Stablecoins’ Surging Power: How $200 Billion Is Quietly Shaking Up US Treasury Yields in 2025

Stablecoins Overtake Foreign Investors—And Quietly Reshape the US Treasury Market in 2025

Stablecoins now hold $200B+ in dollar assets, rivaling global funds and subtly impacting short-term Treasury yields. Here’s how.

The U.S. short-term government debt market, once the playground of banks and foreign investors, now faces a new titan: dollar-backed stablecoins like USDT (Tether) and USDC (Circle). The numbers are staggering—over $200 billion in dollar-linked crypto tokens, more than what major foreign investors currently hold in U.S. short-term securities.

Since 2023, stablecoin issuers have funneled nearly $40 billion into US Treasury bills, making digital tokens a force on par with the largest government money market funds. If you think this is just a crypto sideshow, think again; stablecoins now move bond markets—and could reshape how central banks influence rates.

CoinMarketCap
FRED (Federal Reserve Economic Data)
Bloomberg
Yahoo Finance

Q: How Are Stablecoins Driving Treasury Demand?

Stablecoins are digital tokens pegged to the U.S. dollar, attracting billions in fresh capital from crypto traders, cross-border businesses, and yield-seekers. The reserves backing these tokens? Primarily short-term US Treasuries and money market instruments.

This is no minor detail. By snapping up Treasuries, stablecoin issuers siphon supply from the market, putting downward pressure on yields—just as quantitative easing does when the Federal Reserve buys bonds.

How Strong Is the Impact? Real Numbers, Real Shifts

Unpacked by researchers with advanced statistical tools, the effect is unmistakable: A $3.5 billion inflow into stablecoins over five days can drive the yield on 3-month Treasury bills down by 2–2.5 basis points within ten days.

Here’s the kicker: As the sector scales, so does its impact. Should stablecoins swell tenfold to $2 trillion by 2028, their trades could move yields by up to 7.8 basis points, a shift large enough to blur the lines between Federal Reserve policy and crypto market dynamics.

Which Stablecoins Have the Biggest Impact?

The ecosystem is dominated by two giants: USDT (Tether) accounts for a whopping 70% of the yield pressure, and USDC (Circle) follows with about 19%. These issuers have become pivotal players, their aggregated flows even overshadowing the contributions of most foreign central banks.

What Happens If There’s a Stablecoin Crisis?

Researchers warn that the bond market could face a shock if major stablecoins experience a rapid outflow—a “crypto run.” The impact is asymmetric: Outflows push yields up faster than inflows push them down, especially if stablecoins are forced to liquidate large Treasury positions quickly.

As stablecoins become even more intertwined with traditional finance, the risk posed by their lack of direct backstops—like a Federal Reserve discount window—looms larger.

Are There Policy and Regulation Risks?

Absolutely. Regulators face mounting pressure to increase transparency around stablecoin reserves. USDC offers granular real-time disclosure, aiding predictability. Tether (USDT) remains more opaque, making risk assessments harder and fueling calls for standardized reporting across the sector.

Policy-makers are now wrestling with astonishing scenarios where the crypto market—rather than bond traders or banks—can steer Treasury yields, possibly undermining the effectiveness of conventional monetary policy.

How Does This Shake Up the Future of Finance?

Three major channels are at play as stablecoins disrupt the Treasury market:

1. Direct Demand Channel: Stablecoins gobble up Treasuries, diminishing available supply and influencing price dynamics.
2. Dealer Balance Sheet Relief: By absorbing T-bills, stablecoins ease pressure on broker-dealers, changing how dealers interact with sovereign debt.
3. Market Sentiment Signal: Fungible, large stablecoin inflows signal shifts in global risk appetite—driving institutional behavioral changes.

If the stablecoin sector continues to mushroom, its direct and indirect footprint on the Treasury market will only grow—potentially demanding entirely new forms of financial regulation.

What Should Regulators, Investors, and Crypto Users Watch Next?

– Sharpened transparency and reserve audits for all stablecoin issuers.
– New rules that anticipate run-risk and prevent market destabilization.
– Ongoing research into how cross-border capital flows in crypto echo into global sovereign bond prices.

Stay Ahead: What Investors and Policy Makers Must Do Next

• Monitor stablecoin market caps and major inflows/outflows.
• Demand clear, timely disclosures from all stablecoin issuers.
• Watch for regulatory updates from the SEC and Federal Reserve.
• Study spillover effects to longer-term bonds and international markets.
• Be prepared for liquidity crunches tied to sudden stablecoin redemptions.

The era of passive crypto finance is over. In 2025, stablecoins are the new power brokers—don’t let their quiet rise catch you off guard.