Stablecoins could generate a massive demand for U.S. Treasury bills amounting to $1 billion by 2028

A Standard Chartered analysis projects that stablecoin issuers could become a key factor in the U.S. debt market, driving demand for Treasury bills to a potential $1 trillion by 2028. This phenomenon represents a significant shift in global investment dynamics, where digital stablecoin issuers seek safe instruments to back their operations.

The push from emerging markets

The pressure to acquire T-bills would mainly come from emerging economies, where stablecoin issuers need low-risk assets to maintain the reliability of their issuances. This capital migration to Treasury bills reflects a broader trend: seeking safety amid crypto volatility. These digital currency issuers require reserves denominated in U.S. dollars, making them significant buyers of short-term U.S. Treasury instruments.

Reshaping the yield curve and suspension of auctions

To respond to this increased demand, the U.S. Treasury’s bond issuance structure could undergo substantial changes. Analysts suggest that the Treasury may need to expand its T-bill operations while considering a pause on 30-year bond auctions for about three years. This measure would have profound implications: flattening the yield curve and reallocating resources toward short-term debt segments.

The reconfiguration of the yield curve would impact institutional investors, pension funds, and other participants relying on long-term instruments. The long-term debt market would face significant pressure, altering price-setting dynamics across all maturities.

Implications for the global financial system

This scenario underscores the growing influence that stablecoins and their issuers exert on conventional financial markets. The potential demand of up to $1 trillion in Treasury bills by 2028 demonstrates that stable digital currencies are not just isolated crypto instruments but are intertwined with U.S. sovereign debt and capable of reshaping the global financial architecture.