A research letter from the Federal Reserve Bank of San Francisco puts a hard number on what stablecoin issuers now mean for the US Treasury market: about $200 billion in holdings added between 2021 and mid-2026, which covered more than 40 percent of the decline in China’s Treasury positions over the same period. The letter, published September 28 by Sylvain Leduc, Luiz Edgard Oliveira and Aleisha Sawyer, also projects that demand for short-term Treasuries from stablecoin issuers could nearly double to roughly $400 billion by the end of 2030.
The comparison carries weight because China has been the significant reduction story among large foreign holders. Trading firms from Beijing cut their US government debt positions for years, and economists have argued about who would absorb the sales. The San Francisco Fed found that part of the answer sits in a place most Treasury market participants did not track a decade ago: companies that issue tokens pegged to the dollar and park their reserves in short-dated government paper.
Who holds what
The buying is concentrated at the top. Tether alone backs its tokens with about $187.8 billion in assets, roughly three-quarters of it in short-dated Treasuries and Treasury-backed repurchase agreements, according to an Alvarez and Marsal stablecoin payment report from September. Circle runs a similar reserve structure around USDC. Together the two issuers rank among the twenty largest holders of short-term US Treasuries, a group that otherwise consists of sovereign funds, central banks and a handful of asset managers.
Since 2023 the growth in stablecoin issuers’ short-term holdings exceeded that of Japan, the largest foreign holder of Treasuries. That comparison works only at the short end of the curve: issuers favor bills and repo, while China’s decline concentrated in longer-dated securities. The letter describes the effect as a partial offset at specific maturities, not a swap of one country’s books for another’s.
| Measure | Figure | Period |
|---|---|---|
| Stablecoin issuers’ added Treasury holdings | About $200 billion | 2021 to mid-2026 |
| Share of China’s decline covered | More than 40 percent | Same period |
| Projected demand if the trend continues | About $400 billion | By end of 2030 |
| Tether total reserve assets | About $187.8 billion | 2026 |
The projection assumes the trend holds
The $400 billion figure comes with an obvious condition attached. It extrapolates recent growth language and assumes stablecoin supply keeps expanding. A Citizens and Allium analysis from April, when combined stablecoin supply stood near $295 billion, estimated that reserves generate about $170 billion in incremental Treasury demand, or roughly 58 cents of new demand for each dollar of supply, with the balance reallocated from exchange cash, money market funds and brokerage accounts. Other research cited by the letter projects even stronger growth; a San Francisco Fed estimate puts the trajectory near $400 billion by 2030 if current patterns continue.
Reverse scenarios also exist. A September Bloomberg report noted that weak crypto trading this year has reduced stablecoin demand, which chips away at one source of Treasury purchases just as the government makes plans to sell more debt. The Bank for International Settlements found in 2026 that stablecoin issuers’ buying is already large enough to measurably affect short-term government bond yields, which cuts the other way: a slowdown would register, not just an expansion.
Where the money actually goes
Not all stablecoin flows turn new. The letter and other studies separate reserve demand that draws fresh money into Treasuries from demand that simply moves money between forms a holder already owned. Someone swapping bank deposits for a stablecoin shifts their dollar exposure, and the issuer’s Treasury purchase displaces either bank reserves or money market holdings rather than pulling in cash from abroad. How much of the next $200 billion is genuinely new depends on who buys the stablecoins: cross-border payment users and holders in weak-currency countries generate new demand, arbitrage traders on exchanges mostly repackage existing holdings.
The letter’s authors also note the market structure question. Two issuers dominate, both keep portfolios fenced off from credit risk, and both would face redemption pressure in a stress event just as a money market fund would. The GENIUS Act, signed in July 2025, requires full backing in high-quality liquid assets, and its rules continued taking shape through September, with the Treasury publishing an interim final rule on September 30 that creates a $10 billion threshold separating federal-route issuers like Tether and Circle from smaller state-certified ones.
What it means for the market
Treasury bills are the funding instrument of the US debt market, and a persistent new buyer at that end changes pricing in ways the letter’s authors consider already observable. Primary dealers still absorb most issuance, and the US government’s borrowing needs far exceed $400 billion a month in heavy periods, so issuers remain a small part of overall financing. Over five years of data, the gap that opened when China stepped back got filled in part by a token-issuance business no one had penciled into the demand stack.
The letter closes by describing stablecoins as an increasingly noteworthy source of demand that remains substantially smaller than the government’s financing needs. That phrasing reads as a caution against the more expansive claims circulating among stablecoin companies, several of which have marketed themselves as institutional-scale buyers of US debt. The record so far: issuers own short-dated paper in quantities that rival middle-tier foreign holders, and their growth rate, if anything like the past half-decade, keeps compounding into 2030.