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Let’s have some coffee. Because stablecoins may be on the verge of reshaping the U.S. bond market. A new report from Standard Chartered suggests that increased demand for Treasury bills by digital dollar issuers could quietly force the US government to rethink how it finances its debt.
Today’s crypto news: Demand for stablecoins could force Washington to rethink US debt strategy
Stablecoins could soon reshape the U.S. Treasury market, forcing fundamental changes in bond issuance, according to a new report from Standard Chartered.
The bank predicts that stablecoin issuers could create between $0.8 trillion and $1 trillion in new demand for Treasury bills (T-bills) by the end of 2028.
When this trend is combined with Federal Reserve purchases, total short-term Treasury demand could reach $2.2 trillion.
The report warns that the Treasury could justify this new excess demand by increasing the issuance of Treasury bills while reducing the supply of long-term Treasuries. Such a move could effectively allow the U.S. government to suspend all 30-year bond auctions for the next three years.
“We believe the U.S. Treasury may issue more Treasury bills due to this potential excess demand,” Jeff Kendrick said in a new report for Standard Chartered, highlighting that stablecoin issuers are increasingly important buyers of U.S. Treasury bills.
Emerging market stablecoins are expected to drive much of this demand. Standard Chartered estimates that two-thirds of expected demand for Treasury bills will come from emerging markets, representing net new demand. Developed market stablecoins, on the other hand, replace most existing holdings.
This pattern highlights the growing role of digital assets in global capital flows and their impact on traditional bond markets.
The potential impact on the Treasury yield curve is significant. Shifting about $9 billion from long-term bonds to T-bills could initially flatten the Treasury curve.
Yield curve risk increases as Treasury considers expanding share of Treasury bills
However, Standard Chartered notes that long-term premiums, deficit concerns and market sentiment could influence investor reaction over time.
The bank cautioned that while a flattening on the front end of the bull market could be the immediate reaction, structural factors such as term premiums and rollover risk could shape yields differently over the longer term.
Treasury Secretary Scott Bessent could use this scenario to increase the proportion of Treasury bills in the overall debt portfolio.
Increasing the share of T-bills by just 2.5% over three years would generate approximately $900 billion in additional T-bill supply to offset projected excess demand.
This could ease the shortfall at the tip of the curve while keeping 10-year Treasury yields manageable.
The report also notes that Treasury bills have historically accounted for an average of 26.1% of outstanding marketable debt. This is well above the range of 15% to 20% recommended by the Treasury Department’s Borrowing Advisory Committee, suggesting there is room for an increase.
Despite the short-term stagnation, stablecoin market capitalization is projected to reach $2 trillion by the end of 2028. Growth has recently stalled at around $304 billion due to the downturn in the digital asset market and regulatory delays associated with the US GENIUS Act.
However, at Standard Chartered we believe that these factors are cyclical rather than structural. Therefore, demand for stablecoins, combined with continued Fed-managed purchases and replacement of maturing mortgage-backed securities, could prompt a historic restructuring of the U.S. short-term debt market.
The report concludes that while suspending 30-year bond auctions is not unprecedented — Treasury had suspended auctions from 2002 to 2006 — the current deficit environment is markedly different.
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