Stablecoin issuers are emerging as a new source of demand for US government debt as foreign official holdings decline, according to researchers at the Federal Reserve Bank of San Francisco.
Tether and Circle have increased their Treasury securities and repurchase-agreement holdings by about $200 billion over the past five years. That increase is equivalent to more than 40% of the decline in China's Treasury holdings over the same period, the researchers found.
The shift is beginning to alter the investor base underpinning the world's largest government bond market. Stablecoin issuers' Treasury holdings have risen more than tenfold in five years as demand for dollar-linked digital tokens expanded, while China has continued a retreat from US government debt.
- Tether and Circle combined have added roughly $200 billion in Treasury and repo holdings over five years.
- That amount offsets more than 40% of the decline in China's Treasury holdings over the same period.
- Stablecoin issuers' Treasury holdings have grown more than tenfold in five years.
