Report interpretation: What does the U.S. Treasury think tank think about stablecoins?

Written by: Xiaobai Navigation Coderworld

Stablecoins are undoubtedly a hot topic in the crypto market in the past week.

Previously, there was the US GENIUS Stablecoin ActVoting through Senate procedure, and then the Hong Kong Legislative Council read it for the third timePassage of the Stablecoin Bill, stablecoins have now become an important variable in the global financial system.

In the United States, the future development of stablecoins is not only related to the prosperity of the digital asset market, but is also likely to have a profound impact on government bond demand, bank deposit liquidity, and U.S. dollar hegemony.

A month before the GENIUS Act was passed, the U.S. Treasury’s “think tank”, the Treasury Borrowing Advisory Committee (TBAC), used a report to explore in depth the potential impact of the expansion of stablecoins on U.S. fiscal and financial stability.

As an important part of the Treasury Department's debt financing plan, TBAC's recommendations not only directly affect the issuance strategy of U.S. Treasury bonds, but may also indirectly shape the regulatory path of stablecoins.

So, what does TBAC think about the growth of stablecoins? Will the think tank’s views influence the Treasury’s debt management decisions?

We will use TBAC'sLatest ReportAs a starting point, we will interpret how stablecoins have evolved from “on-chain cash” to an important variable that influences US fiscal policy.

TBAC, a fiscal think tank

First, let me introduce TBAC.

TBAC is an advisory committee that provides economic observations and debt management advice to the Treasury Department. Its members are composed of senior representatives from buy-side and sell-side financial institutions, including banks, broker-dealers, asset management companies, hedge funds and insurance companies. It is also an important part of the U.S. Treasury Department's debt financing plan.

TBAC Meeting

The TBAC meeting is mainly to provide financing advice to the U.S. Treasury Department, and is an important part of the U.S. Treasury Department's debt financing plan. From the perspective of the financing plan process, the U.S. Treasury Department's quarterly financing process includes three steps:

1) Treasury debt managers seek advice from primary dealers;

2) After the meeting with the principal dealers, the Treasury debt manager seeks advice from the TBAC; the TBAC issues a formal report to the Secretary of the Treasury based on the questions and discussion materials raised by the Treasury Department;

3) Treasury debt managers make decisions on changes in debt management policies based on research analysis and suggestions received from the private sector.

Report Summary:Impact on U.S. banks, the Treasury market, and money supply

• Bank deposits:The impact of stablecoins on bank deposits depends on whether they have a yield function and their operational payment characteristics compared to other financial products. In the context of increased competition, banks may need to raise interest rates to maintain funds or seek alternative sources of financing.

• Treasury Market:The overall increase in demand for treasury bonds. The reserve requirements in stablecoin legislation will provide an additional and growing source of demand for treasury bonds. The overall advancement of the holding period of treasury bonds. Legislation requires stablecoin issuers to hold treasury bills with a term of less than 93 days, resulting in the concentration of treasury bond holdings in the short term.

• Money Supply:Stablecoin demand could have a net neutral impact on U.S. money supply. However, the appeal of stablecoins pegged to the U.S. dollar could shift current non-USD liquidity holdings toward USD..

• Impact of existing market structure:Current legislative proposals fail to provide non-qualified issuers with access to the primary account. Stablecoin issuers’ lack of access to the Federal Reserve could exacerbate risks to stablecoins during periods of stress or volatility.

Digital CurrencyCurrent Diversification: From Private toCentral BankPanorama

This picture provides us with a panoramic view of digital currency, showing its diverse implementation paths and its practical applications in various fields.

1. Digital CurrencyCategories

• Private sector issuance (commercial bank balance sheets)

  • Tokenised Deposits：Represents the deposit liability of commercial banksBlockchainchange.

  • Tokenised Money Market Funds（TokenizationMoney Market Funds):based onBlockchain的货币市场基金代币化。

• Private Sector Issues (Central BankBalance Sheet

  • Stablecoins: A form of blockchain cash backed by 1:1 reserve assets, which can be interest-bearing or non-interest-bearing.

• Private or public sector issuance

  • cryptocurrency: Virtual currency based on a decentralized network.

  • Central Bankissued

    • Trigger Solutions：Connecting blockchain with the central bank’s real-time gross settlement system (RTGS).

    • CBDCCentral BankDigital Currency): A form of blockchain cash directly issued and supervised by the central bank.

2. Current Market Trends

• Tokenized deposits

  • JP Morgan and Citi A blockchain-based solution for payment and repurchase activities has been launched.

• TokenizationMoney Market Funds

  • BlackRock The launch of BUIDL attracted more than US$240 million in investment.

  • Franklin Templeton Launch of the BENJI token, supporting Stellar, Polygon, and Ethereum blockchains.

• Stablecoins

  • Market by Tether and Circle Led by major issuers such as, the total market value is approximately US$234 billion.

• cryptocurrency

  • The total market capitalization is close to $3 trillion, with mainstream currencies including Bitcoin ($1.7 trillion) and Ethereum ($191 billion).

• Trigger Solution

  • The mechanism introduced by the German central bank facilitates the settlement of blockchain assets with traditional payment systems.

• CBDC

  • Of the 134 countries and monetary unions tracked, 251 TP3Ts have been launched, 331 are in the pilot phase, and 481 are still under development.

The current state of the stablecoin market: market capitalization and key events at a glance

The stablecoin market has experienced significant fluctuations and developments in recent years. As of April 14, 2025, the total market value of the entire market has reached $234 billion, of which USDT (Tether) dominates with a scale of $145 billion, followed by USDC (Circle) with $60.2 billion, and the total market value of other stablecoins is $28.7 billion.

Looking back over the past four years, two major events in the stablecoin market have become watersheds in the development of the industry.

In May 2022, the collapse of the algorithmic stablecoin UST triggered a crisis of trust in the entire DeFi field. The decoupling of UST not only made the market question the feasibility of algorithmic stablecoins, but also affected the market confidence of other stablecoins.

Then, the regional banking crisis in March 2023 plunged the market into turmoil again. At that time, USDC issuer Circle had about $3.3 billion in reserves frozen at Silicon Valley Bank (SVB), causing USDC to temporarily depeg. This incident caused the market to re-evaluate the transparency of stablecoin reserves andSafetyDuring this period, USDT further consolidated its market share.

Despite multiple crises, the stablecoin market gradually recovered in 2024 and kept pace with the development of the broader digital asset market. In 2024, the first spot crypto ETFs were launched in the United States, providing institutional investors with tools to gain exposure to BTC and ETH.

Currently, the growth of the stablecoin market is mainly due to three aspects: increased institutional investment interest, the gradual improvement of the global regulatory framework, and the continuous expansion of on-chain application scenarios.

numberMoney Market FundsComparison of two on-chain assets:

With the rapid growth of Tokenized Money Market Funds (MMFs), a narrative of alternative stablecoins has gradually taken shape. Although there are similarities in the use scenarios of the two, a significant difference is that stablecoins cannot become income-generating tools under the current GENIUS Act, while MMFs can generate returns for investors through underlying assets.

Market potential: from 230 billion to 2 trillion US dollars

The report believes that the market value of stablecoins is expected to reach approximately US$2 trillion in 2028. This growth trajectory not only relies on the natural expansion of market demand, but is also driven by a variety of key drivers, which can be summarized into three categories: adoption, economy, and regulation.

• use：The participation of financial institutions, the on-chain migration of wholesale market transactions, and merchants' support for stablecoin payments are gradually driving it to become a mainstream payment and transaction tool.

• economy：The value storage function of stablecoins is being redefined, especially the rise of interest-bearing stablecoins, which provide holders with the possibility of generating income.

• Supervision：If stablecoins can be included in the capital and liquidity management framework and obtain permission from banks to provide services on the public chain, their legitimacy and credibility will be further enhanced.

(Note: The Stablecoin Act had not been passed when the report was issued, and it has entered the voting process at this time)

The stablecoin market is expected to grow from the current $234 billion to $2 trillion by 2028. This growth requires a significant increase in transaction volume and assumes that the circulation velocity of stablecoins remains constant.

Market dominance of USD stablecoins

• USD stablecoins account for the total amount of fiat-pegged stablecoins 83%, much higher than other currencies (EUR accounts for 8%, others account for 9%).

• In the overall stablecoin market value, USD stablecoin accounts for more than 99%, market value reached $233 billion, of which about $120 billion Backed by US Treasury bonds. Non-USD stablecoin market cap is only $606 million.

• The market size of USD stablecoins is 2.5 times that of non-USD stablecoins. 386 times, demonstrating its absolute dominance in the global stablecoin market.

Potential impact of stablecoin growth on bank deposits

The growth of stablecoins could have a significant impact on bank deposits, especially given their design.Whether to pay interestwill be the key factor.

By the fourth quarter of 2024, the total deposit size in the United States will reach $17.8 trillion, of which non-transaction deposits (including savings accounts and time deposits) account for the majority, respectively $8.3 trillion and $2.9 trillionTransaction deposits include demand deposits ($5.7 trillion) and other non-demand transaction deposits ($0.9 trillion).

Among these deposits, transaction deposits are considered the most "vulnerable", that is, more vulnerable to the impact of stablecoins. The reason is that such deposits usually do not pay interest, are mainly used for daily activities, and are easy to transfer. During periods of market uncertainty, uninsured deposits are often transferred by holders to instruments with higher returns or lower risks, such as money market funds (MMFs).

If stablecoins do not pay interest, their growth will mainly rely on payment functions and the overall activity of the digital asset market, so the impact on bank deposits will be limited. However, if stablecoins start to pay interest, especially if they offer higher yields or ease of use, traditional deposits may be transferred to such stablecoins on a large scale. In this case, USD-pegged interest-bearing stablecoins will not only attract on-chain users, but also become an important tool for value storage, further strengthening their global appeal.

In summary, the interest-bearing properties of stablecoins will directly affect their potential impact on bank deposits:

The impact of non-interest-bearing stablecoins is relatively small, while interest-bearing stablecoins may significantly change the deposit landscape.

The potential impact of stablecoin growth on U.S. national debt

According to public reserve data, major stablecoin issuers currently hold more than $120 billion of short-term Treasury bonds (T-Bills), of which Tether (USDT) accounts for the largest proportion, about 65.7% of reserves are allocated in T-Bills. This trend shows that stablecoin issuers have become important participants in the short-term Treasury market.

It is expected that in the future, the demand for T-Bills by stablecoin issuers will be closely related to the expansion of overall market instruments.

In the next few years, this demand may push up approximately $900 billionShort-term Treasury bondsneed.

There is a trade-off between the growth of stablecoins and bank deposits. Large amounts of funds may flow from bank deposits to stablecoin-backed assets, especially during market volatility or a crisis of confidence (such as a stablecoin depegging), and this transfer may be further amplified.

The U.S. GENIUS Act’s requirements for short-term Treasury bonds may further drive stablecoin issuers’ allocation to T-Bills.

In terms of market size, the size of T-Bills held by stablecoin issuers in 2024 is approximately $120 billion, and by 2028, this number could grow to $1 trillion, the growth rate reached 8.3 timesIn comparison, the current market size for tokenized government securities is only $2.9 billion, showing huge growth potential.

In summary, the demand for T-Bills by stablecoin issuers is reshaping the ecology of the short-term Treasury market, but this growth may also intensify competition between bank deposits and market liquidity.

Potential Impact of Stablecoin Growth on U.S. Money Supply Growth

The impact of the growth of stablecoins on the U.S. money supply (M1, M2, and M3) is primarily reflected in potential shifts in fund flows rather than direct changes in total volume.

1. Current Money Supply Structure:

• M1 includes currency in circulation, demand deposits and other deposits that can be checked, totaling about $6.6 trillion.

• M2 includes savings deposits, small time deposits and retail money market funds (MMFs).

• M3 includes short-term repurchase agreements, agency MMFs, and large long-term deposits.

2. The role of stablecoins:

• Stablecoins are seen as a new means of storing value, especially in the context of the GENIUS Act.

• Stablecoins may attract some funds to flow out of M1 and M2 and flow to stablecoin holders, especially non-US dollar holders.

Potential impact

• Transfer of funds:

The growth of stablecoins may not directly change the total amount of U.S. money supply, but it will cause funds to shift from M1 and M2. This shift may affect bank liquidity and the attractiveness of traditional deposits.

• International influence:

Stablecoins, as a way to obtain U.S. dollars, could increase demand for dollars among non-dollar holders, thereby increasing inflows into the U.S. money supply. This trend could boost the use and acceptance of stablecoins around the world.

While the growth of stablecoins will not immediately change the total money supply in the U.S., their potential as a store of value and a way to access money isThis may have a profound impact on capital flows and international demand for US dollars. This phenomenon needs to be paid attention to in policy making and financial supervision to ensure the stability of the financial system.

Possible directions for future stablecoin regulation

The current stablecoin regulatory framework proposed by the United States is similar to the reform requirements of MMF after 2010, with the following highlights:

• Reserve Requirements：Ensure high liquidity of stablecoin reserves andSafetysex.

• Market Access: Explore whether stablecoin issuers can obtain Federal Reserve (FED) support, deposit insurance, or access to a 24/7 repo market.

These measures are intended to reduce the risk of stablecoin depegging and enhance market stability.

Summarize

1. Market size potential

The stablecoin market is expected to grow to Growing to approximately $2 trillion by 2030.

2. Dominance of the US dollar peg

The stablecoin market is mainly composed ofUSD-pegged stablecoinThis has led to recent focus on the potential US regulatory framework and its legislation’s accelerating impact on the growth of stablecoins.

3. Impact and opportunities on traditional banks

Stablecoins may have an impact on traditional banks by attracting deposits, but they also create opportunities for banks and financial institutions to develop innovative services and benefit from the use of blockchain technology.

4. The far-reaching impact of stablecoin design and adoption

The ultimate design and adoption of stablecoins will determine the extent to which they will impact the traditional banking system and the impact onU.S. Treasury Bondsneedpotential driving force.

The article comes from the Internet:Report interpretation: What does the U.S. Treasury think tank think about stablecoins?