Stablecoin Issuers Added About $200 Billion in Treasury Holdings
Over the past five years, stablecoin issuers increased their Treasury-related holdings by approximately $200 billion, according to the San Francisco Fed analysis.
The researchers compared that increase with the decline in China’s U.S. Treasury holdings during the same period.
Stablecoin issuers’ additional Treasury holdings represented more than 40% of the decline in China’s Treasury holdings, although the two trends involve different maturities of U.S. government debt.
China’s reduction has been concentrated largely in longer-term Treasury securities, while stablecoin issuers have primarily increased their exposure to short-term Treasury securities.
Stablecoins Are Becoming a New Source of Treasury Demand
The changing composition of Treasury holders comes as the share of U.S. government debt held by foreign investors has declined.
According to the San Francisco Fed researchers, foreigners held more than 50% of U.S. Treasury securities around 2008. By early 2026, that share had fallen to roughly 30%.
The decline has partly reflected lower holdings by foreign governments.
At the same time, demand from private investors has become more important, including demand from newer participants such as stablecoin issuers.
The shift does not mean stablecoin issuers are replacing foreign governments on a one-for-one basis. The maturity of the securities being purchased differs, and the ultimate effect on Treasury demand depends on where new stablecoin users obtain the funds used to acquire stablecoins.
Short-Term Treasuries Are Particularly Important
Stablecoin issuers have concentrated much of their Treasury exposure in short-term securities.
This structure is closely related to the redemption requirements associated with dollar-pegged stablecoins.
If a stablecoin is designed to maintain a one-to-one relationship with the U.S. dollar, its issuer needs liquid assets that can be converted into cash when users redeem tokens.
Short-term Treasury bills are therefore particularly useful because they are highly liquid and generally have relatively short maturities.
The San Francisco Fed noted that stablecoin issuers have increased their holdings of short-term Treasury securities more than Japan since 2023. Japan remains the largest non-U.S. holder of U.S. Treasury securities.
$400 Billion Estimate Is Based on Continuing the Recent Trend
The headline $400 billion figure comes from extending the recent growth trend in stablecoin issuers’ Treasury holdings into the future.
The researchers said that if the recent trend continues over the next five years, demand for U.S. debt from stablecoin issuers could double to roughly $400 billion.
That assumption is important.
The report does not state that stablecoin issuers will necessarily hold $400 billion of short-term Treasuries in 2030. Instead, it presents the figure as an extrapolation based on recent growth.
Actual demand could be different depending on the future size of the stablecoin market, regulatory requirements, reserve-management practices, interest rates and the sources of capital entering stablecoins.
Stablecoin Growth Could Affect Treasury Markets
The San Francisco Fed researchers said the growing demand from stablecoin issuers could become increasingly important for the Treasury market.
They cited research indicating that stablecoin issuers’ demand for Treasury securities is already large enough to have a measurable effect on short-term government bond yields.
The potential effect is particularly relevant because stablecoins can grow rapidly when their use expands in payments, trading, settlement and other digital financial applications.
However, the Fed researchers stressed that even a $400 billion position would remain substantially smaller than the U.S. government’s financing needs.
Tether and USD Coin Account for Most of the Market
The San Francisco Fed’s analysis focuses particularly on the two largest stablecoin issuers by market capitalization: Tether and Circle’s USD Coin (USDC).
As of mid-August 2026, these two stablecoins accounted for more than 80% of total stablecoin market capitalization, according to the report.
Both stablecoins are designed around one-to-one dollar convertibility and hold significant amounts of short-term U.S. Treasury securities alongside other reserve assets.
The concentration means that changes in the reserve-management policies or market share of the largest stablecoins can have an outsized effect on aggregate stablecoin demand for Treasury securities.
Stablecoin Demand Could Partly Offset Declining Foreign Demand
The Fed researchers also examined the relationship between stablecoin demand and China’s declining Treasury holdings.
China’s overall Treasury holdings peaked in late 2013 and subsequently declined by more than half by mid-2026, according to the Economic Letter.
Stablecoin issuers, meanwhile, increased Treasury-related holdings by about $200 billion over the past five years.
The researchers said this growth has partially offset declining demand from China, although the comparison should be treated carefully because China’s reductions have primarily involved longer-duration debt while stablecoin issuers favor short-term securities.
Stablecoin Regulation Could Influence Future Treasury Demand
Regulatory developments are another factor that could influence the relationship between stablecoins and Treasury markets.
Rules governing reserve composition, redemption rights, issuer eligibility and liquidity can affect how much Treasury debt stablecoin issuers need to hold.
The San Francisco Fed report’s projection therefore depends not only on stablecoin adoption but also on how the market develops and how issuers structure their reserves.
The researchers specifically noted that future demand will depend on global stablecoin adoption and the mix of investors entering the market.
A Growing Link Between Crypto and Traditional Finance
The findings illustrate how stablecoins are creating a direct connection between the cryptocurrency ecosystem and traditional government bond markets.
When users hold dollar-backed stablecoins, the issuers can hold corresponding reserves in traditional financial assets. As the stablecoin supply grows, the amount of reserve assets can increase as well.
This creates a feedback channel between digital-asset adoption and demand for conventional financial instruments such as Treasury bills.
The San Francisco Fed’s research therefore treats stablecoins not simply as a cryptocurrency-market phenomenon but as an emerging component of the broader financial system.
What the $400 Billion Projection Means
If the recent growth trend continues, stablecoin issuers could become a much more noticeable buyer of short-term U.S. government debt by 2030.
The potential increase would represent a substantial expansion from current levels, but the Fed researchers do not suggest that stablecoin demand would replace the Treasury market’s traditional sources of financing.
Instead, stablecoin issuers could become one additional and increasingly important category of Treasury investors.
The ultimate impact will depend on how quickly stablecoin adoption grows, who uses the tokens, how issuers manage reserves and whether new stablecoin demand represents new Treasury exposure or simply shifts existing Treasury exposure into a different vehicle.
Bottom Line
San Francisco Fed researchers estimate that stablecoin issuers’ demand for short-term U.S. Treasury securities could nearly double to about $400 billion by the end of 2030 if the recent growth trend continues.
Stablecoin issuers have already increased their Treasury-related holdings by approximately $200 billion over the past five years, with much of the growth concentrated in short-term securities.
The researchers say stablecoin demand has partially offset declining Treasury holdings by China and has grown faster than Japan’s holdings of short-term Treasury securities since 2023.
However, the $400 billion figure is a trend-based extrapolation, not a guaranteed forecast, and would still be considerably smaller than the U.S. government’s overall financing requirements.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment, financial, tax or legal advice. Stablecoins, Treasury securities and digital-asset markets involve different risks, and future market conditions may differ substantially from current trends.
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